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The New York Times: As Argentina's Debt Dwindles, President's Power Steadily Grows

Tuesday 3 January 2006
Published: January 3, 2006
BUENOS AIRES, Dec. 30 – Just four years ago, Argentina's economy was prostrate and its politics in chaos, after a financial crisis resulted in bank deposits being frozen, the government defaulting on more than $100 billion in debt and five presidents holding office in two weeks. But on Tuesday, the country is expected to pay off the last of its debt to the International Monetary Fund and simply walk away from further negotiations with the group.
Argentina still owes tens of billions to private lenders, even after a debt restructuring in March. But the $9.8 billion payment is an important symbolic milestone and just one of several recent signs that President Néstor Kirchner appears to be concentrating more power in his own hands and steering his government to the left. Since a midterm election victory in October, Mr. Kirchner has also moved to establish an alliance with Venezuela's populist leader, Hugo Chávez, and, as a traditional Peronist, to extend the hand of the state deeper into the economy, the judiciary and the news media.
“With this payment, we are interring a significant part of an ignominious past,” Mr. Kirchner said recently, adding that the action would liberate Argentina from a supervisory body that was making “more and more demands that contradict themselves and economic growth.” That position is popular here because many Argentines believe that the I.M.F. is responsible for the policies that led to the economic crisis of 2001, and then left the country to recuperate on its own.
Mr. Kirchner, 55, took office in May 2003 having won less than a quarter of the popular vote. But he has erased memories of the crisis of 2001 and early 2002 and now enjoys record levels of public support – 75 percent or more, according to recent polls – that allow him to do largely as he pleases.
“Kirchner has resolved the problem of power and legitimacy” that the crisis created, “and so has more margin to maneuver,” said Juan Carlos Torre, a political scientist at Torcuato di Tella University here who has written extensively on Peronism, the nationalist movement formed in the mid-1940's by Juan Domingo Perón with strong working-class support. “But instead of being more generous and open, he has become more sectarian.”
Mr. Kirchner's popularity is mainly a result of three consecutive years in which the economy has grown by an average of about 9 percent. That has left him and his team confident, even cocksure: the presidential chief of staff, Alberto Fernández, told reporters just before Christmas that although the government surely made some mistakes in 2005, he would be hard pressed to name one.
But an inflationary surge is now threatening, and Mr. Kirchner has responded in statist fashion, trying to impose price controls on certain essential products. He first used that weapon in March, when he urged Argentines to buy “nothing, not even a can of oil” from Shell after company executives ignored his suggestion that they not raise prices.
Late in November, as a prelude to negotiations to control increases in food prices, he blasted owners of two of the country's biggest supermarket chains, warning them to “stop extorting us.” Supermarkets then agreed to temporary price freezes that are to expire early in 2006, but economists said they feared that the accords might be a prelude to more systematic controls if inflationary pressures did not abate.
Complaints of official pressures on the news media are also growing. In a report on what it called “indirect censorship,” the Association for Civil Rights warned this month that “the current government has made control of national media content a priority that it pursues with systematic vigor, subjecting the media to a behind-the-scenes executive siege.”
Most controversial of all, however, is Mr. Kirchner's plan, now before a Congress that recently renewed his emergency powers over the economy, to overhaul the Council of Magistrates, the 20-member panel that oversees the judiciary. Human rights groups and opposition political parties say the plan, which would cut the number of members to 13, is intended to give Mr. Kirchner greater control over judicial nominations.
“We believe this reform is unconstitutional and a step backwards,” the executive director of the Association for Civil Rights, Roberto Saba, said in an interview here, adding, “There is a sensation that the government feels stronger and wants to make its authority felt.”
In foreign policy as well, there has been a notable shift in attitudes. Argentina's relationship with the United States in the 1990's was so close that one president, Carlos Saúl Menem, called it “carnal.” But Mr. Kirchner has been moving in the opposite direction, seeking the embrace of Venezuela's leader, who has proved a perennial thorn in the Bush administration's side.
During a hastily scheduled visit to Venezuela in November, Mr. Kirchner and Mr. Chávez reached several agreements that sealed what Mr. Chávez has taken to calling “a Caracas-Buenos Aires axis.” Mr. Chávez announced plans to build a gas pipeline to Argentina and to make fuel available on highly favorable terms, an important guarantee with an energy shortage said to be looming.
Analysts say the alliance is more tactical than ideological. “For someone like Kirchner,” a native of frigid Patagonia “who doesn't have an extroverted character, Chávez is too tropical,” Mr. Torre said. Others say Mr. Chávez embodies the kind of military-nationalist alliance that Mr. Kirchner finds repugnant because of his own experiences here during the military dictatorship in the 1970's, when friends of his were killed and he was briefly detained.
The election this month of Evo Morales, a Chávez acolyte, as the president of neighboring Bolivia complicates matters even further. Mr. Kirchner has courted and encouraged the new Bolivian leader, but would see his own popularity drop if Mr. Morales's promised transformation were to go awry and degenerate into class, regional or racial conflict that, in the worst case, would send refugees spilling across Argentina's northern border and constrict the flow of natural gas to Argentina.
But Mr. Chávez has already bought more than $1 billion in Argentine bonds and, according to officials here, may be willing to buy up to $2 billion more. That, plus booming exports, has given Mr. Kirchner the latitude he needs to pay off, in one lump sum, Argentina's final obligations to the I.M.F. and to call off further negotiations on issues like monetary policy and utility rates.
Economically, the deal offers no advantages for Argentina, which will pay Venezuela interest rates more than double the 4 percent or so that Argentina has been paying the fund. But it has enhanced Mr. Kirchner's image politically, as was made clear when he summoned politicians, businessmen, labor leaders and leaders of civic groups to the presidential palace on Dec. 15 to announce that, from now on, “this country will be different; it will have political sovereignty and economic independence.”
Roberto Lavagna, who as economy minister since 2002 was the main architect of Argentina's stunning emergence from the 2001 financial crisis, had consistently urged a more cautious course regarding both the recent inflationary surge and the fund. But he was ousted in late November and replaced by a lesser-known economist, Felisa Miceli, president of the state-run Banco de la Nación, who has described herself as “a Kirchnerite soldier.”
That change was part of a broader cabinet shake-up that also brought in new defense and foreign ministers. The new defense minister, Nilda Garré, had served as ambassador to Venezuela, where she had praised Mr. Chávez and his policies. The new foreign minister, Jorge Taína, has a reputation as a nationalist who favors closer ties with the rest of Latin America, rather than an emphasis on the United States and Europe.
“What Kirchner likes is to be absolutely in charge, so he has become his own economy minister,” said Joaquín Morales Solá, chief political columnist for the conservative daily La Nación. “Even more than moving left, there's a turn towards a personalistic style of governing, with a dose of authoritarianism and hegemony and an aggressive style of permanent rupture and confrontation.”
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