MercoPress. South Atlantic News Agency

FT criticizes Kirchner's confrontational (but popular) style

The Financial Times this week harshly criticised Argentine President Nestor Kirchner warning that the effects of his style of government could have an enduring impact in future investments.

Mr Kirchner's "stubborn provincialism and disdain for diplomatic niceties", says the FT, and his "aggressive nationalism" are damaging Argentina's long-term interests.

"There will be a big price to pay in the long term if Mr Kirchner's mix of nationalism and unpredictability continues to undermine business confidence".

"If investment continues to lag behind economic growth ? analysts say investment needs to increase by several percentage points of gross domestic product to keep up with present levels ? the ghost of inflation will return to haunt Argentina, and the markets will be the first to suffer".

FT correspondent in Buenos Aires Benedict Mander writes that since Mr. Kirchner's election to office three years ago, he has maintained a fairly conservative approach towards public spending that has kept inflation under control, "but his government has repeatedly ridden roughshod over unpopular foreign business interests".

Executives at privatized utility companies ? which many Argentines associate with the "neo-liberal" policies of the 1990s that contributed to the economic collapse of 2001-02 ? have grown accustomed to rough treatment from ministers. Friction between the government and international companies culminated this year with the nationalization of Aguas Argentinas, a water company controlled by Suez of France. Last month, a widespread rumour forced Repsol YPF, the Spanish-owned oil company, to reassure employees that it was not about to undergo the same fate.

"The government has violated contracts and has a very confrontational discourse," says a prominent local businessman. "Clearly its attitude is not good for attracting investment and could even scare off those who are already investing".

Mander points out to the signs of "growing authoritarianism" manifested in a sometimes "intemperate" Mr Kirchner opting to "micro-manage" economic matters normally tackled by more junior officials.

Earlier this year he was visibly involved in daily negotiations with dozens of businesses to establish price agreements to control inflation. In later attempts to control beef prices, Mr Kirchner dramatically banned beef exports for six months and then appealed to his heavily carnivorous nation not to eat beef.

But President Kirchner's confrontational style and robust defense of national interests ? visible in negotiations with creditors over Argentina's international debt and the sudden cancellation of obligations to the IMF in January ? are popular with voters.

"Kirchner's power is fed by his dramatic style in singling out symbolic targets, winning him important public support," says Graciela Romer, a political analyst.

With a weak fragmented opposition few question the probability that Mr. Kirchner will be re-elected next year, barring an unlikely reversal of three consecutive years of good economic growth. The Argentine president's personal approval ratings are estimated at about 70%.

Others analysts are more skeptical, seeing the present trend as part of a deeper historical pattern. "This strong nationalist impulse in Argentina goes way back to the 19th century. There's this idea that foreigners are just there to rip them off," says David Rock, a historian specialising in Argentina at the University of California.

He points out the similarities with the postwar boom in the 1940s when foreign investment was repatriated under President Juan Peron, the founder of Mr Kirchner's party, who by the 1950s was forced to try to attract foreign capital again.

Rosendo Fraga, director of the Nueva Mayoría think-tank, classifies Mr Kirchner as a pragmatic populist who is positioning himself between Venezuela's not-so-business-friendly president, Hugo Chávez, and Brazil's more moderate Luiz Inácio Lula da Silva.

However those sympathetic to the government, such as pollster Artemio López, say the business climate will improve. "Argentina's treatment of foreign companies "may seem unpleasant to the distant observer but the country is going through a correction process," he says, explaining that the country was thrown off course by a corrupt and arbitrary privatization process in the 1990s.

"It may take a couple of years for businesses to regain confidence".

But with no crisis looming and sound economic fundamentals ? in spite of the threat of inflation, which most analysts believe is under control in the short term ? investors have been willing to overlook political problems, which are only hampering business investment.