October 31, 2014
Looking beyond the vultures
If in over a decade in power, Kirchnerism has at times shown a remarkable ingenuity and sometimes strained a point to draw a line in the sand and clearly identify an enemy, no such strategic sophistication is required when making a stand against the vulture funds. Paul Singer and his henchmen are the perfect rivals— so much so that the Cristina Fernández de Kirchner administration has gained allies in this battle far beyond these frontiers. Yet even though this battleground deserves its maximum priority, it would be a dangerous mistake to rest on these laurels and distract attention from the other very real problems of the Argentine economy, which all too often represent an own goal for the government.
Practically since advancing to the helms of the Economy Ministry and Central Bank respectively, Axel Kicillof and Juan Carlos Fábrega have with their different styles (and often ideas) dedicated almost all the eight months since to repairing the long-term dislocation to which both policy areas were subjected when largely under the heavy-handed sway of Guillermo Moreno (domestic trade secretary from 2006 to 2013). With these corrections since the last weeks of 2013, the government seemed to be implicitly admitting that it missed the best moment to switch gears when CFK began her second term on the back of an electoral landslide — until late last year they found themselves up against an alarming fall in Central Bank reserves, high inflation (in pesos and dollars alike) and economic slowdown which was starting to dent their electoral base (as clearly spelled out in the October midterm election results). Along with legislation and plans as palliatives for the most underprivileged sectors and the middle class (Pro.cre.ar, Progresar and increases in the universal child benefits), the uncomfortable partnership of Kicillof and Fábrega has tried to take some corrective measures which (in the best of cases) would start the electoral year of 2015 on a more hopeful footing than the two bleak previous years.
The ratification of the ruling in favour of hedge funds has had the twin effect of complicating the economic horizon of a lame-duck CFK while improving her political scenario. The government should not fool itself. If a process of job destruction, peso devaluation, high inflation and falling reserves is triggered, the good image of a minister who stood firm against the vulture funds and a grotesque judge could evaporate. When the closing phases of a government generate so many traumas, the jury of history tends to take its time to decide an acquittal.