| BUENOS AIRES, July 5
BUENOS AIRES, July 5 President Cristina
Fernandez is seeking re-election and polls show she could take
victory in the first round on Oct. 23, helped by brisk economic
growth and the absence of a strong opposition challenger.
Fernandez ended months of speculation in June by confirming
she will run for a second four-year term, vowing to deepen the
leftist policies that have infuriated many business leaders and
farmers in Argentina, Latin America's No. 3 economy.
The center-leftist leader has billed her candidacy as a
tribute to the legacy of her late husband and predecessor as
president, Nestor Kirchner, who died late last year.
Analysts say they expect few changes to Fernandez's
interventionist and unpredictable policy-making in the likely
event she is re-elected, although she could be forced to make
some adjustments. [ID:nN1E75L0A7]
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.
Financial markets had largely factored in Fernandez's
expected re-election bid and her decision to name her economy
minister, Amado Boudou, as her vice presidential candidate did
not impact Argentine asset prices. [ID:nN1E75O06V]
Here are some of the main issues investors are watching:
Fernandez has support of about 40 percent and an advantage
of at least 20 points over her nearest rival, centrist
congressman Ricardo Alfonsin, in most opinion polls. That
points to her being re-elected in the first round and averting
a riskier run-off. [ID:nN1E75M0QI]
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.
Argentine politics are notoriously volatile, however, and
less than four months from polling day, the president's easy
election for another four years cannot be guaranteed.
Some analysts say her popularity has taken a hit from a
corruption scandal at prominent human rights group Mothers of
the Plaza de Mayo, which has close government ties. The scandal
may fizzle out without serious implications for Fernandez, but
any more similar debacles could alter the election outlook.
Even if she loses several points of support over the coming
months, she will only be at serious risk if her rivals can
mount a more convincing challenge.
Alfonsin has stitched up an alliance with dissident
Peronist lawmaker, Francisco De Narvaez, who is popular in the
key electoral district of Buenos Aires province.
Other opposition efforts to forge strategic pacts have
failed, however. Hermes Binner, the Socialist governor of Santa
Fe province, has launched his own candidacy after talks with
Alfonsin broke down. Binner's candidacy is seen stealing votes
from both Fernandez and Alfonsin, as well as center-left
congresswoman Elisa Carrio.
Some trade union leaders and old-school Peronist leaders
are said to be unhappy with the ruling party's electoral lists,
saying they have been passed over in place of young
pro-government loyalists in the La Campora group founded by her
son, Maximo Kirchner.
What to watch for:
-- Fernandez's poll ratings and any sign of a drop in
support big enough to make opposition challenges a threat.
-- Outcome of provincial and mayoral elections in July and
August in Buenos Aires, Santa Fe and Cordoba and whether that
could influence national outlook.
-- Any sign of rebellion among traditional Peronist allies
over electoral lists.
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 voiced support for her re-election bid,
Moyano wanted greater representation for union figures in the
government and on lists of electoral candidates. Boudou is an
acceptable vice presidential candidate for the unions, but
Moyano would have liked Fernandez to choose a figure directly
linked to his CGT labor confederation.
Emboldened by the opinion polls, Fernandez seems more
willing to challenge the government's traditional alliances.
She has been forging closer ties with non-Peronist
center-leftists such as congressman Martin Sabbatella as well
as members of La Campora.
Many supporters from the ranks of the youth group will run
as ruling party candidates on Oct. 23, underlining Fernandez's
commitment to rebuild the support base she largely inherited
from her husband.
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 cut their trade deficits, leading
some to export goods from wine to biodiesel.
What to watch for:
-- Possible tensions with Moyano, mayors over electoral
lists and any defections from ruling party ranks
-- Suggestions over who might run the economy in a second
Fernandez term, due to Boudou's move to the relatively
powerless role of vice president
-- Hints on policy pledges for a second term
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
These issues could become more pressing from 2012 onward if
the global outlook deteriorates.
What to watch:
-- Ongoing wage negotiations and strikes in sensitive
industries such as the energy sector, which has been hard hit
-- Further deterioration in the trade surplus and budget
balance if transfers from the central bank and pensions agency
(Editing by Kieran Murray)