External Pressure, Internal Chaos

If ever there was one, the honeymoon is over for President Cristina Fernández.  In less than a year, she has managed to waste the (little?) political capital that her husband transferred along with the presidential band.  Far behind remain the times when the world looked up at her as a signal of changing times in Argentina, maybe even a maturity that the nigh-adolescent behavior that her husband often showed never allowed.  "She was the thinking one", said many and thought more.

Indeed, she turned out to be the thinking one - and the talking one.  Everything else was done by her husband, ex-President Néstor Kirchner.  The fiscal voracity they showed when they tried to raise farmer export taxes for the fifth time in as many years backfired violently - and turned people's sentiments into that of hatred and disgust (which any president must avoid).  Furthermore, the tinkering with inflation indices worsened and trust in the country dramatically fell - generating a capital flight only comparable to that of 2001.  Until this point, things were bad but Argentina suffered from a self-induced illness.

Little could the Kirchners imagine that the very same external economic conditions, which were undoubtedly the single most important factor that kept them in power, were about to change direction fiercely and mercilessly.  Along with the sub-prime crisis (shamelessly dubbed Jazz Effect by President Fernández), came the end of Argentina's good fortunes.  No longer could the government milk the export taxes, since commodity prices around the world were falling at unimaginable rates.  What now?

Fortunately, politics is not short in imagination.  Less than 60 days ago, the government decided unilaterally to nationalize the private pension system.  Granted, the system is less than 2 decades old and full of flaws - but certainly there are other remedies before cutting the limb altogether.  Wrokers's reactions, however, were not as organized or as noisy as the farmers' - after all, people have to go to work and lack the organizational structure of the 4 national agricultural entities.  The lower chamber passed the law very easily into the Senate, who have a very tough job, for the second time this year ...


A rising dollar, falling employment, falling commodity prices, worsened public sentiment ... all seem a well too common picture for old timers, and the outcome is all too familiar and lacking serious alternatives. While the world tightens its belt, Argentineans are finally realizing that the Kirchners are very efficient riding good waves, but are not fit to captain stormy waters ... and stormy waters, these definitely are.

Sunday Headline News in Argentina

Nothing too interesting happened this weekend in the news. There was - as usual - at least one common denominator in the first-page news at Clarín and La Nación, the 2 most popular newspapers in the country. This was the imminent increase in ABL (property taxes - stands for lighting, sweeping and cleaning in Spanish) taxes everywhere around the city, looking to raise approx. U$S 50 million this year and U$S 200 extra million in 2008. The reason: property fiscal valuations have not been updated since 1993, and the new mayor needs some additional funding to cut the deficit that Telerman - actual mayor and 3rd place out of three in last election - promised to leave the city with breakeven finances.

Anyhow, the sad result of this untimely tax increase - amidst the President´s other set of economic measures all moving in the direction of increasing disposable income and thus prolonging the consumption boom that's fueling economic growth - is that we will all pay increases ranging from 50% tp 150%. Macri's PRO party will have to take some of the heat for the tax increase, even though the FpV (President's party) also approved it. There is a heated debate right now, that will spread over this last week of the month - whether this increase will be revoked or not.

Other headline news: La Nación mentions illegal aliens in the US, who left Argentina after the last crisis (totally irrelevant subject, if you ask me), and also shows evidence about how January's inflation was manipulated. This has been an ongoing topic and the national statistics organism (INdEC) has lost absolutely all credibility in the eyes of local and foreign - and may even generate important legal actions against the country since manipulating the inflation index directly lowers the yield on Gov't Bonds ties to inflation (CER adjusted) therefore newly affecting investors' rights. Seems we need to make our homework there, otherwise we'll just end uo selling all of our bonds to petrodollar-rich-neighborhood-friendly Chávez. At twice the rate the IMF used to lend to us, but hey, they bothered us with the talk about institutions that may actually force us to reconsider if our path to growth is something that can last over the long run or a short-lived fantasy. Heck, sometimes it seems like the 90's, except that it's a 3 to 1 convertibility instead of 1 to 1 and there are less trips to Miami!

Clarín talks about the most important and relevant news in the country: My beloved Independiente is leading the local champsionship. With a 3 point lead over the 2 challengers, we are playing historic rival Boca Juniors on Wednesday.