With three years to go, the odds are against Argentina's president, Cristina Kirchner, lasting her first full term, writes Tom Henniganin São Paulo
IT WAS JUST a year ago this week that Cristina Kirchner won a crushing victory at the polls to succeed her husband Nestor as president of Argentina.
Rich with cash from commodity exports and faced with a weak and divided opposition, this Latin power couple looked set to dominate Argentine politics for years. However, just 12 short months later, the Kirchners, both members of the populist Peronist movement, are running short of money just as public confidence in their ability to manage the economy is evaporating and their political support dwindles.
This change in fortunes has been swift and is largely linked to a turn in the economic cycle. Five years of 8 per cent plus growth following the calamitous economic crash of 2001-02 was the basis for his soaring popularity and her victory last year.
Now though, growth is slowing just as the global outlook darkens, exposing weak points in the couple's frequently unorthodox economic management. It has produced galloping inflation and a maze of subsidies that gobble up revenue while stymieing investment.
Politically they were weakened by a conflict earlier this year with the country's farmers. The need to replenish state coffers depleted by a pre-election spending binge led to a move to raise already steep export taxes on Argentina's main earner, soybeans. This touched off a rural revolt.
After a tense and at times violent three-month standoff, the Kirchners' tax hike was defeated in congress in July, the crucial vote against it coming from Mrs Kirchner's own vice-president.
The bitter dispute has eaten into her popularity, which fell from 56 per cent in January to just 28 per cent today.
It is unclear how much of this decline is due to Mrs Kirchner's own poor performance and how much is the result of her inheriting her husband's legacy.
"They have always been a team and the team is still there, so it is not so much that she isn't as good as he was as president but rather that their act doesn't work any more," says Felipe Noguera, an Argentine political consultant. "She is in a sense having to foot the bills that he ran when he managed the country."
Mr Kirchner is still thought to be in charge of economic policy and is a prominent figure in his wife's administration.
"Decisions in the final instance are probably still being taken by him, as they have been historically in their marriage and in their long political career together," says Kirchner biographer and home editor of the Clarínnewspaper Walter Curia.
Now the recent collapse in the price of soybeans has heightened fears about the government's ability to service its foreign debt.
Argentina is still locked out from international capital markets because of the Kirchners' reluctance to settle outstanding disputes from its 2001 default, while affordable loans from Hugo Chávez's government have dried up as the drop in the price of oil forces belt-tightening in Venezuela.
Facing a US$15 billion funding shortfall in 2009 and 2010, Mrs Kirchner recently announced that she intended to nationalise the private pension system, a move that would put $30 billion under government control. Equivalent to 10 per cent of GDP, this would provide the money to get over the funding shortfall, though the government says this is not the motive for the move.
The markets do not believe them, though, and the plan has sparked renewed controversy.
The nationalisation would remove one of the only sources of private capital for local companies. Given the pension funds' holdings, the move would also place the government at the heart of the economy with strategic stakes in many listed companies.
The move was described as "legalised robbery" by La Nacionnewspaper and fears that it amounted to a government takeover of the economy caused the Buenos Aires stock market to crash and foreign investors to write off the country's bonds following this latest economic heterodoxy.
"Bond prices have collapsed not because of fears of another default but basically because nobody cares," says Alberto Bernal, head of emerging markets macroeconomic strategy at Bulltick Capital Markets. "It is like: 'Argentina? Whatever. Who cares any more? Let them do whatever they want to do.'"
Already opposition to the move is building in congress which has to approve the measure. Analysts warn that another defeat for the Kirchners there could spell political turmoil.
"If they succeed in nationalising the pension funds it is going to be a disaster - it will be the end of capital markets in Argentina and will leave the economy dominated by the state," says Sergio Berensztein, director of Argentine political consultancy Poliarquía, "but if it is not successful, they are going to be so weak I am not sure they can survive.
"It will be really hard for them to regain any momentum. They have made so many mistakes in the last three or four months it is just too much. I do not see the light at the end of the tunnel now."
The first couple though can count on several important advantages in their battle to stay in power. They are backed by the country's powerful unions and have foreign reserves of $47 billion, though they are loath to spend much of it lest they spark a run on the peso, a currency in which Argentines traditionally have very little faith.
Also, while soy prices have fallen 44 per cent since July, they are still 100 per cent higher than they were when the country defaulted in 2001.
The Kirchners also remain blessed with the same weak and divided opposition that has helped to reinforce their rule since Mr Kirchner took power in 2003 with just 22 per cent of the vote.
"The government's new weakness has not resulted in a stronger political opposition," says Clarín's Walter Curia. "The political scenario is pretty evenly balanced between a weak government and a weak opposition. You do not see a strong political alternative to the government."
Even so, the newly unpopular Mrs Kirchner faces long odds if she is to complete the remaining three years of her first term. Since 1946, just four presidents, two military and two civilian, have managed it, one of them being her husband. Nineteen others have not.