| BUENOS AIRES, June 1
BUENOS AIRES, June 1 Argentine President
Cristina Fernandez is far ahead in the polls five months before
a presidential election, her position boosted by brisk economic
growth and the absence of a strong opposition challenger.
Candidates have until June 25 to register for compulsory
primaries ahead of the Oct. 23 election, and the center-left
leader will likely keep voters guessing about whether she will
run until the last minute. [ID:nN30241693]
Fernandez has said she is "not dying to be president
again," but she is almost certain to run. Political analysts
say such comments and her decision to postpone an announcement
are aimed at whipping up support. [ID:nN12243558]
Fernandez's popularity surged late last year after the
death of her powerful power-broker husband, Nestor Kirchner,
who preceded her as president. [ID:nN04130826]
Some analysts expected her approval ratings to slide once
public sympathy had ebbed, but she has widened her lead over an
ever-shrinking pool of opposition challengers.
That has spurred key opposition figures such as Buenos
Aires Mayor Mauricio Macri to quit the presidential race.
Betting that a Fernandez victory in October will mean a
slightly steeper depreciation of the peso ARSB=, investors
are putting more money into dollar-denominated bonds and
American Depositary Receipts (ADRs) as the vote draws closer.
Safe-haven demand for dollars, which tends to accelerate in
the run-up to elections, has increased since the start of the
year, but currency traders say the central bank will intervene
to avert any significant fluctuations in the exchange rate.
Here are some of the main issues investors are watching:
Numerous polls conducted since Kirchner's death on Oct. 27
have suggested Fernandez could win in a first round of voting,
especially as opposition leaders struggle to cement strong
alliances or abandon their presidential hopes. [ID:nN26210915]
Under Argentina's electoral system, candidates can win in a
first round with 40 percent of the vote if the second-placed
candidate trails by at least 10 points. Support of 45 percent
guarantees a first-round victory.
Fernandez's approval ratings rose to 53.9 percent in the
latest monthly poll by the Management & Fit consulting firm,
and some surveys have shown more than 45 percent of voters
would cast their ballot for her.
Her nearest rival, center-left Congressman Ricardo
Alfonsin, trails far behind. His success may hinge on whether
he is able to sew up a pact with Hermes Binner, the Socialist
governor of Santa Fe province.
If Binner chooses to launch his own presidential bid,
Alfonsin could lose the support of the Socialists and smaller
leftist parties. Some have already expressed doubts about
Alfonsin's efforts to court dissident Peronist lawmaker,
Francisco De Narvaez, seen as a center-rightist.
What to watch for:
-- The announcement of Fernandez's candidacy and any
reaction from markets, which have largely factored in a
-- Her choice of running mate. That could be a key sign of
her policy direction in a second term.
-- Outcome of negotiations between Alfonsin, Binner and De
Narvaez and the impact of any deals on the polls.
There have been signs of increasing strains in relations
between Fernandez's government and powerful union leader, Hugo
Moyano, since Kirchner's death.
Although he has repeatedly voiced support for her
re-election bid, Moyano is also demanding greater
representation for union figures in the government and on lists
of electoral candidates. [ID:nN22178023]
Fernandez has also been forging closer ties with
non-Peronist center-leftists such as congressman Martin
Sabbatella and a young Kirchnerista group called La Campora
that was founded by her son, Maximo Kirchner.
That strategy could further hurt ties with Moyano as well
as the Peronist mayors who control the vote-winning machinery
in the densely populated outskirts of Buenos Aires.
After some initial signs that she might be more pragmatic
following the death of her combative husband, Fernandez has
increased pressure on the private sector this year -- ordering
businesses to cap prices, fining economists over their
independent inflation forecasts and moving to increase the
state's presence on company boards. [ID:nN13300029]
She has also imposed new import obstacles on manufactured
goods and forced carmakers to make sure their imports do not
exceed their exports.
What to watch for:
-- Possible tensions with Moyano over electoral lists and
the inclusion of unionists.
-- Trade spat with neighboring Brazil over Brazil's move to
slow car imports and any sign it could hit industry output.
INFLATION AND FINANCES
High grain prices and strong demand from Brazil underpin
the strength of the Argentine economy, but economists warn that
surging consumer prices are becoming entrenched -- leaving a
tricky legacy for the next government.
Public spending is up more than 30 percent from last year,
highlighting steep wage hikes and Fernandez's decision to
prioritize growth despite rising inflation ARCPI=ECI,
estimated by analysts at above 20 percent annually.
Hefty growth in tax revenue and social security
contributions have allowed her to raise pensions and child
welfare benefits and she has continued to tap central bank
reserves to service the public debt.
However, economists say loose fiscal and monetary policies
make rising prices ever harder to contain, raising the appeal
of imports due to the nominally stable exchange rate, eroding
purchasing power and fueling pay demands that often lead to
Strikes have battered the energy sector in recent months,
causing sporadic fuel shortages and hitting oil exports.
What to watch:
-- Ongoing wage negotiations and strike threats in
sensitive industries such as the grains export sector, though
several key unions, including Moyano's truckers, have already
agreed to wage hikes.
-- Further deterioration in the country's trade surplus and
budget balance if transfers from the central bank and pensions
agency are excluded.
-- Signs of economic policy direction if Fernandez is
elected in October.
(Editing by Kieran Murray)