By Martin Gambarotta

The opposition has insisted that Argentina's many political flaws can be sorted out through what they call "dialogue." President Cristina Fernández de Kirchner (and her husband and predecessor Néstor Kirchner) thought they could sort it all out with the constant cracking of their warring whip and with the cash in their coffer. "Dialogues," after all, have been held many times in the past and flunked - like everything else for that matter. The Kirchners played bruising hardball in a bid to turn a political corner on June 28 - the day of the midterm elections. But that corner has not been turned. Kirchner, then the head of the Peronist party, lost in Buenos Aires province against Francisco de Narváez, the candidate of the centre-right coalition Unión-PRO. Buenos Aires province was supposed to be the Kirchnerite stronghold. If Kirchner could have won there it would have been like winning everywhere. But Kirchner lost. The very next Monday, June 29, Kirchner quit as head of the Peronist party. Also that very next Monday Fernández de Kirchner told a press conference that no, there were no immediate plans to reshuffle the Cabinet. But things can move incredibly fast when you fail to turn a corner and hit the brick wall that is Argentina's unstable political system.

Kirchner, who became president in 2003 and even when out of office commanded a huge clout (until June 28) is now out of the picture (at least for now). And did the President say that she did not plan a reshuffle? Yes, you heard right. But that was more than a week ago. That's a long time when you're heading for a crisis. Fernández de Kirchner, whether she liked it or not, announced a major Cabinet reshuffle on Tuesday. Sergio Massa, the sprightly young Cabinet chief, and Carlos Fernández, the tight-lipped technocrat of an Economy minister, resigned. Massa was replaced by Aníbal Fernández, until then Justice minister. Amado Boudou, the head of the state-run pension fund administrator ANSeS, was named Economy minister. The new Justice minister is Julio Alak, the manager of the airline Aerolíneas Argentinas (nationalized last year). Aerolíneas will now be managed by Mariano Recalde, the son of Peronist deputy and General Labour Confederation (CGT) lawyer Héctor Recalde. Diego Bossio, a 29-year-old economist, will take over from Boudou at ANSeS.

Boudou, an economist trained in a neoconservative university who has embraced state intervention in the economy under Fernández de Kirchner, gained prominence when the government prodded Congress into approving the nationalization of the private pension funds late last year. Boudou, who purportedly takes his economic orders directly from Kirchner, has been promoted. Aníbal Fernández (because there are so many Fernándezes in the administration he is often known as Aníbal F.) has also been promoted.
The talkative Aníbal F., a Peronist chief from Greater Buenos Aires who has been a Cabinet minister since 2003, is known for fiercely defending the Kirchners. The ruling Victory Front, Aníbal F. has said through his bushy moustache after defeat, will surely field a presidential candidate - male or female - in the elections of 2011. It's the kind of talk that the Kirchners have rewarded with a promotion. Aníbal F., a former mayor of Quilmes, goes back a long way in the Peronist party. He also served as a minister in the Cabinet of caretaker president Eduardo Duhalde between 2002-2003. Duhalde, then the chief of the party in Buenos Aires province, endorsed Kirchner in the elections of 2003. Aníbal F. stayed on as a minister under Kirchner and so did Roberto Lavagna, the Economy minister at the time. Kirchner and Duhalde, ever since the Kirchnerites defeated the Duhaldites in the midterm elections of 2005, are arch-rivals.

Duhalde currently commands little territorial clout, but he still has many contacts. The reshuffle, incidentally, was announced on the day Duhalde, after months of seclusion, made his first public appearance after the elections.

Duhalde is one of a small sharp-tongued group of the Peronist old guard out to get Kirchner, who campaigned using the militant rhetoric of a leftwing Peronist, now that he has been defeated. Was the reshuffle announced to bury Duhalde's appearance under a pile of banner headlines about the new Cabinet? Duhalde's comeback was, until the President played the reshuffle card, the day's top story. "The elections," Duhalde had said, "are a thing of a past." He kindly urged the President, who in 2005 had likened him to a mafia boss out of a Francis Ford Coppola flick, to "call for dialogue." Duhalde was appointed caretaker president by Congress after the economic and political crisis of 2001. He called consensus talks sponsored by the Catholic Church in a bid to pour cold water over the simmering political situation. The masses on the streets were hollering one single chant: "all (politicians) must go." Duhalde was so pressed that a sweeping political reform, which included compulsory presidential primaries for all political parties, was approved in 2002. Yet when the presidential elections were called in 2003 there was no way that the splintered Peronist party could agree on calling a primary, especially because Carlos Menem (the neoconservative Peronist who ruled Argentina between 1989-1999) was making a comeback opposed by Duhalde. The political reform was not killed. But Duhalde put it on ice and the Peronist party allowed three presidential candidates to run: Kirchner, Menem and Aldolfo Rodríguez Saá (who was president for a week after Fernando de la Rúa of the Radical-Frepaso Alliance quit as head of state in December 2001). Kirchner bagged the presidency in 2003 when Menem withdrew from the runoff and once in office quickly amassed power and popularity by introducing reforms (including the overhaul of the unpopular Supreme Court). Yet Kirchner never delivered on his promise of political reform. In 2006 Congress, with practically all political parties but the Socialists in agreement, abolished the political reform law.

Most lawmakers said the law had never been put into practice and was of no use now that stability had returned.

So why talk about the history of stillborn reform? Well, because on Thursday (July 9, Independence Day) Fernández de Kirchner called for "dialogue" with all sectors of society and announced a plan to submit a political reform bill to Congress.

To go back to where you started, in most places, you need to turn corners. But not here. The Kirchners have hit a wall and so they have played - just like Duhalde in 2002 - the political reform card.

Tuesday's Cabinet reshuffle had done little to appease the opposition and the centre-right dissident Peronists. The new Cabinet chief, said leftwing deputy-elect "Pino" Solanas, was a "sick joke." New names mean nothing if policies are not changed, said Vice-President Julio Cobos (now at odds with the Kirchners and a member of the opposition). De Narváez called for the resignation of Domestic Trade Secretary Guillermo Moreno, the official who aggressively monitors consumer prices and is also accused by the opposition of manipulating the inflation rate as reported by INDEC.

The Kirchners are reportedly currently in Patagonia mulling over what to do with Moreno. The pressure to sack Moreno comes after Ricardo Jaime, the Transport secretary with direct access to Kirchner, quit on July 1 over corruption allegations. Yet Boudou reportedly voiced no objections to working with Moreno. The daily Clarín called it an "Ultra K Cabinet," implying that Kirchner will still be calling the shots from the master bedroom in the Olivos presidential residence. The Kirchners, who accuse the daily of trying to turn public opinion against them, have been locked in a fierce confrontation with the powerful Clarín media group. So evident is the clash that Clarín group shares went up after Kirchner, who had plans to reform the media law to crush what he called a monopoly, was defeated on June 28.

Boudou meanwhile has said that one of his priorities will be to "return to capital markets." The comments came a day before Standard & Poor's said in a report that Argentina could be heading for another default (like the one that sunk it in 2001) by 2010. The Fernández de Kirchner administration, the report said, can get away with its policy of issuing debt to different government agencies into 2010. But "it is very clear that this policy is not sustainable over the medium term," the report said. Boudou, according to S&P, has a limited amount of time "for changing economic policies in the coming months."

Is Boudou listening? It's hard to tell. Yet already he is talking of "returning to capital markets." Argentina cancelled its debt with the International Monetary Fund during Néstor Kirchner's presidency, it is still in debt with the Paris Club of creditor nations and a group of holdouts is still in litigation over Kirchner's fierce restructuring of the debt the nation defaulted on in 2001. Kirchner, when he commanded power, had placed words like IMF, Paris Club and holdouts in an icebox. Will Boudou be bold enough to take those words back out of the cold again? Possibly. But speculation about Boudou's plans - which could include the taxing of the financial system - were quickly overtaken by the President's July 9 speech delivered in Tucumán province.

The President, without being too specific, called for consensus talks on Thursday. She also urged public opinion to admit that military coups of the past had enojoyed "civilian support."

The opposition had chortled in disgust when the new Cabinet formally took office on Wednesday. But the opposition has been championing "dialogue" and harping about "consensus" for so long that it could hardly diss the President's call.

City of Buenos Aires Mayor Mauricio Macri, the leader of the centre-right party PRO that endorsed De Narváez, announced that he had sent a letter to the President asking for a meeting to discuss pending metropolitan issues. Cobos said that Congress was the right setting for consensus talks. The UIA Argentine Industrial Union said that the Social and Economic Council could be another forum for debate. The farmers - grouped in a liaison board of four lobbies that fiercely opposed the export duties hike plan last year - said it was willing to give talk a chance. Ricardo Echegaray, the head of the AFIP tax bureau, said on Friday that the export duties - like all the tax system - will be initially on the negotiating table. It's a sign that the government wants the farmers to join the talks.

Some opposition leaders said that political reform should also include practical changes like using electronic voting-machines instead of paper ballots. Others voiced concern that the President could be extending an olive branch simply to buy time. The President, for example, trumpeted the Social and Economic Council last year during the conflict with the farmers only for the thing never to really get off the ground.

Fernández de Kirchner said on Thursday that the reform she has in mind - and which must be approved by Congress - would replicate the system used in Santa Fe province since 2005. In Santa Fe, primaries to elect candidates of all parties are held on the same day. The winners of those primaries then face each other in new election.

Even when the opposition is demanding changes such as an end to the "superpowers" enjoyed by the Cabinet chief to reallocate funds, the overhaul of INDEC and the reform of the Council of Magistrates to free it from the grip of the ruling party, the consensus talks can degenerate into waffle.

(You don't think so? Check a history book and see what you dig up.) But, if approved by Congress, political reform sounds more like a concrete thing.

The irony of all this is that the nation's politicians in general (including Peronists, Radicals and Elisa Carrió's Civic Coalition) thought they could get away with burying the demands for reform desperately voiced during the tumultuous uproar of 2001. Irony number two is that, according to polls, the public has no time for party politics and politicos. Voters will have to come to terms with the fact that a better political system will mean the hassle of more elections and more party politics.

The reform could be especially painful for the Peronist party, which has ditched the notion of discipline a long time ago. Will the Kirchnerite Victory Front agree to, say, face Senator Carlos Reutemann in a Peronist primary? The reform will also pose a challenge for politicians like De Narváez and Macri who loosely call themselves Peronist, at times, and were aiming to seek the formal backing of the party in the future. Will De Narváez, who has declared he wants to run for governor in Buenos Aires province, agree to go through the motions of a Peronist primary against a Kirchnerite candidate? Stronger political parties and stricter rules are not necessarily good news for mavericks with a personal fortune like De Narváez.

The opposition in general must now deliver on consensus and reform. Already there seems to be a feud brewing in the Radical party (UCR). Cobos was expelled "for life" from the Radical Party when he sided with the Kirchners in 2007. But the party, after Cobos severed ties with the Kirchners when he voted against the export duty hikes last year, recently announced he will be allowed back once he serves out his mandate. Yet Senator Gerardo Morales, the outgoing chairman of the UCR, declared on Friday the new party leader cannot be a member of the Cobos group that joined forces with the Kirchners. Morales was moving to quash speculation that Cobos had demanded in a backroom meeting not only to be the UCR's presidential candidate in 2011, but also wanted to handpick the new party leader. Morales' UCR has a standing agreement with Carrió's Civic Coalition and with the Socialist Party. The three parties ran together as the Social and Civic Accord in the June 28 election. Technically Cobos is part of the Accord. But he sees a rival in Carrió. The Accord came third in the City of Buenos Aires where it fielded Carrió as a candidate. The candidates endorsed by Cobos in his home province, Mendoza, thrashed the ruling Kirchnerites (roughly by 50 percent to 25 percent). Cobos had declared that he would make a bid for the presidency if he won in Mendoza, which he did. Talk of political reform could thus buy time for what is left of the Fernández de Kirchner administration machine.

The Kirchners lost badly, yes. But not everywhere. In Tucumán, where the President made the announcement, the ruling Kirchnerites won by a landslide. The Kirchnerites also won in small provinces like Chaco and San Juan. The Victory Front won 5.7 million votes nationwide. But the winning governors can claim most of those votes as their own. The Kirchners are now at the mercy of the Peronist governors. A sign that the President is leaning on the governors is that the new health minister, Juan Manzur, is a former Tucumán administration official. Manzur, whose challenge is to deal with the swine flu outbreak, replaced Graciela Ocaña, a non-Peronist leftist who quit on June 29. The government also has the support of Hugo Moyano, the boss of the CGT.

Yet Moyano early in the week bewildered many when he declared that "I have nothing against Duhalde."

Moyano's comment prompted speculation that he is ready to turn on Kirchner after defeat, especially because he is under fire from rival unions who criticize him for calling a rally in support of the government just before the elections.

Moyano had also clashed with Ocaña over the management of union healthcare funds that go through the ministry. He also objected to the new official from Tucumán named by Manzur to manage the healthcare funds. Moyano's truck drivers are also in salary talks and had threatened to call a strike due to lack of progress in negotiations. Yet when all was said and the Cabinet was reshuffled Moyano had not turned on the Kirchners. Recalde Jr's appointment as head of Aerolíneas Argentinas was seen as a move to appease Moyano. Manzur also named a new official backed by the CGT to manage the healthcare funds.

Macri on Thursday complained that Moyano had amassed too much power. Toppling Moyano as head of the CGT would not mean the end of him. Moyano's muscle comes from controlling the transport unions (now including Aerolíneas). He is unlikely to lose control of the transport unions, which can do a lot of damage when they go on strike, even if he steps down as CGT head.

Correction: Last week's column said the midterm election in Río Negro province was won by the ruling Kirchnerite Radicals. In fact it was won by the Peronist party, which also backs Kirchner.