| BUENOS AIRES
BUENOS AIRES The death of former President Nestor Kirchner, the current president's husband and a strong contender to succeed her in the 2011 presidential race, has shaken Argentina's political landscape.
President Cristina Fernandez, whose approval ratings have risen this year in tandem with brisk economic growth, may now adopt more moderate, consensus-building policies as she seeks to shore up her administration without the support of her powerful husband.
Kirchner was widely seen as the architect of Fernandez's interventionist economic policies and some of her more controversial measures, including her fights with farmers' groups and media companies.
Without her closest ally and behind-the scenes power broker husband, the center-leftist president could now change tack.
The center-leftist Fernandez will likely maintain the couple's intimate circle of close advisers, although she may also seek to cement ties with more moderate Peronist figures such as Buenos Aires provincial Gov. Daniel Scioli.
Here are some of the issues investors are watching:
The Peronist faction that Kirchner led will still likely field Fernandez as its presidential candidate for 2011, but she may look for a running mate acceptable to other factions of the fragmented party, such as Scioli.
Both Kirchner and Fernandez had governed with a combative approach, clashing with powerful farmers' groups, the Roman Catholic church, media companies and the armed forces.
Kirchner's death could see dissident members of the party opposed to the government gain influence and prompt more moderate policy in South America's No. 2 economy. That prospect drove Argentine financial asset prices higher on Wednesday.
Argentina's splintered opposition has failed so far to form a united front against the government despite winning control of Congress in last year's mid-term elections, but Kirchner's death could boost their confidence as campaigning heats up.
There had already been some signs the opposition is getting organized, such as blocking the government's 2011 budget bill and passing a law to hike pensions, which Fernandez swiftly vetoed saying it would have bankrupted the state.
Vice President Julio Cobos, who has broken with Fernandez and is among the emerging field of opposition presidential candidates, cast the deciding Senate vote against the government on the pensions bill -- apparently keen to emphasize his place in the rival camp.
Cobos was among those who paid tribute to Kirchner on Wednesday, but after the period of mourning is finished, the opposition is likely to go on the offensive.
Fernandez's popularity hovered around 20 percent after last year's mid-term elections, but the economic rebound has lifted it to about 35 percent, a level it has maintained for several months, pollsters say.
What to watch for:
-- Signs of political alliances between Fernandez and possible running mates, or a more conciliatory approach on policy.
-- Signs that Fernandez's approval ratings get a boost following Kirchner's death.
-- Any signs of strong opposition challengers emerging to challenge her.
-- Any fresh political tensions, which bubbled up following the October 20 murder of a leftist activist who was shot dead during clashes with members of a railway workers' union.
Doubts over state finances have eased due to the sizzling economic recovery in Argentina, a bumper soy harvest and the completion of a $12.3 billion bond restructuring to clean up the damage from a massive 2002 debt default.
But while the financing outlook has brightened, analysts say steeper social spending ahead of the election could stoke annual inflation running at about 25 percent, far above official estimates and fueling pay demands.
Political analysts say inflation remains the government's Achilles heel as it tries to shore up backing among the urban poor, its key support base.
Public spending is not expected to slow and this, combined with an expansive monetary policy, is seen stoking inflation to between 25 percent and 30 percent by year-end, forcing the central bank to step up short-term debt sales.
What to watch:
-- Any sign opposition senators might be able to muster enough votes to approve a bill to reform the questioned INDEC national statistics agency.
-- Fresh government income-boosting measures that could prove inflationary, such as tapping credit markets to allow higher social spending as the election nears.
-- Further loosening of the central bank's money supply targets.
Tax revenue is picking up quickly following last year's slowdown, growing at rates of above 35 percent in recent months year-on-year, but public spending is also growing rapidly and is unlikely to ease as the election draws closer.
After her veto of the opposition-led pensions hike law, Fernandez may wan to raise pensions and other welfare benefits herself, partly to avoid being punished by voters.
Argentina's completion of the long-awaited debt swap has boosted investor appetite for sovereign bonds, although the government has not yet issued a $1 billion bond as originally planned.
Economy ministry officials have said repeatedly the government will wait until market conditions are right, stressing that there is no need to sell debt.
Opposition lawmakers are pushing several measures that would hit state finances, such as a pensions hike, but so far they have failed to push them through the upper house.
Opposition legislators also want to cut grains export levies, which account for about 10 percent of state revenue, but they have not yet put a bill to the vote.
What to watch:
-- Global risk appetite and whether yields fall low enough to encourage a new bond sale.
-- Creative accounting to maintain primary budget surpluses, such as increased use of central bank profits.
-- Any sign that pre-electoral public spending is accelerating faster than tax revenue.
CONFLICT WITH BUSINESS
Business leaders have increasingly spoken out against Fernandez's administration in recent months as her escalating row with Argentina's top media group Clarin sharpens political divisions, although Kirchner's death could ease tensions in the short term.
Relations with the business elite could be further strained over a union-led bill that would make companies share 10 percent of their net profits among employees. The government has not expressed support for the bill so far.
What to watch for:
-- Any sign Fernandez will urge her congressional allies to back the bill in Congress.
-- Any signs of Fernandez reaching out to big business as she seeks to consolidate her position following Kirchner's death.
-- Involvement of any pro-government trade unions, such as the truck drivers, in strikes or protests, which might end up testing Fernandez's ties with powerful union leader Hugo Moyano or irking business leaders.
(Editing by Simon Gardner and Kieran Murray)