“Hurricane K” Takes on the U.S. and the IMF

 

Is Néstor Kirchner the man to bring back prosperity and independence to what was once Latin America’s richest country? Jedediah Briggs of the US-based  Council on Hemispheric Affairs looks at the record of the man who has given Argentines reason to hope.

 

After Argentina’s economy collapsed in December 2001, the country’s crime, poverty and unemployment rates skyrocketed, with the country famously going through five different presidents in two weeks.  Few would have imagined that Néstor Kirchner, an obscure provincial governor who took office in May of last year, would not only effectively rule the deeply unsettled and troubled country, but also would emerge as Latin America’s most extraordinary and gifted leader of 2003.  Kirchner is a leader who best connects with his own people, a designation which was once given to Brazil’s President Lula.  A man of great probity and political rectitude, his primary virtue is his unchallenged honesty, a phrase that never could be applied to his recent predecessor, President Carlos Saúl Menem. 

 

Considered by many seasoned analysts as being too inexperienced and politically unlettered to do the job, Kirchner has proved his critics resoundingly wrong by presiding over a growing economy and by making some daring adjustments to the government’s budget.  He now appears more than ready to address the rebuilding of the nation’s economy with a potential domestic economic miracle in the offing, while at the same time taking on the world with fiery rhetoric aimed at the U.S. and the IMF.  His one weakness up to now has been his tendency to fail to properly institutionalize changes that he has electrifyingly announced—like the thorough reform of the corrupt federal police.  Nevertheless, as a consequence of his dynamic impact on the country, his outspoken views internationally and his daring audacity to challenge the policy of his weak-willed predecessors, who insisted on providing amnesty to the military killers of tens-of-thousands of innocent civilians during the period of the Dirty War (1976-83), Kirchner has been affectionately dubbed, “Hurricane K,” by his fellow citizens. 

 

Economy on the Rebound

 

Even with his high approval ratings, Kirchner still has to worry about the stability of his administration because of Latin America’s, and certainly his own country’s, history of radical shifts in its economic fortunes, which have often spawned military coups.  Rosenda Fraga, a Buenos Aires political analyst, recently observed that, “When you consider that only three South American countries in the last 15 years have seen all their presidents complete terms in office, you realize the scale of the problem.”  Still Kirchner can somewhat relax over any prospects that he might lose his job or his neck anytime soon, if nothing else than due to an improving economy.  Of course, this turnaround is in part linked to the dramatic improvement in productivity of both the U.S. and global economies.  Taking the region as a whole, Latin America had its best year since 1991, even with the notable underachievement of some of its major countries.  Argentina’s economy was one of the biggest surprises of 2003, which is estimated to have grown by 7.8 to 8 percent, largely due to increased investment and heightened consumption levels of products.  The increase surpasses the most optimistic estimates of just two months ago as Argentina posts its best year since 1997.

 

Kirchner has to be proud of the overall increase in his country’s GDP.  And while this increase has a lot to do with the positive workings of the global economy, he has wasted no time in instituting his own fiscal policy in the hope that his country’s economy will continue to grow at impressive levels.  One of the biggest and most difficult choices that Kirchner must make is to slim down the 2004 budget.  His plan to cut back increases for hospitals, the army, navy, air force, and vetoing promotional tax breaks have begun to erode his popularity among some government employees and disappointed members of the middle class.  However, he has strenuously argued that some of these increases were unwarranted and reflected a lack of balance.  He also chose to eliminate 32 lines from the 2004 national budget prepared by the Economy Minister, Robert Lavagna, that would have increased government spending.

 

Kirchner’s Popularity

 

Even with a relatively booming economy, Argentina still suffers from high levels of unemployment.  Many of the unemployed have begun to mobilize en mass on the streets of Argentina’s capital, which is reminiscent of the protests prior to the collapse of the Fernando de la Rua administration in December 2001.  This throng made up of the deprived underclass, known as piqueteros (picketers), generally pours out of Argentina’s poorest slum communities to express their bitterness over the lack of jobs.  Kirchner has shown caution in handling such protests, in part because of Argentina’s oppressive modern history, which still smoulders in the hearts and minds of many of its inhabitants.  Kirchner maintained, “I do not want more violence in Argentina, as everybody has the right to express their dislike….Some people still believe that problems can be solved by the use of force.  Such policies brought us the military dictatorship [1976-1983] and a number of shameful events that we still regret.”   Kirchner has decided to leave the piqueteros alone for now, but this tactic could prove to be politically dangerous, as many middle-class citizens are beginning to complain about the endless protests taking place across the country as well as the road closures and other inconveniences and disruptions caused by the demonstrations. 

 

However, Kirchner, the leader of a country where 50 percent of the population remains in poverty and over 20 percent are unemployed, is fast becoming one of the most popular presidents in Argentina’s recent history.  He currently enjoys not only an 85 percent approval rating according to opinion polls, but a very high level of respect and affection in a country notorious for its fickle political swings.  He is frequently found travelling across the country, inaugurating public works and addressing spirited crowds.  Many world leaders are becoming aware of his somewhat flamboyant personality and take-charge attitude, and are being won over by his charm—this list clearly includes Brazil’s Lula, and some have said, even President Bush.  Kirchner met with Bush at the White House on Jan. 23, 2003 to discuss the war on terrorism and Argentina’s current plague of corruption and money laundering scandals.  The Argentine press ran stories indicating that the two leaders established a “good chemistry,” and Bush anticipated that Kirchner’s efforts to revive his country’s economy would be effective.  But, the State Department and some of the White House’s incorrigible headliners like Noriega and Presidential Envoy Otto Reich look upon Kirchner as little better than Castro-loving dirt.

 

Noriega Muddies the Water

 

The perhaps premature optimism over a long history of troubled relations between the two countries has been somewhat darkened by Kirchner’s cold rhetoric in responding to recent provocative comments about Argentina uttered by Roger Noriega the U.S. State Department’s assistant secretary for western hemisphere affairs.  Noriega is an official who, in general, is held in very low esteem by Washington’s specialists, as well as the majority of leaders throughout the region, for his loose tongue, his stream of unlettered clichés, his simplistic ideas and a total lack of comprehension of the dangers to his country’s national interest resulting from the current crisis in U.S.-Latin American relations, for which he is in part responsible.  Noriega recently has criticized Argentina for not promptly paying back its IMF loan and has questioned the solidity of Argentina’s recent economic success. 

 

Noriega also enraged Buenos Aires by saying that Washington was extremely disappointed with Argentine Foreign Minister Rafael Bielsa, when he did not meet with Cuban dissidents during a recent visit to Havana.   In December, Noriega menacingly noted that he saw “a certain leftward drift” in Argentina’s foreign policy and made an issue out of Kirchner’s warm relations with Cuba and with the defiant president of Venezuela, Hugo Chávez. 

 

In response to Noriega’s undiplomatic statements, Alberto Fernández, Kirchner’s cabinet chief, observed that the U.S. official’s comments were “impertinent” and Aníbal Fernández, Argentina’s Interior Minister, found that the Noriega’s remarks were “those of an insolent individual.”  Kirchner then indicated that the days are gone when his country would jump every time that the U.S. would wave its scolding finger, saying, “As an independent country—we Argentines must rebuild our national identity and boost our self-esteem because we are a country, we are a nation.”  Alberto Fernández also pointed out that “Carnal relations and automatic alignment [between the two countries] don’t exist anymore,” calling upon a phrase used during the 1990s to describe Argentina’s unwavering support for Washington and initiatives that came about under the pro-U.S. ex-President Carlos Menem.  Kirchner now is leading his country in a populist revival that echoes back to the period of Peron’s rule, and is intensified by his proclamation that Argentina is no longer a “carpet” to be trampled on by foreign nations because it is “an independent country with dignity.” 

 

Debt Concerns

 

The Inter-American Development Bank (IDB) in December granted Argentina $400 million to help the country recover from its economic crisis.  This is just part of a total of $1.5 billion in aid that was approved by the IDB last February.  Argentina’s economic minister said the money will support the “government’s measures to ensure the economic stability, and shore up social services for the poorest sectors.”  These measures will avoid any cancellation of health, education, and social development programs aimed at the neediest citizens.  The loan conditions include the implementation of a stabilization program that was seen before in Argentina’s agreement with the IMF in September, which concentrated on the protection of priority social programs.  Under the IMF plan, Argentina is committed to controlling its spending at the federal and provincial levels in order to achieve a budget surplus of 3 percent of its gross domestic product in 2004.

 

During the recently concluded Summit of the Americas in Monterrey, debt relief was one of the primary themes that Kirchner addressed.  The Argentine government desperately needs to pay off, renegotiate and become current on its $88 billion debt to the IMF; however, in “Hurricane K”-like fashion, Kirchner has already accused the institution of demanding extremely tough terms in its economic deadlines with Argentina.  Kirchner recently said, “When we entered an agreement with the IMF, we made it clear that we would pay what we could to bondholders.  Here we had to pay international organizations and bondholders, but we are talking about an Argentina that is bankrupt, where we must also promote economic reactivation and consolidate growth.  We must also pay the domestic debt.” 

 

While President Bush seems to have expressed some interest in Kirchner’s crusade to only honour twenty five percent of its defaulted commercial debt, Bush wants it to be made clear that Argentina will fulfil its financial obligations.  Kirchner has claimed that the IMF is taking advantage of his country’s efforts at achieving economic recovery, arguing that, “every time we take a step forward they start to ask for more.”  Some experts believe that with a little more time and some creative structure settling, Argentina will be able to bounce back from the financial collapse that left the country in ruins; in the mean time though it will have to continue to ward off its financial creditors. 

 

“Axis of Evil” or Renewed Independence?

 

When Kirchner met with Bush at Monterrey, recent feelings of animosity already had begun to cool since neither of them referred to Noriega’s crude remarks or made any reference to Fidel Castro.  Bush did, however, bring up the troubling matter of the activities of Venezuela’s president, Hugo Chávez, to which Kirchner responded by saying, “I told him that Lula [Brazil] and I maintain fluid contacts with President Chávez because we consider it totally negative to isolate Chávez.  In the first place, Chávez is a democratically-elected president….I believe each people’s right to self-determination must be respected.  People must decide what kind of ruler they want.”

 

Washington has become fearful of what some of its regional policymakers refer to what is seen as the Latin American version of the “axis of evil,” i.e., the putative alliance being forged among the leaders of Argentina, Venezuela, Cuba, Haiti, Bolivia and Brazil.  The leaders of these and other Latin American countries are being seen as defying U.S.-designed efforts to achieve a free trade zone in the hemisphere out of fear that the lifting of trade barriers might not necessarily be in their best interest, as they push to consolidate their own Mercosur as well as other trade blocs.  Chávez has argued that Latin America’s weak economies will prevent the region’s industry from competing on more equal terms with the more powerful U.S. corporations.  Since Kirchner has allied himself with Chávez, who in turn is warmly disposed to Castro, Kirchner is being closely watched by Washington over Argentina’s ties with Cuba, with which Buenos Aires has recently reopened up relations.  Argentina used to be a major regional ally of the U.S., but under the current reign of Noriega, presidential envoy Otto Reich and other Bush administration extremists now helping to make up the Washington cabal currently in charge of U.S. policymaking, any Latin American country that seems to sympathize with Castro is a candidate to be marginalized by the Bush administration.

 

However, it is not clear how close Kirchner wants to be to Castro for now; but it is clear that he is not afraid of the U.S. as he follows his country’s own national interests and policy targets.   In the meantime, it is far too early to say whether Argentina’s history will register a dazzling Kirchner or whether his rule will be tarnished by later events.  He definitely has brought a new spirit of optimism and independence that his country’s citizens can rally around.  Most of Argentina’s population applauds his leadership and audacity, such as his standing up to Washington and the IMF, but domestically, he will still have to walk a tightrope between pleasing the country’s masses with new jobs, while catering to the pro-business and investment community.  But with an improving economy, the outlook appears bright, as Argentina appears to have found a president who cares as much about the common man as he does about pleasing global giants.    

 

 

 

This analysis was prepared by Jedediah Briggs, Research Associate of the Council on Hemispheric Affairs, Washington DC. For more information about COHA, go to www.coha.org or email coha@coha.org