Cristina and Obama: A Crisis Minuet
Barack Obama, an expert at making the most of the spotlight, knew how to find the right moment to meet with Cristina Fernández, Kirchner's widow. As soon as he confirmed the results of the October 23 elections, which handed her a spectacular triumph with nearly 54 percent of the vote, he called her on the phone, breaking the ice from the past relationship between the U.S. State Department and the Argentinian government.
Obama probably wanted to be in Cristina's place — since he started to call her at that point — forgetting the reports of his embassy in Buenos Aires, disclosed by WikiLeaks, that talked about her in less friendly terms. Cristina has an enviable degree of popularity and the Argentinian economy has developed spectacularly over the years, while Obama's image is free-falling, the American economy is showing signs of an incurable relapse, Obama's reform program is buried and he has little chance of being re-elected.
Nevertheless, when he advised Sarkozy (another who is on thin ice) that “we all need to learn lessons from her,” there was something more than friendliness, envy or a desire to align himself with a successful personality, as Obama just demonstrated in the private meeting that he and CFK held in the Hotel Carlton in Cannes.
There, beyond the photos, which show Obama with a more human profile, announcing the salvation of the banks and the simultaneous collapse of mortgage debtors or the hiding and secret assassination of bin Laden, he talked about unresolved economic issues between Buenos Aires, Washington and Wall Street, and he also discussed Latin America's political barriers with the State Department and questions about nuclear weapons, security and “terrorism.”
There are two phrases that sum up the bilateral meeting. Obama allegedly began by stating: “[I]t is wonderful to be joined by the president of Argentina, a great friend of not only mine but the United States,” congratulating CFK on her reelection, while CFK recalled that “it isn't possible to overlook the leadership of the United States at the global level.” Later, they talked about business — the more than 500 American companies that are still deciding factors in Argentina's production structures, the $250 million compensation that Argentina owes two U.S. companies (as demanded before the ICSID [International Centre for Settlement of Investment Disputes]), — about Argentina’s payments to the Paris Club and about hot-button issues on the international agenda, promising an “honest and frank” relationship.
This rearrangement of ties with the Argentinian government will undoubtedly help politicians plan for CFK's second term, which will begin next December, and which will confront clear domestic problems as well as problems resulting from the world capitalism crisis.
In addition, ties between the U.S. and Argentina are useful for the geopolitical needs of the world's primary power. Until now, Washington's main ally in the region has been Brazil, despite the fact that it failed in the attempt to create a treaty that would link its economy with that of the U.S., like the treaty signed with Mexico, Chile, Peru and, recently, Colombia and Panama. But the U.S. State Department is forced to seek out other alliances in Latin America, due to Brazil's jump to play its own game — often with its allies in the so-called BRIC — which will drag its neighbors along due to its influence and the existence of Mercosur, and also because Brazil voted against the U.S. and its allies on the Security Council.
Argentina may be a good counterweight and moderator, since the U.S.' traditional associates, along with those who have signed TPA [Third Party Administrator] agreements, have very little bearing on this balance. Chile, for example, has a totally discredited government; Colombia has Juan Manuel Santos, losing horribly in his first municipal elections; and Mexico has Fernando Calderón, in intensive care. Diplomatic relationships, as we know, compete in the most blatantly hypocritical contests, and this is clearly seen in the scandalous and ineffective G-20 Summit, a fact to which articles published in Sin Permiso attest.
The Argentinian government has pragmatically advanced toward a relaxed stance, and has gone so far as to establish a friendship with the White House, something more trustworthy and transparent than the frequent and sly visits of government officials, double-speak addicts (one speech for the “idiots” and another for the State Department), to the Yankee Embassy in Buenos Aires, according to WikiLeaks' wires.
Growth, Crisis and Inequality
Certainly, after the great economic depression that began in 1968 and culminated in the collapse of the Convertibility Regime, and social upheaval, in 2001, Argentina's economy started to grow steadily in late 2002, opening up one of the most sustainable and long-lasting periods of growth. There is abundant literature and no shortage of polemic about this phenomenon, some of which we have published in Sin Permiso.
Néstor Kirchner's policies, and Cristina's, which are now being realized, sailed on the headwinds of an exceptional situation. At the same time, they were able to renegotiate public debt — much of it illegitimate and fraudulent, according to court rulings — which had been weighing the country down like a lead backpack since the end of the dictatorship. This was aggravated, of course, during the cycle of privatizations, economic reforms, swaps, mega-swaps and outrageous maneuvers of every type during the time of Carlos Menem and continued by Fernando de la Rúa and Domingo Cavallo.
The global economic recession, triggered by the fall of Lehman Brothers, affected Argentina's economy, which recuperated apace in 2010 when prices of primary products, particularly soy, rebounded. Since then, the economy has not stopped growing.
Not only did Argentina grow but Peru did also, in a notable way, and the growth ranged all the way to Paraguay, which beat out the Chinese with its growth rate in 2010. What is the common plan of all these economies? Refocusing, with some additions or “economic steroids.” The case of Paraguay is emblematic, as it went from 1 million cultivated hectares of soy to nearly 3 million, using the Argentinian innovation of direct seeding, which involves genetically modified seed and technology packages, i.e. agricultural chemicals, in addition to the presence of large Brazilian funds in the business.
In Argentina's case, there are other elements in the ascending economic cycle, but the central factors are based on soy, the exploitation of natural resources and Brazil as the engine of the automotive industry.
This landscape makes a progressive interpretation problematic. The most developed countries are facing one of the worst economic crises in history. They stopped growing, increased unemployment and reached an unprecedented state of inequality. One example is the United States, while in Europe people are taking huge steps toward dismantling the welfare state. In turn, the decline of their economies advanced the debate over the urgent situation that climate change is creating. On the other hand, in Latin America a period of prosperity is encouraging new capitalist development that does not consider, even theoretically, changing the current productive matrix. Nor are the consequences of a change in the international cycle or the effects of predators on natural resources and the environment, which is supposed to support the current model, being considered. People are also unaware that the crisis in the North is not a passing phenomenon but, rather, a phase of the capitalistic crisis that will drag everyone down sooner rather than later.
Economics and Politics in CFK's Second Term
What did the economy mean for CFK's overwhelming electoral victory? Some numbers are illustrative, even discounting the mendacious figures of INDEC [National Institute of Statistics and Censuses] or the government's accounting gimmicks. The activity level, measured in dollars, increased more than 60 percent during the last four years. The sale of automobiles rose 40 percent during the same period. Over 900,000 latest-generation cell phones have been sold so far in 2011. Many Argentinians are traveling the world, as they were during Menem and Cavallo's Convertibility Regime. Argentinians compete with Brazilians in the Miami real estate market, which has decreasing prices. Meanwhile, in Buenos Aires, the dollar prices in the best listed neighborhoods soared. Banks, which benefit from the legal standards put in place by the dictatorship in 1976, have had extraordinary profits after defrauding investors in 2001.
Large corporations and groups that benefit from the privatization of public services have enjoyed unprecedented state subsidies. Nevertheless, the results in the social sector have not been so good, not to mention the quality of some services, such as public transportation. The number of slums has grown in recent years, just as much in the capital as in suburban Buenos Aires. Nearly 90 percent of retirees have seen minimum pensions that do not cover basic living costs. Undoubtedly, when it comes to social policy, the benefits given to children in low-income households, that are not in the informal sector, are very successful, although inflation has compromised their positive effect in the past few months.
This is why improvements to the economy explain, in part, the triumph of Kirchnerism, especially in comparison to the situation in 2009, when Néstor Kirchner lost the elections in the province of Buenos Aires and in nearly all major cities in the country, not to mention if the comparison is made with the situation in 2001 at the lowest point of the depression.
All of Argentina's modern history shows that a government is almost never changed, either through elections or through a coup d'etat, at a time of economic prosperity. The march of the economy is crucial, and this is not only an Argentinian phenomenon. The formula: Internal problems plus international crisis have always been fatal.
In these elections, economic prosperity came to fruition for many people, with a pathetic opposition that was facing a successful and disciplined Kirchnerist Peronism, as well as the feeling of being better for others who are less fortunate, which encourages continuity.
Beyond the political and psychological effect of Kirchner's death, which his wife’s leadership re-enforced, Kirchnerism created a motley alliance that was nearly impossible in Néstor's lifetime.
Some internal policies — which a large part of the opposition supported, thinking that it would serve the purpose of alienating the left and consolidating American bipartisanship, and selecting the best position to contest CFK's second term — were the crowning point of the government's triumph. Far from helping internal party democracy, the simulacrum of the primaries left the worst electoral machines, which define the internal life of the large parties, intact and well-oiled, in addition to determining the outcome of the election 70 days early.
Neither slow nor lazy, large economic groups also voted for continuity without betting anything on the opposition. At an Idea Symposium, a traditional meeting of large businesses, which coincides with the days prior to a general election, 80 percent voted in favor of Cristina Fernández's second term in a sealed envelope survey.
That said, the opposing candidates who sought to seduce the establishment were dead.
In turn, Kirchnerist Peronism did not leave any loose ends in its alliance politics. From rescuing Carlos Menem, the re-elected senator of La Rioja; the corrupt and unpresentable Ramón Saadi of Catamarca; pro-Nazi Carlos Soria, governor elect in Rio Negro; José Manuel de la Sota, who is going back to Córdoba; and those in the Neuquén People's Movement territory, without leaving aside the usual allies — the multifaceted Daniel Scioli, suburban mayors, union bureaucrats, chief San Juan spokesman for open pit mining José Luis Gioja, the Formosa resident Gildo Insfran and many other less important associates — they were joined, in different proportions, by people from La Cámpora, K Radicals, K Socialists, Luis D’Elia, the Evita Movement and Sabbatella's Nuevo Encuentro, followed by other companies.
Victory was secured. Now it remains to be seen how to manage this political resource.
The Coming Times
The good news on the economic front cannot be long-lasting anywhere when those who hold resources and make decisions in the world don't know what's going to happen tomorrow.
As has been said, not all of Argentina's economic numbers are showing success. The government was postponing decisions because it didn't want to stir things up before the elections. The economy is booming and high public investment did not prevent capital flight all these years. Some seven billion dollars have left in only the last two months. So, the first step after the elections was to put a lock on the free buying and selling of currencies. It's still too early to know the result. At the same time, it was established that mining and oil companies would be obligated to liquidate all of their capital from exports into the local market, an excessive move on which the government inexplicably decided. A gradual end to the subsidy policy will begin with an unusual source of financial support which the government used to grant to banks, finance companies and even casinos — lotteries and game rooms.
The question remains: What will happen to public utility rates, inflation and salaries in future collective negotiations with unions? In the electoral campaign, Cristina already publicly confronted the CGT Secretary General, and leader of the powerful truck-driver's union, Hugo Moyano. Quarreling with Moyano helped attract many sectors of the middle class, who consider him to be the local version of Hoffa. The primary problem is whether Moyano is being thrown out the window at CGT for the right or wrong reasons. The second problem is evaluating the cost of a fight with Moyano. So far, the government is supporting itself, in order to get rid of or neutralize Moyano, by associating him with people who have criminal records bulkier than the truck drivers and who lack any of his merits. The person heading the operation is none other than millionaire manager and Menem supporter Oscar Lescano, the architect of the privatization of distribution, transportation and electric companies. And the main governmental candidate to replace Moyano in the CGT is Gerardo Martínez, the construction union's “boss” and “informant” of the sinister 601 regiment of the military dictatorship, who just accompanied Cristina to the G-20 Summit.
The grace period that begins with every new government may, in this case, not be so calm when it comes to politics or economics.
Obama probably wanted to be in Cristina's place — since he started to call her at that point — forgetting the reports of his embassy in Buenos Aires, disclosed by WikiLeaks, that talked about her in less friendly terms. Cristina has an enviable degree of popularity and the Argentinian economy has developed spectacularly over the years, while Obama's image is free-falling, the American economy is showing signs of an incurable relapse, Obama's reform program is buried and he has little chance of being re-elected.
Nevertheless, when he advised Sarkozy (another who is on thin ice) that “we all need to learn lessons from her,” there was something more than friendliness, envy or a desire to align himself with a successful personality, as Obama just demonstrated in the private meeting that he and CFK held in the Hotel Carlton in Cannes.
There, beyond the photos, which show Obama with a more human profile, announcing the salvation of the banks and the simultaneous collapse of mortgage debtors or the hiding and secret assassination of bin Laden, he talked about unresolved economic issues between Buenos Aires, Washington and Wall Street, and he also discussed Latin America's political barriers with the State Department and questions about nuclear weapons, security and “terrorism.”
There are two phrases that sum up the bilateral meeting. Obama allegedly began by stating: “[I]t is wonderful to be joined by the president of Argentina, a great friend of not only mine but the United States,” congratulating CFK on her reelection, while CFK recalled that “it isn't possible to overlook the leadership of the United States at the global level.” Later, they talked about business — the more than 500 American companies that are still deciding factors in Argentina's production structures, the $250 million compensation that Argentina owes two U.S. companies (as demanded before the ICSID [International Centre for Settlement of Investment Disputes]), — about Argentina’s payments to the Paris Club and about hot-button issues on the international agenda, promising an “honest and frank” relationship.
This rearrangement of ties with the Argentinian government will undoubtedly help politicians plan for CFK's second term, which will begin next December, and which will confront clear domestic problems as well as problems resulting from the world capitalism crisis.
In addition, ties between the U.S. and Argentina are useful for the geopolitical needs of the world's primary power. Until now, Washington's main ally in the region has been Brazil, despite the fact that it failed in the attempt to create a treaty that would link its economy with that of the U.S., like the treaty signed with Mexico, Chile, Peru and, recently, Colombia and Panama. But the U.S. State Department is forced to seek out other alliances in Latin America, due to Brazil's jump to play its own game — often with its allies in the so-called BRIC — which will drag its neighbors along due to its influence and the existence of Mercosur, and also because Brazil voted against the U.S. and its allies on the Security Council.
Argentina may be a good counterweight and moderator, since the U.S.' traditional associates, along with those who have signed TPA [Third Party Administrator] agreements, have very little bearing on this balance. Chile, for example, has a totally discredited government; Colombia has Juan Manuel Santos, losing horribly in his first municipal elections; and Mexico has Fernando Calderón, in intensive care. Diplomatic relationships, as we know, compete in the most blatantly hypocritical contests, and this is clearly seen in the scandalous and ineffective G-20 Summit, a fact to which articles published in Sin Permiso attest.
The Argentinian government has pragmatically advanced toward a relaxed stance, and has gone so far as to establish a friendship with the White House, something more trustworthy and transparent than the frequent and sly visits of government officials, double-speak addicts (one speech for the “idiots” and another for the State Department), to the Yankee Embassy in Buenos Aires, according to WikiLeaks' wires.
Growth, Crisis and Inequality
Certainly, after the great economic depression that began in 1968 and culminated in the collapse of the Convertibility Regime, and social upheaval, in 2001, Argentina's economy started to grow steadily in late 2002, opening up one of the most sustainable and long-lasting periods of growth. There is abundant literature and no shortage of polemic about this phenomenon, some of which we have published in Sin Permiso.
Néstor Kirchner's policies, and Cristina's, which are now being realized, sailed on the headwinds of an exceptional situation. At the same time, they were able to renegotiate public debt — much of it illegitimate and fraudulent, according to court rulings — which had been weighing the country down like a lead backpack since the end of the dictatorship. This was aggravated, of course, during the cycle of privatizations, economic reforms, swaps, mega-swaps and outrageous maneuvers of every type during the time of Carlos Menem and continued by Fernando de la Rúa and Domingo Cavallo.
The global economic recession, triggered by the fall of Lehman Brothers, affected Argentina's economy, which recuperated apace in 2010 when prices of primary products, particularly soy, rebounded. Since then, the economy has not stopped growing.
Not only did Argentina grow but Peru did also, in a notable way, and the growth ranged all the way to Paraguay, which beat out the Chinese with its growth rate in 2010. What is the common plan of all these economies? Refocusing, with some additions or “economic steroids.” The case of Paraguay is emblematic, as it went from 1 million cultivated hectares of soy to nearly 3 million, using the Argentinian innovation of direct seeding, which involves genetically modified seed and technology packages, i.e. agricultural chemicals, in addition to the presence of large Brazilian funds in the business.
In Argentina's case, there are other elements in the ascending economic cycle, but the central factors are based on soy, the exploitation of natural resources and Brazil as the engine of the automotive industry.
This landscape makes a progressive interpretation problematic. The most developed countries are facing one of the worst economic crises in history. They stopped growing, increased unemployment and reached an unprecedented state of inequality. One example is the United States, while in Europe people are taking huge steps toward dismantling the welfare state. In turn, the decline of their economies advanced the debate over the urgent situation that climate change is creating. On the other hand, in Latin America a period of prosperity is encouraging new capitalist development that does not consider, even theoretically, changing the current productive matrix. Nor are the consequences of a change in the international cycle or the effects of predators on natural resources and the environment, which is supposed to support the current model, being considered. People are also unaware that the crisis in the North is not a passing phenomenon but, rather, a phase of the capitalistic crisis that will drag everyone down sooner rather than later.
Economics and Politics in CFK's Second Term
What did the economy mean for CFK's overwhelming electoral victory? Some numbers are illustrative, even discounting the mendacious figures of INDEC [National Institute of Statistics and Censuses] or the government's accounting gimmicks. The activity level, measured in dollars, increased more than 60 percent during the last four years. The sale of automobiles rose 40 percent during the same period. Over 900,000 latest-generation cell phones have been sold so far in 2011. Many Argentinians are traveling the world, as they were during Menem and Cavallo's Convertibility Regime. Argentinians compete with Brazilians in the Miami real estate market, which has decreasing prices. Meanwhile, in Buenos Aires, the dollar prices in the best listed neighborhoods soared. Banks, which benefit from the legal standards put in place by the dictatorship in 1976, have had extraordinary profits after defrauding investors in 2001.
Large corporations and groups that benefit from the privatization of public services have enjoyed unprecedented state subsidies. Nevertheless, the results in the social sector have not been so good, not to mention the quality of some services, such as public transportation. The number of slums has grown in recent years, just as much in the capital as in suburban Buenos Aires. Nearly 90 percent of retirees have seen minimum pensions that do not cover basic living costs. Undoubtedly, when it comes to social policy, the benefits given to children in low-income households, that are not in the informal sector, are very successful, although inflation has compromised their positive effect in the past few months.
This is why improvements to the economy explain, in part, the triumph of Kirchnerism, especially in comparison to the situation in 2009, when Néstor Kirchner lost the elections in the province of Buenos Aires and in nearly all major cities in the country, not to mention if the comparison is made with the situation in 2001 at the lowest point of the depression.
All of Argentina's modern history shows that a government is almost never changed, either through elections or through a coup d'etat, at a time of economic prosperity. The march of the economy is crucial, and this is not only an Argentinian phenomenon. The formula: Internal problems plus international crisis have always been fatal.
In these elections, economic prosperity came to fruition for many people, with a pathetic opposition that was facing a successful and disciplined Kirchnerist Peronism, as well as the feeling of being better for others who are less fortunate, which encourages continuity.
Beyond the political and psychological effect of Kirchner's death, which his wife’s leadership re-enforced, Kirchnerism created a motley alliance that was nearly impossible in Néstor's lifetime.
Some internal policies — which a large part of the opposition supported, thinking that it would serve the purpose of alienating the left and consolidating American bipartisanship, and selecting the best position to contest CFK's second term — were the crowning point of the government's triumph. Far from helping internal party democracy, the simulacrum of the primaries left the worst electoral machines, which define the internal life of the large parties, intact and well-oiled, in addition to determining the outcome of the election 70 days early.
Neither slow nor lazy, large economic groups also voted for continuity without betting anything on the opposition. At an Idea Symposium, a traditional meeting of large businesses, which coincides with the days prior to a general election, 80 percent voted in favor of Cristina Fernández's second term in a sealed envelope survey.
That said, the opposing candidates who sought to seduce the establishment were dead.
In turn, Kirchnerist Peronism did not leave any loose ends in its alliance politics. From rescuing Carlos Menem, the re-elected senator of La Rioja; the corrupt and unpresentable Ramón Saadi of Catamarca; pro-Nazi Carlos Soria, governor elect in Rio Negro; José Manuel de la Sota, who is going back to Córdoba; and those in the Neuquén People's Movement territory, without leaving aside the usual allies — the multifaceted Daniel Scioli, suburban mayors, union bureaucrats, chief San Juan spokesman for open pit mining José Luis Gioja, the Formosa resident Gildo Insfran and many other less important associates — they were joined, in different proportions, by people from La Cámpora, K Radicals, K Socialists, Luis D’Elia, the Evita Movement and Sabbatella's Nuevo Encuentro, followed by other companies.
Victory was secured. Now it remains to be seen how to manage this political resource.
The Coming Times
The good news on the economic front cannot be long-lasting anywhere when those who hold resources and make decisions in the world don't know what's going to happen tomorrow.
As has been said, not all of Argentina's economic numbers are showing success. The government was postponing decisions because it didn't want to stir things up before the elections. The economy is booming and high public investment did not prevent capital flight all these years. Some seven billion dollars have left in only the last two months. So, the first step after the elections was to put a lock on the free buying and selling of currencies. It's still too early to know the result. At the same time, it was established that mining and oil companies would be obligated to liquidate all of their capital from exports into the local market, an excessive move on which the government inexplicably decided. A gradual end to the subsidy policy will begin with an unusual source of financial support which the government used to grant to banks, finance companies and even casinos — lotteries and game rooms.
The question remains: What will happen to public utility rates, inflation and salaries in future collective negotiations with unions? In the electoral campaign, Cristina already publicly confronted the CGT Secretary General, and leader of the powerful truck-driver's union, Hugo Moyano. Quarreling with Moyano helped attract many sectors of the middle class, who consider him to be the local version of Hoffa. The primary problem is whether Moyano is being thrown out the window at CGT for the right or wrong reasons. The second problem is evaluating the cost of a fight with Moyano. So far, the government is supporting itself, in order to get rid of or neutralize Moyano, by associating him with people who have criminal records bulkier than the truck drivers and who lack any of his merits. The person heading the operation is none other than millionaire manager and Menem supporter Oscar Lescano, the architect of the privatization of distribution, transportation and electric companies. And the main governmental candidate to replace Moyano in the CGT is Gerardo Martínez, the construction union's “boss” and “informant” of the sinister 601 regiment of the military dictatorship, who just accompanied Cristina to the G-20 Summit.
The grace period that begins with every new government may, in this case, not be so calm when it comes to politics or economics.