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Fernandez on Course for Landslide Re-Election in Argentina

Argentine President Cristina Fernandez de Kirchner is likely to be re-elected by a landslide today as voters reward her for economic growth that has masked mounting imbalances caused by double-digit inflation.

Argentines may give Fernandez the biggest percentage of votes in a presidential race since Juan Domingo Peron returned to power in 1973 after a two-decade-long exile. The Peronist party leader had 53 percent support in an Oct. 4-13 poll taken by Giacobbe & Asociados, 36 percentage points ahead of her closest challenger, Santa Fe province Governor Hermes Binner.

The 58-year-old president, who has overseen annual economic growth averaging 5.6 percent since 2007, also is expected to regain control of Congress, which she lost after threatening to raise taxes on farm exports in 2008. She’ll need the extra political muscle to tame consumer price increases that independent economists say are accelerating 24 percent annually and close a fiscal gap fueled by a surge in spending.

“The margin of victory will be historic,” said Mariel Fornoni, director of Buenos Aires-based pollster Management & Fit. “The government managed to win allies in the past with a very low approval rating, so now it will be even easier.”

Polls Open

Polls opened at 8 a.m. local time (7 a.m. in New York) and close at 6 p.m. Fernandez voted at 11:47 a.m. local time in her hometown of Rio Gallegos. About 35 percent of the 29 million people eligible to cast ballots had voted by then, Interior Minister Florencio Randazzo said. Voting is mandatory.

“Argentine history doesn’t end today,” said presidential candidate and lawmaker Ricardo Alfonsin after voting in his home town, Chascomus, in Buenos Aires province. “It’s not the first difficult election and we don’t think we should desist.”

Alfonsin and former President Eduardo Duhalde were tied with 12.2 percent of votes in an open primary on Aug. 14, while Fernandez had 50.1 percent.

Argentines have rallied behind Fernandez as the country’s economic expansion reduced unemployment to a record low of 7.2 percent in the third quarter and fueled a boom in consumption. Shopping center sales rose 34 percent in August from a year earlier, the fastest pace in eight months.

Even as Argentines are busy buying cars and flat-screen televisions, investors remain wary of South America’s second-biggest economy a decade after its default on $95 billion of bonds. Traders see a more than 40 percent chance that Fernandez will stop payment on the country’s debt in her second four-year term. The cost of insuring against default for five years rose 406 basis points to 1,016 this year. The increase is the biggest in the world after Greece, Portugal and Pakistan.

Capital Flight

Argentines pulled $9.8 billion out of the country in the first half of this year, compared with $11.4 billion in all of 2010, as the debt crisis in Europe worsened and prices for grain exports to China fell. The capital flight led the central bank to sell $2.7 billion of reserves in August and September to control declines in the peso.

A budget surplus left by Fernandez’s late husband and predecessor, Nestor Kirchner, has turned into a shortfall as the government boosted spending on social programs and subsidies to keep energy and transport costs low. Economists estimate that inflation is running at 24 percent, more than double the 9.9 percent reported by the national statistics agency in September.

Economic Challenges

Fernandez hasn’t signaled how she’ll address the economic challenges in a second term. An easy victory may be taken as a sign that no major policy changes are needed, BNP Paribas said in a report last week.

“We need to correct what we have to correct and improve what needs to be improved,” Fernandez, wearing a black dress that’s become her staple outfit since her husband’s death from a heart attack a year ago, told supporters at a campaign rally Oct. 20 in Buenos Aires.

Against the worsening economic outlook, Argentina hasn’t regained access to global credit markets since its 2001 default. Fernandez restructured almost $13 billion in bonds outstanding from the default last year, yet creditors holding about $4.5 billion are pursuing payment in court. Without being able to sell bonds abroad, Fernandez has tapped central bank reserves to make payments on debt and plans to use $5.7 billion in savings next year for the same purpose.

Paris Club

The country hasn’t allowed the International Monetary Fund to review its finances, as it does for every other member country, since 2006. It’s also failed to reach an accord with the Paris Club group of creditor nations to settle claims on $9 billion in defaulted bonds.

“Is the central bank going to finance us for the rest of our lives or will we resolve differences with the Paris Club and IMF?,” said Maximiliano Castillo Carrillo, a former manager of macroeconomic analysis at Argentina’s central bank who now runs ACM, a Buenos Aires-based research company. “What we want to see is some kind of path.”

In addition to electing their next president, voters will choose governors for Buenos Aires and other provinces as well as half of the 257-seat lower house and a third of the 72-member senate.

A lawyer and mother of two, Fernandez has built popular support by creating monthly stipends for families who keep their children in school and supporting wage increases that have helped reduce poverty to 20 percent from as high as 54 percent in 2003, said Artemio Lopez, a political analyst who runs Consultora Equis in Buenos Aires.

“The improvement in employment and the social welfare plans have eased the impact of raising prices,” Lopez said.

‘Symbol of Resistance’

She’s also benefited from an outpouring of sympathy following Kirchner’s death. By softening the confrontational rhetoric of her longtime political partner, she’s turned his haggling with the IMF and foreign investors into a virtue, said Fabian Perechodnik, a political analyst at Poliarquia Consultores. Later this month, supporters in the couple’s home town of Rio Gallegos hope to erect a statue of Kirchner where one of Argentina’s 19th century patriarchs is currently located.

“She’s built a political narrative that resonates with people about their recent past,” said Perechodnik, in an interview in Buenos Aires. “To younger voters especially, she’s a symbol of resistance, of having stayed the course even amid a great deal of international pressure.”

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