Kirchner’s legacy at the centre of high-stakes election

There are several campaigns reaching a crescendo ahead of Sunday's presidential election in Argentina.

The populist Peronist Daniel Scioli is crisscrossing the country chasing after the extra support that will push him from the 41-42 per cent he is polling to the magic 45 per cent share of the valid poll that would see him declared outright winner thanks to the country's front-runner-friendly voting system.

His closest opponent Mauricio Macri, the right-wing mayor of Buenos Aires, cannot realistically expect anything better than to extend the contest into a run-off round next month. But to do so he needs to round up enough votes to push him above 30 per cent and hope Scioli falls short of 45 per cent.

Currently, though, Macri is stuck on 28 per cent, in part thanks to the stubborn support for dissident Peronist Sergio Massa. The young mayor of the picturesque riverside town of Tigre has almost no chance of becoming president this year. But a good showing on Sunday could see him become kingmaker in a run-off and leave the 43-year-old well placed for a second tilt at the main prize in four years' time.

But another campaign taking place is that being waged by outgoing president Cristina Kirchner. She is trying to set the agenda for whoever wins when it comes to dealing with bondholders who rejected a debt restructuring deal in 2005 following Argentina's historic 2001 default. These so-called holdouts have waged a legal battle in a US court that prevents the country returning to global capital markets almost 14 years after the default.

President’s backing

Though the president is formally backing Scioli, you would not necessarily know it from some of the language emanating from her inner circle. They slammed the Scioli campaign when a senior adviser suggested a resolution to the stand-off could be quickly negotiated should their man win.

Scioli, who will need the votes of Kirchner’s loyalists on Sunday, has tried to defuse the issue, saying negotiations would not be a priority for his administration.

Such an approach would mean tying one hand behind his back as he seeks to deal with the poisoned economic legacy being left by Kirchner – rampant inflation, a gaping deficit and dwindling foreign reserves. A deal with the holdouts would allow the government to borrow the money to smooth the transition away from Kirchner’s busted economic model. Otherwise the risk grows of either hyperinflation or a more brutal adjustment when the cash runs out.

Kirchner, however, has met with some success in portraying the US hedge funds as practitioners of “economic and financial terrorism”. In her view these “vulture funds” are seeking to rob the food off the table of poor Argentines. This success makes negotiating with them politically fraught for whoever succeeds her.

There is a legitimate debate to be had about the morality of a small group of bondholders being able to block a wider settlement between a sovereign and its creditors. Many bonds issued today already restrict the ability of opportunistic hedge funds to hold up the return of a sovereign to markets after settling with a majority of those creditors it defaulted on.

But Kirchner’s position reeks of populist hypocrisy. After all her concern for Argentina’s poor did not prevent a frenzy of corruption during the 12 years her family has held the presidency.

Their defence of the poor did not, according to former officials and investigative journalists, prevent them using their control over the tax agency to allow friends in the business community indulge in tax avoidance on a massive scale, to name just one of the litany of scandals that have blighted the Kirchner era.

Charmed circle

Proximity to the Kirchners has allowed a charmed circle to become fabulously wealthy even though the number of Argentines living in poverty is almost 30 per cent, despite the decade after 2001 being one of the best in the country’s economic history thanks largely to China’s appetite for its resources. Now that Chinese demand is slowing the Kirchners’ so-called “Victory Decade” increasingly looks like a massive lost opportunity.

Kirchner’s ability to manipulate the judicial system will dramatically weaken when she leaves power in December. Then finally Argentines might find out exactly how many billions were robbed from the public purse.

Fear of such an audit probably explains another campaign under way in Argentina, that of Kirchner’s son Máximo. Praised by his mother as the business brains behind their family’s extraordinary financial success since they reached the Casa Rosada, he is set to use the seat he is on course to win in the lower house of congress to defend her political legacy.

Conveniently, the job comes with parliamentary immunity.