Fernandez Wins Over Farm Foes in Cruise to Argentina Re-Election
Argentine President Cristina Fernandez de Kirchner has won over farmers who just three years ago were blocking roads with tractors to protest higher export taxes and can count on their support as she seeks re-election on Oct. 23.
Fernandez was backed by 53 percent of 2,000 people surveyed Oct. 4-13 by Buenos Aires-based pollster Giacobbe & Asociados. In an Aug. 14 primary, her coalition won 23 percentage points more in rural areas like San Pedro than in 2009 legislative elections, when angry farmers caused her to lose control of Congress.
The 58-year-old Peronist party leader swayed rural voters with economic growth that averaged 5.6 percent since 2007 and may top 8 percent this year, led by increasing soybean and auto production. Record tax revenue allowed more spending on pensions and the poor while the government helped unions win wage increases of more than 30 percent per year to offset accelerating inflation.
“A lot of people in this town voted for her because they see that they have a better quality of life, that they can buy a flat-screen television or a new car,” said cattle rancher Raul Victores, who in 2008 led roadside protests against Fernandez in San Pedro, 165 kilometers (100 miles) from Buenos Aires, and still opposes her. “They know that international prices for our commodities have helped us and they praise the government for that.”
The increased backing in rural areas has helped Fernandez boost her overall support even as some investors remain wary of South America’s second-biggest economy. The country was downgraded to “frontier” from “emerging market” status by MSCI Inc., putting it in a category with Oman and Sri Lanka, after Fernandez in 2008 nationalized the $24 billion pension fund industry.
Argentina’s dollar bonds have returned 9.7 percent since Fernandez’s 2007 inauguration, compared with 36 percent for Latin American debt, according to JPMorgan Chase & Co. indexes. Peso-denominated debt has returned 16 percent, below the 59 percent gain for Latin American local-currency bonds. Businesses and individuals pulled $9.8 billion out of the country in the first half of this year even as policy makers in Brazil took steps to curb dollar inflows that were pressuring its currency.
When turbulence from Greece’s debt crisis spread this year, prompting investors to withdraw from riskier markets, Argentina’s central bank began spending as much as $316 million per day to defend the peso. Reserves tumbled to $48 billion from a record $52.6 billion in January as the government sold dollars and paid off debt using savings.
Independent economists and opposition politicians estimate annual inflation is about 24 percent, compared with the 9.9 percent reported by the government. Interest rates on bank deposits have surged to 18.7 percent, the highest since Jan. 2009, while the peso has fallen 26 percent since Fernandez took office.
Still, Argentina’s economic growth has lured investments from Moline, Illinois-based tractor maker Deere & Co. (DE) and Milan- based tire company Pirelli & C. SpA, which plans to invest $300 million in the country. It’s also pushed unemployment down to a record 7.2 percent in the third quarter from 7.5 percent a year ago and more than 20 percent when her late husband and predecessor, Nestor Kirchner, took office in 2003 in the wake of the nation’s financial crisis.
Fernandez said Argentina’s experience in shunning the advice of the International Monetary Fund after defaulting on a record $95 billion of bonds in 2001 is a lesson for other economically struggling countries.
“Today we can tell the Argentine people, amid a world that is crumbling and that paradoxically insists on applying the same prescriptions that were tried on us and that led us to the 2001 implosion, that we are better prepared than ever to face a complex, difficult world,” Fernandez said at an Oct. 18 campaign rally.
Fernandez’s office didn’t respond to messages seeking comment on her record by Bloomberg News.
In 2010, Fernandez restructured $12.9 billion of bonds remaining from the 2001 default, bringing the country closer to being able to sell bonds abroad for the first time in a decade. Argentina still has $9 billion in defaulted debt outstanding to the Paris Club and holders of about $4.5 billion of defaulted debt are suing the country.
Without access to international credit markets, Fernandez has relied on cash from the nationalized pension funds and 35 percent taxes on soybean exports to boost spending on everything from sewage treatment plants to a program that provides free laptop computers to school children.
The global financial crisis may lead to a drop in commodity prices that could accelerate a slowdown in Argentina, said Boris Segura, Latin America strategist at Nomura Securities International. Segura forecasts that the economy will grow 4 percent in 2012 after a 9.2 percent expansion in 2010.
“The economic model has benefited by an unusually positive external environment with significant tail winds” Segura said in a telephone interview from New York. “The big risk is that if China and India cause a drop in commodity prices, the mood of the people will change.”
The economy could also take a hit from a slowdown in Brazil, its main trading partner, where growth this year and next is expected to slow to half of the 7.5 percent pace recorded in 2010.
Former President Eduardo Duhalde, who is running against Fernandez on a rival Peronist ticket, said Argentina needs “an investment shock” and that the government has failed to boost production needed to reduce inflation that economists estimate is more than 20 percent.
“This government has decided to finance consumption and not production,” said Duhalde, who ran the country at Congress’ behest for 17 months before handpicking a then-unknown Kirchner to succeed him in 2003. “Argentina has lived through 9 years of economic growth, but we are now seeing some yellow lights.”
Duhalde, 70, was fifth in the Giacobbe poll with 8 percent support. Hermes Binner, the socialist Governor of Santa Fe province, was second with 17 percent of those polled. The survey had a margin of error of 2.2 percentage points.
To avoid a Nov. 20 runoff, Fernandez needs to win 45 percent of the ballots cast this weekend or 40 percent and a 10 percentage point gap over the second-place finisher.
Fernandez’s 2008 plan to raise taxes on farm exports sent tens of thousands of Argentines into the streets, causing food shortages in Buenos Aires and pushing global grain prices higher. The plan was defeated when Vice President Julio Cobos cast the deciding vote against the proposal in the Senate. Cobos was replaced on Fernandez’s ticket this year by 48-year-old Economy Minister Amado Boudou.
As a sign of her warming relationship with farmers, Fernandez this week visited the headquarters of Coninagro, one of the four farm groups that organized protests against her three years ago. It was the first-ever visit by an Argentine president, Coninagro’s President Carlos Garetto said Oct. 17.
“The scenario has changed, we are no longer in 2008,” Garetto said in an interview on Radio 10. “We have to take advantage of these signals to try to look ahead and get over the past.”
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