October 22, 2014
K is for Kicillof
Events give the new economy minister more power
You know by now the way politics works. Stars will rise. Stars will fall. Hear the story about the governor of New Jersey and the blocked bridge? No? Well, go on and google it. It’s an amusing story about political foul play in the United States of America involving a blocked bridge during a rush hour. No more details about that here because these lines don’t cover world news. But the scandal up in New Jersey shows how fragile a political career really is.
Take the administration of President Cristina Fernández de Kirchner, in office since 2007. If you look at the big picture, and the way in which Fernández de Kirchner has centralized power since taking over from her late husband Néstor Kirchner in 2007, it’s easy to forget that governments depend on how individuals perform at the top once they get there.
Some things have changed in the CFK administration after the ruling Victory Front lost the midterm elections in all the major districts in October. The Cabinet has been reshuffled. Guillermo Moreno, the draconian Domestic Trade secretary, has been replaced with a much younger official with a friendlier face (Augusto Costa).
The Cabinet chief is now Jorge Capitanich, the governor of Chaco. Hernán Lorenzino, an expert in restructuring debt, has been replaced as economy minister with Axel Kicillof, who served as his deputy economy minister. All eyes are now on Capitanich and Kicillof.
Cabinet chief and economy minister: those are big jobs with big responsibilities. Technically, it is Capitanich who is the boss. Capitanich and Kicillof go back a long way. They worked together as economic consultants in the 90s. Kicillof, a Keynesian economist, is used to seeing Capitanich as his boss.
It all sounds so straightforward. Yet you’re talking about real people here. Real people who interact with other officials who are still in office including, for instance, AFIP tax bureau chief Ricardo Echegaray.
Suddenly it’s not that simple at all.
It’s all the more complex because Fernández de Kirchner, who underwent head surgery to drain a clot in October, has been keeping a low profile — presumably to avoid stress even when she is technically fully recovered. The president’s last major appearance came on December 10 when she headed the celebrations to mark 30 years of uninterrupted democratic rule in Argentina.
CFK’s decision to lie low is making some opposition leaders and observers anxious. The president has been criticized for not delivering a formal year’s end message to the population. December was not an easy month in Argentina. Police forces across the nation staged protests to demand salary hikes prompting a wave of looting. Then late in December, during an unprecedented heat wave, thousands suffered power cuts in Buenos Aires City and Greater Buenos Aires.
The outrages, which hit most of Buenos Aires’ middle class neighbourhoods, infuriated many during the hottest December in living memory. Roads were blocked by angry residents banging pots and pans. The wrath was directed at the two private utilities: Edenor and Edesur. But also at the national government, which heavily regulates the electricity distribution market.
Throughout all this Fernández de Kirchner, who used to lead a gruelling schedule and behaved like a leader constantly on the campaign trail before falling ill, has remained practically unseen. The president’s absence is a story in itself because she had been omnipresent before. Fernández de Kirchner returned to Government House on Tuesday after 19 days away. But she was donning dark glasses and could only be photographed leaving the Pink House to board a limousine that night.
The situation is also amusing because the opposition for years has complained that Fernández de Kirchner has been too talkative. The president has many times used national broadcasts to drive home her messages, often criticizing the opposition press.
Now the talking has been left down to Capitanich, who holds a daily press conference — and to Kicillof. Taxman Echegaray is also talking a lot. But Echegaray has been forced to address the issue of a luxury holiday to Rio de Janeiro over the new year at a time when Argentina has strict currency exchange controls in place. Echegaray called a press conference on January 3 to address the criticism and the negative coverage surrounding his trip to Rio with his family and associates.
It’s really up to you to decide what to make of Echegaray’s “blame it on Rio” story. Echegaray, who was reportedly ordered by the president to give an explanation, complained about “media lynching.” But he also said something else.
Echegaray declared last week that the national government was poised to reform the personal wealth tax. A bill to be sent to Congress, he said, would take the market price of real estate to estimate the wealth tax — a move that potentially would force thousands into paying more tax.
Capitanich, in one of his wordy morning press conferences, confirmed the personal wealth tax reform. The Cabinet chief’s statement prompted sweeping coverage of what effectively amounted to a whopping increase in the personal wealth tax. Trade unions are already highly critical of the current income tax levels. The public, especially in sophisticated Buenos Aires City, was in no mood to contemplate the prospect of dishing out more cash to meet new tax obligations after the crippling blackouts over the new year.
Echegaray’s move was astute. By tabling the personal wealth tax issue suddenly nobody was all that interested in the story about his trip to Copacabana. The personal wealth tax reform had unpopular written all over it. Yet its imminent debate in Congress, which is still controlled by the Kirchnerites, had been confirmed by Capitanich.
Capitanich’s morning press conferences are also a story apart. Fernández de Kirchner rarely, if ever, holds press conferences. Other CFK administration officials also have an awkward relationship with the press. Capitanich’s press conferences are a change. But are they a breath of fresh air? Maybe. Maybe not. But they do recall the morning press talks delivered in the nineties by Carlos Corach, who served as interior minister during the presidency of Carlos Menem (a conservative President).
Yet practically from the start Capitanich has at times been forced to eat his words. Critics have accused Capitanich of using long words to say very little. (It’s waffling and not waffles for breakfast if you have to endure the Cabinet chief’s press conferences, if you ask the critics.)
The Cabinet chief, during the blackouts, had declared that scheduling the power cuts sounded like a good idea. Not if you ask the rest of the administration. Raúl Alfonsín, the Radical who was president between 1983-1989, scheduled power outrages during his time in office and his reputation (and that of the Radical Party) was damaged for at least a decade. So what about the personal wealth tax?
Echegary said it was up for approval. Capitanich said the same. Then Kicillof spoke up. He was interviewed on Tuesday by a perfectly respectable journalist on a radio station.
There will be no change to the personal wealth tax, Kicillof said. The reform was discussed, but it had been binned because it would bring about a “negative socioeconomic effect.” Kicillof said that he had discussed the issue with the president who had made the decision.
The president was, if only briefly, back at the office on Tuesday. But a high-profile public appearance scheduled for Wednesday was cancelled. Yet Kicillof said in the interview that Fernández de Kirchner still has the last word on all matters.
On the issue of the personal wealth tax Fernández de Kirchner had sided with Kicillof, arguably the the most influential economy minister since Domingo Cavallo (the economy minister who embraced neoliberal policies under Menem).
The next morning Capitanich declared that he had no further comments on the botched tax reform. What Kicillof had said, Capitanich stated, will stand. The economy minister was at the wheel of the U-turn.
Also arguably Kicillof, at least for the coming weeks, is the most powerful official in the CFK administration. Clearly he has the president’s ear. Kicillof, who is technically a member of the youth group La Cámpora, also enjoys direct access to Máximo Kirchner (the president’s son). The president’s inner circle includes Máximo Kirchner and Legal Secretary Carlos Zannini. But there can be little arguing at the moment that Kicillof is second only to that inner circle (hey, his surname also starts with a K).
The luck of economy ministers, obviously, is tied to the economic situation. Kicillof will only continue to hold the kind of power that he enjoys today if he can deal with the problems hitting the economy: the currency exchange controls, the Central Bank’s dwindling foreign currency reserves, and inflation. Yet already one Kirchnerite lawmaker on Friday dared to name Kicillof as one of many potential Kirchnerite presidential candidates for 2015.
The economic situation will decide Kicillof’s political future. The economy minister swiftly announced that food imports (especially tomatoes from Brazil) would be opened if local farmers and manufacturers failed to abide by a “price watch” agreement recently signed to regulate the prices of nearly 200 products.