December 6, 2013
The taxman cometh not
CFK spares most workers from income tax ahead of vote
The midterm elections in October look so far way possibly because they will hold little surprises. The ruling Victory Front coalition lost the primaries last month in Buenos Aires City, Córdoba, Mendoza and Santa Fe. It also lost in Buenos Aires province, the nation’s largest voting district. The battle in Buenos Aires province, a Peronist bastion, was won by Tigre Mayor Sergio Massa, a former Kirchnerite who now heads his own coalition called the Renewal Front. Polls show that, if anything, Massa could win the election in Buenos Aires province by a wider margin over Martín Insaurralde, the Lomas de Zamora mayor handpicked by President Cristina Fernández de Kirchner to head the Victory Front’s ticket of candidates to the Lower House of Congress.
The Victory Front’s defeat looks bad. But because the real midterm vote is in October Argentina is currently not in the state of agitation associated with a period of political instability.
The opposition is behaving itself. Massa is strategically lying low and all he really has to do until October is keep still to win again. The trade unions that oppose the CFK administration, headed by the teamster Hugo Moyano, also seem to be leaving any agitation they might have in mind for after October. But if the Victory Front’s defeat is confirmed in October then an entirely different game of chess will begin. The agitation that is now lacking will hit home because Fernández de Kirchner will formally enter the lame duck era.
So for the good of yourself and your loved ones, if you live and work in Argentina, what you need to do on election night in October is to take a closer look at the results to answer a few crucial questions.
Will the Victory Front, the Kirchnerite coalition that includes the Peronist party, still be in control of Congress? Will the Victory Front manage to score the same result as in August? Or will it lose even more votes?
Campaigning still makes sense because crucial parliamentary seats will be up for grabs in October. It’s easy to forget that this is a midterm election. Massa behaves like a potential presidential candidate. But the Victory Front needs to at least stay in control of Congress if it is to withstand the instability that will come with defeat after October.
Also interested in landing softly is Buenos Aires province Governor Daniel Scioli, a Kirchnerite Peronist who has cultivated a moderate style and still performs well in public opinion polls. Scioli is canvassing in favour of Insaurralde and, unlike Massa, he has not quit the Victory Front.
When Néstor Kirchner, the president’s husband and predecessor, died suddenly of a heart attack in 2010 it was Scioli (Kirchner’s vice-president between 2003-2007) who was left in charge of the Peronist party. Massa is very close to defeating the Kirchnerite machine in October. But he still has to defeat Scioli and the Peronist party machine that he controls and is still at the service of Fernández de Kirchner. Massa and Scioli reportedly engaged in secret negotiations before the deadline to name congressional candidates in June. But the negotiations broke down and Scioli did not leave the Victory Front.
Scioli is only one of a number of provincial governors who have not quit the Victory Front and ultimately pull the strings of the Peronist party. Those governors, including Scioli, closed ranks at a summit in Corrientes on Friday in support of the Kirchnerite candidate for governor.
Kirchner himself, when governor of the Patagonian province of Santa Cruz in the nineties, was a product of the Peronist party. The Victory Front was the coalition Kirchner established nationwide on running for president in 2003. All this matters now because Scioli has already announced that he will run in the Peronist party primaries to elect a presidential candidate in 2015. Scioli had declared that he would only not run for president if Fernández de Kirchner moved to reform the Constitution in order to seek a third consecutive mandate in office.
Fernández de Kirchner never formally admitted plans for a third term in office. But if she ever did have those plans in mind then they seem to have been crushed for good by August’s primary results.
Technically the Peronist party (also known by its acronym in Spanish: PJ) must also hold elections to vote a new national leadership before the end of the year. The same stands for the Buenos Aires province branch of the Peronist party, which is also presently controlled by Scioli and the Kirchnerites and not by Massa. Will Massa move to defy Scioli’s authority as party chief to gain control of the Buenos Aires province branch of the Peronist party? Good question. And what will the Peronist party, meaning the president and the governors, do about the looming PJ election. It has been postponed in the past. It could be postponed again. But eventually the PJ will have to settle on a chairman to steer things until 2015.
Fernández de Kirchner has played a bruising political game at breakneck speed. The Victory Front lost and is bruised — it also came very close to breaking its neck.
What will CFK do about all this? Here’s what: the president, after throwing a fit in public days after defeat, is now trying to regain control of the situation by driving home the message that she is still the head of state.
Fernández de Kirchner on Tuesday called a new meeting with business leaders, trade unionists and bankers and during the talks announced that the income tax floor had been substantially raised to exempt gross monthly salaries of up to 15,000 pesos a month from the taxman’s axe.
The income tax is hugely unpopular and ultimately turned into a campaign issue because the national government has not updated it to keep up with inflation. Massa during the campaign vowed to table a bill in Congress to raise the threshold. But Fernández de Kirchner still has a mandate and on Tuesday she showed reflexes by announcing the tax break for workers, which also includes family benefit increases. Business leaders and bankers backed the idea of slapping a 10 percent tax on company dividends and a 15 percent tax on unlisted stocks to partially compensate for the reform.
The change means that only 10.2 percent of the registered work force will pay income tax. The issue, despite the technicalities, is likely to carry less of a punch in October. But did the president’s announcement come too late to do any electoral good?
The Victory Front lost the election on August 11. Fernández de Kirchner’s public tantrum came on August 14. But it was then that she also called for talks with the “big players” (excluding opposition political parties).
The first meeting with business leaders, bankers and trade unionists took place in Santa Cruz province on August 21. The product of the second meeting was the income tax break announced on Tuesday.
There was no anger vented by the president at Tuesday’s talks. Defeat apparently has sunk in and has had a sobering effect on the Kirchnerite camp.
Victory Front candidates, in a shift of strategy, are now making appearances on media outlets controlled by Grupo Clarín. The national government and Grupo Clarín, the nation’s largest conglomerate, are at odds over the Media Law approved in 2009. The law has been frozen by injunction requests filed by Grupo Clarín and the case has gone all the way up to the Supreme Court.
The Supreme Court presided over two days of public hearings on Wednesday and Thursday to listen to the case of the national government and Grupo Clarín, which claims that the articles of the law that force it to divest (especially in the cable television market) are unconstitutional. The Supreme Court’s ruling on the Media Law will come at a time the electoral mood does not favour the Victory Front. But election battles must still be fought and the Victory Front also lost the midterm elections in 2009 with Kirchner as its main candidate in Buenos Aires province.
Argentina has a history of voters punishing ruling parties in midterm elections. It also has a history of traumatic ends for presidents. Raúl Alfonsín, a Radical elected president in 1983, had to cut short his presidential mandate in 1989 during the hyperinflation crisis. Fernando de la Rúa, a Radical elected president in 1999, quit under pressure late in 2001 during the financial meltdown that ended with Argentina announcing (under the brief caretaker presidency of Adolfo Rodríguez Saá in December, 2001) the biggest sovereign debt default in history.
A big question is how Fernández de Kirchner will end her days in office. She is still very much in charge and it is not clear at all that what voters want is a traumatic end in 2015.
Fernández de Kirchner on Monday used a national broadcast from Government House to announce that Argentina will offer a new debt swap on restructured sovereign debt to shift payment from the United States to Buenos Aires. Fernández de Kirchner’s announcement came in reaction to a New York appeals court ruling on August 23 ordering Argentina to pay 1.3 billion dollars to hedge funds that refused to accept drastic discounts when the republic restructured its debt in 2005 and 2010.
Fernández de Kirchner on Monday contested the US court’s accusations that Argentina was systematically defying orders to pay. Argentina, the president said, is a “serial payer” of debt.
Argentina can still take its case to the US Supreme Court and a stay freezing proceedings means that the holdouts, called “vultures” in Argentina, will not collect their money just yet.
The New York court ruling also criticized the so-called Lock Law that does not allow for the swap to be reopened. But the new bill submitted to Congress does reopen the swap indefinitely. The Lock Law is close to being no more. Government sources have meanwhile yet to confirm if they will go ahead with the president’s announcement that creditors will from now on be paid in Buenos Aires to avoid future US court rulings.
The republic is once again close to a technical default. But the case in the US is not over and a final verdict could be delayed until 2014. And what comes after 2014? 2015, that’s what. Do voters want a soft landing in 2015? Or will they accept a crashing end to the Kirchnerite era? You answer that one.