- The Washington Times - Thursday, November 1, 2007

ANALYSIS/OPINION:

This story really began with a helicopter lifting off from the Casa Rosada — Argentina’s presidential palace — in late December 2001. The complete collapse of the Argentine economy literally chased away the president and created the opening for a little known southern governor named Nestor Kirchner to ascend to the presidency.

Fast forward six years and the Casa Rosada is again preparing for another Kirchner transition, this time from Nestor to his wife Cristina Fernandez de Kirchner, who will don the presidential sash on December 10. Putting aside the wonderful narrative that posits the Kirchners as the Clintons of South America — during the campaign Mrs. Fernandez was only too happy to embrace the analogies of the two former first ladies as presidents — it is what has transpired since the Kirchners emerged on the scene in Argentina that bears discussing.

Once he took office, Mr. Kirchner quickly embraced and deepened the populist measures that provided economic growth for the country while eschewing long-term economic planning. Of particular note were short-sighted policies that included export taxes on oil and agricultural products, currency devaluation called pesification — essentially reducing the value of investments by two-thirds — and freezing utility rates. The Kirchner government’s unwavering opposition to increasing utility tariffs is perhaps the most egregious example. Most rates remain almost unchanged to this day, having long surpassed their legally stipulated 180-day freeze.

These policies may have jumpstarted the economy, but clearly did not fully contemplate the always-looming threat of inflation growth.Moreover, they created an investment climate that by the end of Mr. Kirchner’s administration could see Argentina’s much smaller neighbor Chile receive almost twice the inflow of foreign direct investment (FDI); a recent study in Argentina calculated lost FDI at approximately $6 billion.

With the Kirchner succession official, Mrs. Fernandez will immediately face many challenges. Not the least of which is walking a fine line between implementing her campaign slogan — “Change begins now” — and not wholly eviscerating the populist policies of her husband’s government that form the basis of their popularity. Indeed, urgent attention is needed in the country’s energy sector and a new national energy policy must be unveiled. Mr. Kirchner’s handling of international relations is equally deserving of scrutiny, and is another front on which Mrs. Fernandez can truly move the country forward.

Much work is required of Mrs. Fernandez on the international scene. And she would do well to start with the tattered relationship with trans-Andean neighbor Chile after years of disrupting natural-gas exports that left Chile with its own energy crisis. Indeed, there is a sense of optimism between the two nations that a change at the top will bring a new chapter. Chile’s President Michelle Bachelet — the only other female president in South America — has spoken admirably of Mrs. Fernandez and indicated that she looks forward to her presidency.While the Kirchner modus operandi relies heavily on secrecy, there have been some overt signs that she will handle foreign affairs in a much different fashion than her infamously indifferent husband.

With her vast lead throughout the election and platform as first lady, she long ago commenced tackling the international profile cut by his government. In recent months, she made several international trips, including visits to Mexico, Brazil, France, Spain, Germany and the United States Her trips abroad have afforded her the opportunity to make several policy speeches and to meet with a wide range of businessmen and possible investors.

She will not have to wait long to put her internationalist bona fides to the test, as the ongoing negotiations with creditor nations — the so-called Paris Club — will demand her attention right out of the box.

Along with her apparent desire to repair Argentina’s international standing, Mrs. Fernandez must also alter what has been a confrontational attitude toward energy companies and investors. This should include payment of the World Bank-rendered arbitration settlements levied against the government for its aforementioned restrictive economic actions. Eliminating the “us against them” strategy of her husband’s government while moving to correct frozen utility rates to market realities would have a profound impact and breathe some fresh air into what has become a despondent sector.

After a bitter winter that saw energy shortages and forced layoffs in the manufacturing sector, Mrs. Fernandez must reverse the stagnating investment climate for energy production that was the precursor to the most recent crisis. How she chooses to deal with the remnants of the key pillars of her predecessors’ economic revitalization plan is a key question as she prepares to switch offices in the Casa Rosada.

Election Day has come and gone in Argentina, and again channeling Hillary Clinton, all eyes will now be on how Mrs. Fernandez approaches international affairs.Or, more importantly, observers will focus on her outreach to Argentina’s neighbors and international investors, for that may be the most important bellwether for outsiders to distinguish between the two Kirchner administrations.

Jeremy M. Martin is director of the energy program at the Institute of the Americas, a nonprofit institution based at the University of California, San Diego.

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