| BUENOS AIRES
BUENOS AIRES Feb 1 Simmering political
tensions could worsen over the coming months as Argentine
President Cristina Fernandez and her rivals lock horns ahead of
the presidential election in October.
As Latin America's No. 3 economy booms, the leftist
Fernandez leads polls and is widely expected to seek
re-election following the death last year of her powerful
husband and predecessor as president, Nestor Kirchner.
He had been expected to run for a new term this year and
Fernandez's poll rating shot up after his death, but she lost
ground over the government's handling of a violent land seizure
by squatters in December. Sporadic power cuts and a shortage of
bank notes also weighed on her. [ID:nN07223296]
While Fernandez keeps voters and allies guessing about
whether she will run, numerous opposition candidates are
jostling for position and trying to stitch up alliances strong
enough to chip away at Fernandez's lead.
The squatter unrest unleashed finger-pointing by opposition
rivals and government ministers, setting the tone for what
looks like being a testy election campaign.
Here are some of the main issues investors are watching:
Several polls conducted since Kirchner's death on Oct. 27
have suggested Fernandez would win in a first round if the
election were held now, especially because no opposition
candidate has emerged as a strong challenger.
However, Fernandez's approval rating has dropped from a
high of above 50 percent following Kirchner's death to about 40
percent, according to pollsters Management & Fit.
She might be reluctant to announce her candidacy unless she
can stabilize that level of support, but grief -- she continues
to wear the black of mourning -- or family pressures might see
her step aside whatever the polls say.
Under Argentina's electoral system, candidates can win in a
first round with 40 percent of the vote as long as the
second-placed candidate trails by at least 10 percentage
points. Support of 45 percent guarantees a first-round
That level of backing in polls would also make it easier
for her to secure the loyalty of notoriously fickle Peronist
party bigwigs who control the vote-winning machinery --
especially in the densely-populated outskirts of the capital.
It could also help cement the support of Hugo Moyano, the
country's most powerful trade union leader, and deter any
potential challengers from within ruling party ranks.
What to watch for:
-- Fernandez's poll ratings and any signs of waning support
that could discourage her from standing.
-- Signs of strong opposition challengers emerging and
making significant headway in polls.
-- The outcome of an early primary in the centrist Radical
party and infighting among a dissident group of right-leaning
Peronists, which will help define the opposition line-up.
Kirchner was widely seen as the architect of Fernandez's
interventionist economic policies, which included nationalizing
private pensions and limiting grains exports, but she is likely
to maintain the status quo in the run-up to polling while the
economy grows at one of the world's fastest rates.
Fernandez has shown signs of being more pragmatic than her
husband by asking his arch-foe, the International Monetary
Fund, for help to restore credibility to Argentina's inflation
data and calling for a pact between unions and business on wage
Economy Minister Amado Boudou is heading another drive to
mend Argentina's ties with creditors -- overseeing negotiations
to repay more than $6 billion in defaulted debt to the Paris
Club nations. [ID:nN26132859]
Traders see a deal as crucial for the country to sell
global bonds for the first time since the $100 billion default
of 2002. Negotiations could be disrupted by Boudou's plans to
run for mayor of Buenos Aires. [ID:nN21256961]
Several minor cabinet changes, such as the appointment of
Nilda Garre as security minister and Juan Manuel Abal Medina as
media secretary, suggest Fernandez wants to promote progressive
leftists. Conversely, Cabinet Chief Anibal Fernandez and
Interior Minister Florencio Randazzo appear to have lost
What to watch for:
-- More signs of a softening in tone on economic policy,
where Kirchner's influence was strong.
-- Fernandez's approach to conflicts or street protests and
unrest following her security shake-up.
-- Clearer signs of a more definite shift to the left in
terms of social policy, rhetoric or further cabinet changes.
SPENDING AND FINANCES
Social spending is accelerating fast, highlighting
Fernandez's decision to prioritize economic growth despite
surging annual inflation ARCPI=ECI, estimated by analysts to
be running at about 25 percent. [ID:nN12194801]
She has announced increases to pensions and child welfare
benefits, measures that could help bolster her support among
the poor and assure die-hard Kirchner followers she is
respecting her husband's legacy.
By signing a decree to tap another $7.5 billion from
central bank reserves to repay private creditors, Fernandez
will be able to maintain spending, which has been growing by
about 40 percent year-on-year in recent months.
It remains to be seen how the government will finance the
Paris Club repayment, but further use of reserves is possible.
Although Fernandez will govern without a budget this year
because Congress failed to pass it, she will be able to use
decrees to extend the 2010 budget framework and expand spending
with little congressional oversight. [ID:nN29275761]
What to watch:
-- A surge in pre-election spending that could erode narrow
-- The Paris Club repayment and its impact on finances.
-- Any loosening of central bank monetary supply growth
STRIKES, SOCIAL UNREST
Farm leaders have threatened to resume strike protests if
the government does not lift export curbs on wheat. Fernandez
is unlikely to budge, meaning more protests are likely before
the election, but they are likely to be short and symbolic.
Any repeat strike by farm leaders would be aimed mainly at
tiring the government and exposing perceived differences within
the cabinet over farm policy.
Surging inflation is, however, fanning wage demands across
industries, and could aggravate social tensions and strikes.
Fernandez could face conflicting demands from her leftist
support base, the trade unions and the opposition.
Some trade unions opposed to Fernandez are expected to seek
pay rises of up to 35 percent, though pro-government unions are
more likely to heed her call for moderation. [ID:nN25191886]
December's squatter violence, partly blamed on soaring
rents in the slums, was a reminder of how unrest can escalate.
What to watch:
-- Involvement of pro-government trade unions in strikes or
protests, which might strain Fernandez's ties with Moyano.
-- Any perceived upswing in crime, which opposition could
use to attack the government. Polls show crime is voters' top
-- A repeat of last month's farm strike. [ID:nN18154389]
(Editing by Kieran Murray)