June 24 Argentina's President Cristina
Fernandez is likely to lose her majority in Congress in a
mid-term election on Sunday that could limit her influence over
economic policy and the ruling Peronist party [ID:nN24473130].
Her husband and predecessor, Nestor Kirchner, is seeking a
seat in Congress and faces a close race in the South American
country's most populous province -- a key electoral
battleground and Peronist stronghold [ID:nN2499175].
Here are possible scenarios on how the outcome could affect
CONTINUED UNCERTAINTY NO MATTER THE RESULT
The Kirchners are known for erratic, unorthodox economic
policies and policy-making will remain unpredictable whether
they are viewed as winning or losing the election.
It remains to be seen whether the government will take
steps to gain access to international credit markets to help it
meet some $20 billion in debt payments due by the end of 2010.
To return to credit markets, the government must restore
credibility to its highly questioned economic data, which
economists and analysts say overstate growth and understate
inflation, poverty levels and joblessness.
To demonstrate goodwill to markets, the government must
also repair relations with the International Monetary Fund and
agree to an IMF economic assessment of Argentina.
But it is not clear whether there is political will to
address the data credibility issue or the IMF.
KIRCHNER WINS BUT GOVERNMENT LOSES MAJORITY IN CONGRESS
The government would likely adhere to its policy of
increasing the state's role in the economy.
The government will cast a Kirchner victory, no matter how
narrow, as a sign of public support for the policies since he
would be the top vote-getter in the election.
The Kirchners have imposed price controls and export caps
on agricultural products in recent years to slow inflation and
nationalized several public-service companies.
A state takeover last year of private pension funds and the
flagship airline, Aerolineas Argentines, rattled investors and
A long-running dispute with farmers that has led to
repeated strikes against export taxes could also flare again.
A KIRCHNER DEFEAT AND LOSS OF CONGRESSIONAL MAJORITY
Since the new Congress will not be seated until December,
the government could brush off calls for change in economic
policy and use the following five months to drive its agenda.
Fernandez could use presidential decrees to enact any
politically unpopular measures or put pressure on companies or
sectors through regulatory agencies to accept government
If the Kirchners' political power is significantly
weakened, pressure could come from within the Peronist party
for changes in economic policy, particularly on farm exports.
Many Peronist lawmakers from rural areas have sided with
farmers' calls for less state intervention in agricultural
markets and lower export taxes.
Tensions with the business community will likely grow as
Fernandez seeks to show she remains politically powerful by
aggressively taking on big business.
In another approach, Fernandez could shake up her Cabinet
and seek broader consensus with political and business leaders
on some issues of economic policy to help build support for her
(Writing by Kevin Gray; Editing by Fiona Ortiz and John