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Kirchner Continues His Daring Departure from Past

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Council On Hemispheric Affairs
Monitoring Political, Economic and Diplomatic Issues Affecting the Western Hemisphere

Memorandum to the Press 04.75
Word Count: 2425

Wednesday, 20 October 2004

Argentina’s President Kirchner Continues His Daring Departure from Past Practices


• For better or for worse, Argentine President Nestor Kirchner has taken an almost un-Argentine approach to dealing with the social unrest caused by the nation’s piqueteros as well as in IMF discussions regarding the country’s defaulted debt.


• Kirchner’s recent efforts to crackdown on extremist piquetero organizations of hardcore unemployed workers in response to growing middle class demands for a restoration of civil order have begun to stray from the non-aggressive tactics used by Presidents Carlos Saul Menem and Fernando de la Rua.


• By standing firm against IMF and bondholder demands for payment of a larger percentage of their foreign debt to be made, the Kirchner administration has shown that Argentina is not to be trifled with, but will this last?


• Kirchner’s policies appear to be strengthening Argentina’s economy as foreign lenders realize that the social order is recovering, and foreign investors again seem bullish regarding the country’s near-term prospects.

On August 14, Argentina’s Minister of the Interior Aníbal Fernandez commented on the piqueteros (unemployed workers) who continue to confront the state by means of roadblocks and the seizure of buildings, saying they should “quit fooling around and get to work.” Two days later Fernandez incited more controversy when he implied that what this group really fears is not so much police clubs but physical labor. Thus began President Nestor Kirchner’s new round of more aggressive crackdowns on this unique form of social mobilization. Despite the embarrassment Fernandez’ comments may potentially bring to Kirchner’s left-of-center Peronist Party (PP), which historically has been mainly identified with the country’s blue collar trade union movement, they do reveal an important component of the administration’s thinking.

Kirchner, who ascended remarkably to the presidency in May 2003, has strayed from the usual practices of his predecessors who strived to squash piquetero-like movements in the past through repressive measures. He has likewise strayed from past policies through the bold manner in which he insisted that there be a 75 percent depreciation of the country’s private debt. Carlos Saul Menem (1989-1999) and Fernando de la Rua (1999-2001) adopted an official line that prioritized, in the words of the former’s foreign minister, Argentina’s “carnal relations” with the United States and, by extension, Washington’s multinational and financial interests. In contrast, Kirchner has adopted an economic revitalization program with heavy populist undertones and has taken a strong negotiating stance with foreign and domestic creditors that have assuaged the fears of many Argentine citizens who previously felt that their country had fallen under the influence of self-serving international forces. As president, this former and relatively anonymous governor of the sparsely populated province of Santa Cruz has broken rank with his recent predecessors and, regardless of the solidity of his actions, has forged ahead on a path that offers great opportunities for Argentina, but one fraught with risks and obstacles.

Roots of Discontent and Economic Woes
One of the most indelible images emanating from Argentina during its economic meltdown in late 2001 was of thousands of enraged workers taking to the streets to express their unbridled anger at the economic and political elite whom they believed permitted their once prestigious country to nearly sink to the level of a “banana republic.” Their fury did not discriminate between domestic or foreign entities; in fact, all were to blame for the catastrophe that had befallen them. The disastrous events that transpired across the country culminated in December with the surreal chaos of five figures passing through the presidency in just two weeks and the largest sovereign loan default in history. These occurrences exposed structural deficiencies, mismanagement and malfeasance rooted in the ten-year Menem presidency, with its strict adherence to neo-liberal economic policies and penchant for corruption. It also brought to the forefront a new phenomenon of intensified grassroots social mobilization that Kirchner has had to confront.

Communities Look Inward
Beginning in the late 1990s, unemployment and poverty rates approached levels previously unseen in Latin America’s third largest economy. By 2001, the country teetered towards defaulting on its foreign debt as the de la Rua administration responded with more stringent austerity measures, including a reduction of government salaries and a reexamination of the nation’s decade-old system of convertibility that tied the peso to the dollar. The resulting charged atmosphere provided the impetus for the emergence of labor-based community organizations whose members came to be referred to as piqueteros. The first to organize these popular assemblies were workers laid off due to a slumping economy and the privatization of the state energy company. These community forums grew in breadth and intensity in the wake of government apathy, corruption, misguided policies and political infighting. They offered participants what the state did not - the right of open expression and dissent. Piquetero assemblies organized roadblocks and staged noisy rallies as an effective method of drawing attention to their plight.

As an already severe recession worsened, the level of participation in piquetero organizations grew exponentially, as they sprouted up in almost every major city and province in Argentina. By the end of 2001, fifty percent of Argentina’s 37 million citizens were living under the poverty line and, because of the desperate nature of the economic situation, piquetero organizations became one of the only recourses for self-preservation. The movement thus became the nation’s galvanizing political force – one that brought in elements of the middle class hurt by the layoffs and monetary devaluation. A chant commonly heard during this period, equating worker and middle class symbols of protest, exemplified this new found union: “Piquete y cacerola, la lucha es una sola (Pickets and pans, the struggle is one)." As these movements gained strength in numbers and influence, Menem and de la Rua took forceful measures when confronted with riotous crowds.

Running Out of Gas
But the last few months have witnessed much of the piqueteros’ momentum dissipate as economic and political factors have inexorably worked to marginalize many of its factions. Drastic economic improvements have allowed the middle class to rebound from its recent suffering and the piquetero movement is now seen by many Argentines as little more than a bothersome, if not nasty, inconvenience. The once-popular demonstrations have, in recent months, caused the general public to lose sympathy for the unemployed. Although unemployment continues to be the most pressing concern among Argentines, a poll published on August 1 by the Buenos Aires’ daily El Clarín showed that personal security and the tranquility of the social order have become nearly as critical, and the almost daily blockages of key bridges and thoroughfares have resulted in most Argentines beginning to lose patience with the piqueteros.

Kirchner’s ascension to the presidency has also altered many of the rules of the game. According to popularity polls, more than half of all Argentines feel that they are no longer dealing with a president who is beholden to the interests of foreign and domestic multinational corporations, international financial institutions or, most importantly, the proponents of neo-liberalism. For most of his presidency Kirchner has made it absolutely clear that he would not utilize security forces in an overly oppressive manner to curb what he considers an Argentine’s legitimate right to free expression. Differing from a long line of presidents who resorted to violent responses to street demonstrations, his strategy has been to manage public demonstrations without utilizing repressive measures. When protestors stormed the nation’s legislature on July 16, Kirchner issued a presidential order to police to not intervene in the incident.

The government has also solidified ties with several conciliatory piquetero groups. On September 20, several of them met with government officials, including Minister of Social Development Alicia Kirchner (the President’s wife) and Minister of Labor Carlos Tomada, to outline their collaboration with the government and open a positive dialogue for future progress. But as aggressive behavior has escalated in the streets, the president has been forced to adopt a more traditional policy rooted in prevention and containment which he hopes will demonstrate to his constituency his commitment to social order. Instead of sending armed police to physically disperse the crowds, Kirchner is using his dialogue with the majority of the groups to reach peaceful agreements. But this stance is ineffective against the more extremist piquetero groups, and Kirchner has had to resort to stronger measures.

Enough is Enough
On August 24 an Argentine judge issued an arrest warrant for Raul Castells, leader of the hard-line piquetero group, El Movimiento Independiente de Jubilados y Pensionados (MIJP), on extortion charges related to the group’s occupation of a casino in the city of Resistencia last fall. This was the first indication of the government’s growing impatience with hard-line demands. Since then, the government’s approach to the conflict has not wavered. During the week that followed Castells’ arrest, 123 protestors were detained in separate incidents, including another militant leader, Aníbal Veron Gustavo. On September 5, El Clarín reported that government sources had told them that “Kirchner had issued an order (to Minister of the Interior, Aníbal Fernandez) to remove the social conflict from the streets.” Furthermore, on September 24, the Buenos Aires City Council approved a regulation imposing stronger sanctions against participants in public demonstrations if traffic flows are altered. It is important to note that despite this shift in policy towards more aggressive tactics, Kirchner’s administration has by no means decided to return to the violently repressive line espoused by his recent predecessors.

While Kirchner no doubt continues to try to improve the economic situation of Argentina’s neediest, he has in recent months been increasingly proactive in ensuring that society as a whole enjoys peace and security. In addition to these recent decisions to crack down on belligerent piquetero groups, Kirchner faces a daunting task in fulfilling the routine needs of the poor and unemployed as well as in restoring social peace in order to placate the better off middle class. In a conversation with COHA, Joseph Tulchin, director of the Latin American Program at the Woodrow Wilson Center for International Scholars, poignantly explained that “Kirchner is facing a complex issue he has yet to find an answer for…and he has yet to address the core issues that affect Argentines.”

A New Economic Policy
Kirchner’s shrewd political capabilities and his failure to follow the cut-in-stone policies of his recent predecessors have surprised many observers of the international economy. His long battle with the International Monetary Fund (IMF), regarding the country’s nearly US$90 billion international debt exemplifies yet another break that the current administration has made from the Menem and de la Rua era. In the past, when the United States or international lending organizations like the IMF pressured the Argentine government to enact structural adjustments or turn to austerity measures to fulfill its commitment to foreign investors, Buenos Aires always conceded to the pressure. Both Menem and de la Rua implemented austerity measures that had direct negative effects on the Argentine populace such as decreasing social spending and reducing government salaries. Yet these policies demonstrated little effectiveness in satisfying the growing urgent needs of the population and instead almost singularly benefited foreign investors and large banks. As a result, support for the administrations that instituted such practices decreased, unemployment escalated and the average Argentine could not afford to meet basic family needs.

Sticking it to the IMF
Despite receiving the traditional array of pressures from the IMF in the aftermath of the country’s economic collapse, President Kirchner has nevertheless stayed firm in his anti-IMF stance in spite of sustained minatory gestures from the international community. Along with embarrassing the IMF by arguing that the Fund is partially to blame for failing to prevent the 2001 meltdown, Argentina has been adamant that the country should limit its debt repayment to a maximum of only 25 percent of the debts’ face value. LatinNews reports that the debt restructuring will occur from November 15 to December 17 as “holders of the 152 defaulted Argentine bonds will swap them for new paper.” Many bondholders are dissatisfied with the plan proposed by Kirchner’s Minister of Economy, Roberto Lavagna, but the government remains obdurate in its determination. Such a tough stance against investors and the IMF was a simply unthinkable option under the Menem and de la Rua administrations, but Kirchner’s daring, if not radical, new views on restructuring the economy seem to be paying off. As bondholders realize Argentina’s final offer is inflexible, more and more of them are agreeing to the terms and cutting their losses. The sooner Argentina’s economy rids itself of this debt, the sooner foreign capital sources will be able to invest back into the nation’s now resurgent economy. With a near 8 percent growth in GDP in 2003, Argentina seems to be on a solid road to financial recovery and the erasing of its foreign debt burden will provide Kirchner and Lavagna with much needed leverage. The October 19 report issued by the major accounting firm KPMG, as reported by LatinNews, establishing that Argentines believe Kirchner’s government “to be the least corrupt Argentine government of the last 20 years,” which also lends the current administration a reputation of flexibility and credibility.

Kirchner’s Dynamic Leadership
President Kirchner’s somewhat unprecedented policies towards both the hard-line piquetero groups within his country and the International Monetary Fund dramatically stray from the pattern of recent presidents. Time will tell if Kirchner will continue to be Latin America’s “most dynamic leader,” as COHA argued in January 2004. His legacy will depend on his ability to not overly alienate either his middle class, which is on the record as preferring an end to the social infighting, or the unemployed workers who continue to demand quality jobs, an increase in the minimum wage and expanded social services. Kirchner eventually must realize that the piqueteros have the numbers behind them and that societal stability cannot be achieved without their cooperation. If and when the foreign debt is cleared and investors once again view Argentina as a reliable venue to pump new money into the economy, both of these problems could be alleviated. Up to now, extremist piquetero groups have prompted instability and social discontent, scaring off some investors. Kirchner now has attacked both of these problems head on; he has not succumbed to domestic or international demands that he believes would not benefit the economy. Instead, he has broken from past policies and worked to create a situation that could, with a lot of luck, please everyone, especially the average Argentine. On the other hand, his game plan eventually could please no one, thus opening the door to alienation and disruption.

This analysis was prepared by Gabriel Espinosa Gonzalez and Matthew B. Riley, COHA Research Associates.

October 20, 2004

The Council on Hemispheric Affairs, founded in 1975, is an independent, non-profit, non-partisan, tax-exempt research and information organization. It has been described on the Senate floor as being “one of the nation’s most respected bodies of scholars and policy makers.” For more information, please see our web page at www.coha.org; or contact our Washington offices by phone (202) 223-4975, fax (202) 223-4979, or email coha@coha.org.

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