July 29, 2014
Another viewSaturday, April 26, 2014
I love you, I hate you, give me more
Once again, the relationship between big business and President Cristina Fernández de Kirchner’s administration is under strain. The declaration titled Bases para formulación de políticas de Estado (Bases to formulate state policies) published by the Foro de Convergencia Empresarial seemed more like a programme for the opposition than a serious proposal of reaching agreements between different political parties and business leaders.
The text included more than obvious phrases, as “strengthening the republican, representative and federal” regime of government, which is Article 1 of the Constitution. It also demanded a “strong tax cut,” and expressed strong criticism for official policies like the Price Watch programme, condemning “distortive state interventions” in markets.
First it was said that the Foro de Convergencia Empresarial spoke for every business chamber. Then, some of the main business leaders said they were not aware of the statement, but still the powerful Argentine Business Association (AEA) as well as the Liaison Board (agricultural businesses) backed it.
Meanwhile, President Fernández de Kirchner said that the media are trying to “install that business leaders are on a warpath against the government.” She praised some of the business leaders and signed an agreement with them in order to create more jobs.
If we take a broader look, we can see that this sort of conflict reveals a lot about the “transitional” moment that politics and the economy are going through in Argentina. On the one hand there is a question of how President Cristina Fernández de Kirchner’s administration will fare in economic terms when it comes to an end in December 2015.
Máximo Kirchner, the president’s son, said in one of his rare appearances that some sectors “desperately need the government to fail. Every now and then, some analysts doubt that the economy will withstand without enduring a major crisis. Last January, when the economy went through a tough time, which included a devaluation of the peso that the administration had resisted for years, those gloomy forecasts grew. But by mid-February things started to look differently, more stable.
In the middle of the shouting match that the economic public debate usually turns into in Argentina, the new economic tools handed by the government — for example the higher interest rates applied by the Central Bank — are also part of the discussion for the business sector. Is this just a kind of “pragmatism” or does it imply a whole different approach? Does this policy pave the way for a stronger Cristina or will it only lead the way to a more market-friendly successor?
The market now looks really puzzled and that’s not entirely bad news for a government that every day is depicted as nothing more than a leftist demon by the business community. A recent Bloomberg story shed some light on this situation. It reported how investment banks like UBS and Jeffries Group predict that it’s not a good time to invest in Argentina, while former Deutsche Bank AG trader Luis Caputo is “looking to bet as much as US$300 million they’re wrong.”
“The government is making the necessary adjustments to rebuild trust and improve accounts,” Caputo said, adding that “foreign investors are starting to watch Argentina more closely, and when they realize its economic and financial position is a lot more solid than other emerging markets, stock and bond prices will continue correcting.”
The Financial Times said in a recent editorial piece that Argentina, as well as Venezuela and Ecuador — which it calls “Latin America’s ‘bad boys’” — are “starting to put their economies in order, it seems.” The ultra-neoliberal paper warned its readers to take this pragmatic turn “with a pinch of salt.”
“It is probably too much to expect the reforms to be accompanied by an end to the cheap posturing of recent years. Still, it will be fun to watch leaders eat their words,” the paper added. It is also fun to see a pro-market newspaper’s puzzled reaction when Latin American leaders still show their political strength even when they face rough economic times.
Also, one of the critical business leaders of the Foro de Convergencia Empresarial, Miguel Blanco, said in an interview with El Cronista that “macroeconomic conditions, even when they are not as spectacular as they have been in the past years, still look very good.”
“The conditions to boost exports and investment projects are still there,” said Blanco.
So are these the worst possible times for Cristina Kirchner? Heading for eleven years in office is Kirchnerism expected to finish with a major economic crisis? The IMF recently recommended “further policy adjustments” for Argentina. Is it true then that the Pink House is already leading a major “orthodox turn” like most of the opposition media now denounces? Why is it that if more adjustments are needed, countries like China confirmed fresh financing for infrastructure projects? Or state-controlled YPF gets closer to foreign partners wishing to be included in Vaca Muerta’s oil ventures?
Maybe that’s because things are never crystal clear when it comes to the power issue of who gets what, when and how, an issue that will be widely debated in the next two years to come.
* Nicolás Tereschuk is the editor of the blog artepolitica.com