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“It wasn’t magic.”
Cristina Fernández de Kirchner’s words in her final months as Argentina’s president became a rallying cry for the political movement she built with her late-husband and predecessor, President Néstor Kirchner. The economic growth and improvements in social indicators under their governments, she argued, were caused by their heavy-handed policy interventions.
But a more accurate description of what happened in the Kirchner-era may be “timing is everything.”
A reckoning with the first Kirchner president is particularly timely. Alberto Fernández, Néstor’s former cabinet chief, has been campaigning for the presidency on the legacy of his former boss, who from 2003-2007 oversaw a period of rapid economic growth, political stability and improved social indicators.
In selecting Fernández as the candidate for her coalition, Cristina set him up to effectively “Néstorize” the Kirchner brand, allowing him to recapture voters alienated by her own politics and record. If the results of the open primary vote on Aug. 11 are any indication, this bet will pay off, and odds are that Fernández will be the next president.
However, a drastically different economic and political landscape will await Fernández – from severe budget constraints to an adverse international environment. Timing is not on Fernández’s side.
This could frustrate his promise to duplicate Néstor’s success, which can be attributed to his clever handling of Argentine politics oiled by booming export taxes during an unprecedented commodity supercycle.
Néstor’s flush coffers, in turn, were facilitated by the economic and fiscal policies he inherited after the 2001 crisis. These included the largest sovereign default in history, which had saved the state billions in debt repayment; tax increases on agricultural exports, incomes and financial transactions; controls on utility prices; and a massive devaluation that smashed workers’ wages, including those in the public sector. The state suddenly had a budget surplus and the resources to revive the economy.
Néstor was also graced with a favorable geopolitical context. In 2002, Luiz Inácio Lula da Silva was elected in Brazil, and President Hugo Chávez survived a coup attempt in Venezuela. Meanwhile, the same month Néstor was sworn in, the U.S. invaded Iraq, eroding goodwill towards the U.S. and supercharging the commodity boom through higher oil prices. During the 2005 Summit of the Americas in Mar del Plata, Argentina, the three leaders rejected U.S.-led efforts at a continent-wide free trade agreement. Soon after, the press was awash with claims about post-neoliberalism and the ‘Pink Tide.’
By 2005 the economy had recovered from the crisis and was growing at China-level rates. When the economy started to sputter in early 2007, Néstor (and Fernández) oversaw the intervention of the statistics agency to manipulate economic data to maintain the fiction of a robust economy.
Néstor ended his term with an approval rating over 50 percent by accruing all the benefits of his predecessor’s austerity without paying the political costs. Nor did he pay the costs of his own interventionist policies and of manipulating economic data. Dealing with those distortions fell on his successors, his wife Cristina and current President Mauricio Macri.
For Fernández, the current context could not be more different than it was for Néstor. The IMF-Argentina program limits his room of maneuver; the U.S.-China trade war and fears of recession in many of the world’s leading economies is seeing global trade stagnate; Brazil’s lackluster economic prospects shackle Argentina’s exports; and uncertainty related to climate change on Argentina’s agricultural production all present serious obstacles for Fernández should he win the presidency.
Fernández has stated he is content with a devalued peso to kindle exports. In reality, a devalued peso cannot make up for stagnant demand and lower prices. In 2018, Macri also bet a devalued peso would boost exports, expecting them to grow by over 20 percent in 2019. But in the first half of 2019, exports have grown by only 2.4 percent. Fernández will be disappointed if he plans to imitate Néstor by building a governing coalition using export income as his lubricant.
Fernández would also be taking the reins of an Argentina without easy access to credit, due to a combination of over-indebtedness and a lack of confidence in his political coalition. Investors have good reason to worry. Máximo Kirchner, son of the Kirchners and head of the kirchnerista organization La Cámpora, recently said the country should in fact default on the IMF loan. Then Fernández’s close economic advisor recently said that there would be no renegotiation of debt. Fernández’s position is that the country is “virtually in default” and is willing to renegotiate the debt. This lack of coordination does not bode well for Argentina’s market access under a Fernández administration.
Fernández, meanwhile, “is denying any responsibility for the developing financial and economic crisis, blaming Macri for all that’s gone wrong,” economist Arturo Porzecanski recently argued in AQ. This is likely by design. A lesson learned from Néstor is that the previous government should pay the costs of adjustment. Fernández’s unwillingness to cooperate with the government (notwithstanding a few underwhelming phone calls) ensures Macri fully owns austerity. The benefits from price controls and tax increases will begin to be felt once the new government is in power and Fernández can argue any negative effects are a heavy inheritance from Macri.
Geopolitics is an area where fortune plays an important role, but so does adept diplomacy. Unfortunately, Fernández’s brash style may have met his match in Brazil’s President Jair Bolsonaro, who has not hidden his disdain for Fernández and his running mate, calling them, among other epithets, “leftist bandits.” Fernández then called Bolsonaro a “misogynist” and “violent.” Also, Fernández’s criticism of the Brazilian judiciary and recent visit to the imprisoned former President Lula was a diplomatic faux pas that has further eroded any goodwill in Brasilia.
To make matters worse, Fernández’s skepticism towards the EU free trade deal and his party’s protectionist stance has garnered them a stern warning from Brazil’s minister of economy, Paulo Guedes, who said Brazil would leave Mercosur if Alberto wins. Even in Uruguay, which had a terrible relationship with the Kirchners, presidential candidates are weary of a Fernández government. If a center-right government wins in Uruguay, Argentina may become even more isolated diplomatically.
Fernández may ultimately win on the back of the afterglow of the first Kirchner administration, and he may be an skillful operator, but he will have almost none of Néstor’s good fortune. Also, it is still not clear what role his powerful vice president would play in his administration. Fernández may end up needing a bit of magic to make things right in Argentina.
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Saldías is a researcher for the Wilson Center Latin American Program’s Argentina Project and a PhD Candidate at the University of Toronto.
