MercoPress. South Atlantic News Agency

Argentine president talks about the infamous word, inflation

What? Did the Argentine President actually use the “I” word? Yes she said “inflation”. “The first world” President Cristina Fernandez de Kirchner said on Tuesday, “has collapsed like a bubble.” Bubbles? They burst. It is walls that collapse, Mrs. President.

But by then, with or without mixed metaphors, something was infamously awry in Wall Street. Banks were bursting and collapsing all at the same time. The President, predictably, had something to say about it. Fernández de Kirchner, speaking at a rally in Buenos Aires province on Tuesday, said Argentina's economy can be guaranteed to be "steady in choppy economic seas," largely thanks to the Central Bank's whopping foreign currency reserves and the "construction of an industrial model." Here was the President, who is struggling to gain back some of the popularity lost during the farm rebellion against the export duty hikes, addressing her constituency about the calamities of capitalism. Fernández de Kirchner also blasted international analysts, many of whom worked for the giant banks that have gone down the drain, for recently forecasting that Argentina will have problems servicing its debt next year because it is politically unstable. "International parrots," the President said, had predicted that Argentina will sooner or later crash. Instead, the President chortled, it's them that are going bust. Not only that, Fernández de Kirchner said throughout the week, President George W. Bush is using a pile of greenbacks to "nationalize" ailing banks and insurance companies. If the Republicans are doing it then why can't we? The President said her government had come under fire from the opposition for rescuing Aerolíneas Argentinas, the debt-ridden airline run by a Spanish private company. Critics have also said that Argentina's decision to lock itself out of lending markets will bring it problems in the future. But the President sounded chuffed about the dire news from Wall Street. Had the Wall Street crisis happened in the 90s (when the peso was pegged to the dollar), Fernández de Kirchner told a business conference on Thursday "you would be jumping out of windows right now." Memories of the great bust of December 2001 â€" when many in Argentina had their bank deposits frozen â€" are still fresh. So the neoconservative doomsayers must now eat their words about the way the government is managing the economy, the President has said. Fernández de Kirchner, according to many private economists, is wrong. Argentina is already losing money because of the crisis in the US. The drop in the international price of soy, for example, is hurting revenue from export duties. Opposition economists, like Alfonso Prat Gay of the centrist Civic Coalition, have said that the government is doing nothing to fight inflation and will eventually pay a price for it. Prat Gay, a former Central Bank head who will run for Congress in next year's midterm elections, could well be right. But in the short term all of Argentina's potential woes have been dwarfed by the great crashing sounds coming from New York. Even the critics were admitting that not taking debt from foreign lenders had suddenly turned into a good thing for Argentina. Wall Street analysts had given Argentina hell only last month for borrowing money from Venezuelan President Hugo Chávez at a high interest rate (15 percent). The President, facing questions from "the markets" about her political clout to lead the nation on a tighter budget in an election year, announced on September 2 that Argentina will cancel in full its debt with the Paris Club of creditor nations (about 6.7 billion dollars). The Paris Club on Wednesday welcomed Argentina's decision to cough up. But in a short statement it hinted that the country must do the same with other creditors, which include the holdouts from the debt swap of 2005. Paying the Paris Club, government officials admitted, might take longer than expected and it will not amount to just one payment. Paying the Paris Club will not mean canceling all of Argentina's obligations. The President is not in a strong political position right now. Her popularity currently stands at a lackluster 30 percent, according to polls. Vice-President Julio Cobos is more popular than she. Cobos (not a Peronist but a member of a dissident faction of the Radical Party) voted against the government-sponsored export duty hike in the Senate on July 17. Cobos, on meeting Santa Fe Governor Hermes Binner of the opposition Socialist Party on Friday, has admitted that his political ties with the President are "at a dead end." The whiff of a political crisis is in the air. Fernández de Kirchner must show that she is in charge. The government showed no mercy with a corruption probe currently hitting the army. Six generals and 38 other officers have been cashiered over a graft scandal. Army chief General Roberto Bendini meanwhile retired on Thursday after a court charged him with holding public funds in a private bank account in 2002-03. Bendini was at the time head of a garrison in Santa Cruz province, home to the President and her husband and presidential predecessor Néstor Kirchner. Bendini was named in 2003 by Kirchner, who famously ordered by him to take down portraits of dictators at a military academy. The outgoing chief was replaced by his second-in-command, General Luis Alberto Pozzi. Good news is hard to come by for the Fernández de Kirchner administration. So it should then come as no surprise that the President on Tuesday was merrily bashing the "parrots" of Wall Street in a bid to regain the initiative. Fernández de Kirchner, who portrays herself as a centre-left Peronist out to redistribute the nation's wealth, needs to divert attention from her weak political position and from concerns about inflation. A rant about capitalism going wrong the world over will do just fine. The President is doing a lot of talking. Now her technocrats must deliver on her vow that Argentina's economy is solid as a rock. Critics say that Economy Minister Carlos Fernández lacks character and personal clout to manage the economy â€" especially now that the global going is so rough. But the minister is confident that Argentina will survive the global crisis practically unscathed. Fernández has submitted next year's budget to Congress. The budget predicts an annual economic growth rate of four percent (sticking to the Kirchnerite tradition of undershooting growth). Inflation will increase eight percent next year, according to the budget. An annual inflation rate of eight percent will sound risible to the critics who dismiss it as fake. The cost of living has increased at least 25 percent in a year, the critics say. Budget technicalities abound. But what sticks out is that the government has asked Congress to amend the charters of the Central Bank and the Banco Nación so that funds can be used to service debt next year. The government is already using part of the Central Bank's foreign currency reserves (currently standing at 47 billion dollars) to pay the Paris Club. But the reserves (and Banco Nación loans) could also be used next year to service debt â€" thus presumably quashing fears that Argentina doesn't have the money. The government has also refused to scrap the special powers granted to Cabinet Chief Sergio Massa to reallocate funds. Provinces ruled by the opposition also enjoy similar powers and don't complain, Massa has said. After the Cobos vote, it's not clear what kind of hold the ruling party has on Congress. The President skirted Congress and signed her first emergency decree on Monday to increase this year's budget by 36 billion pesos. Fernández de Kirchner had vowed not to sign any emergency decrees. The opposition was quick to point out that she had broken her word. The 2009 budget shows that the government will continue to heavily subsidize public transport. But it plans to cut subsidies for the energy sector next year, amid speculation that the Kirchners are aiming to trim spending in tougher economic times. Utility hikes have also been announced. The natural gas rates of over half of residential consumers will be increased by 10-30 percent, Planning Minister Julio De Vido announced on Friday. The rates had been practically frozen since the peso was drastically devalued overnight, early in 2002. De Vido said that the government had reached an accord with companies to lower the price of natural gas canisters (used in millions of working-class homes for cooking and heating). De Vido said the distribution of the subsidized canisters will be largely managed by municipal governments. Will that lead to accusations of electioneering with the cheaper canisters next year? Greater Buenos Aires, where the canisters are used by many, is a Kirchnerite stronghold. The mayors in Greater Buenos Aires â€" mostly loyal to the Kirchners â€" will get control of the canisters in an election year. The government recently announced a 10-30 percent hike in electricity rates for upper middle-class residents also in a bid to limit subsidies. Rate hikes are never popular. But De Vido said on Friday the government aimed to "redistribute wealth" by subsidizing the price of canned natural gas. The President on Tuesday meanwhile trumpeted a 35 percent increase for family benefits (paid monthly to workers who earn up to 4,700 pesos). The increase was welcomed by Hugo Moyano, the head of the General Labour Confederation (CGT). Moyano had grumbled when the government recently raised the income tax floor by 20 percent. The tax break, Moyano had said, "is not enough." The comments prompted speculation that the Kirchners' alliance with organized labour was creaking at exactly the wrong time. But Moyano was elated with the family benefit hike. The Kirchners and the CGT still look like staunch allies. Yet leaders of the Argentine Industrial Union (UIA) have voiced concern that the economy is no longer competitive because the peso is too strong (a dollar trades for about 3.09 pesos). Eduardo Buzzi, the leader of the Argentine Farming Federation, has also said that the dollar "should be worth 3.50 pesos." But the President, on addressing a UIA conference on Thursday night, said "a dollar that is too high is inconsistent with the fight against inflation." What? Did the President actually use the "I" word? Yes, she said "inflation." Fernández de Kirchner has rarely talked about inflation â€" even avoiding any reference to the thorny issue when she took office in December. But on Thursday she said that inflation must be dealt with. A change of tune? Perhaps. But the critics insist that the inflation problem can't be sorted out if the state-run statistics bureau (INDEC) continues to manipulate the consumer price index. The opposition is also making difficult questions about the President's campaign funds â€" especially over the bag with 800,000 dollars US-Venezuelan businessman Guido Antonini Wilson tried to sneak into the country last year. Franklin Durán is currently standing trial in Miami accused of working as an agent of Venezuela in US soil. Durán and four others allegedly tried to pay Antonini Wilson hush money, according to the FBI. Antonini Wilson, who was travelling with Kirchner administration officials on a jet hired by a state-run Argentine company, was booked for a minor offense when the money was found in Buenos Aires and he is now in Miami. But an Argentine judge has now asked US authorities to question Antonini Wilson, who is scheduled to appear in court in the Durán trial. De Vido and Claudio Uberti, the official on the same plane, have both denied in court that they knew Antonini Wilson. The allegations that they offered Atonini Wilson protection are also false, they said. Uberti, a Planning Ministry official, was sacked when the scandal broke last year. But Uberti has been cleared of any charges in Argentina due to lack of evidence. Posters urging "Bush, extradite Antonini Wilson" have been plastered on walls all over Buenos Aires by pro-Kirchner groups. Fernández de Kirchner administration officials have said that the US government was politically manipulating the Antonini Wilson case. The President in December accused the US of orchestrating a "trash operation" against her. But Fernández de Kirchner has made no personal comments about the case this time, possibly in a bid to avoid a full-fledged diplomatic crisis with the US. Earl Anthony Wayne, US ambassador to Argentina, acknowledged last Tuesday that the Antonini Wilson case has "caused tensions" between both nations. But Wayne said that the case has also helped Argentine public opinion understand that the US executive branch has no control over an FBI investigation. The row over Antonini Wilson comes at a time when other countries in the region â€" Bolivia and Venezuela â€" are openly accusing the US of siding with the rightwing opposition. The Unasur bloc of South American nations gathered in Santiago, Chile last Monday to consider the crisis in Bolivia. Unasur expressed full support for President Evo Morales of Bolivia, a democratically-elected Socialist currently under pressure from conservative governors campaigning for provincial autonomy. Fernández de Kirchner attended the Santiago summit. Unasur said in a nine-point statement that political violence to force a crisis to overthrow a government was unacceptable. Morales and Chávez in Santiago both openly accused the US of orchestrating the turmoil. But the official Unasur statement made reference to Washington. In Argentina there is currently no brutal political violence like in Bolivia. The army here has no say in politics any more, which is why Bendini's sacking only has political implications because of his ties to the Kirchners. But judges say they are pressured more subtly by the executive branch. Supreme Court Justice Ricardo Lorenzetti has complained about judges being probed by the Magistrates Council, which is controlled by the ruling party. And politicians are also at times mobbed and heckled. Felipe Solá, a Peronist deputy from Buenos Aires province, was heckled by leftwing demonstrators in Neuquén on Thursday. The demonstrators held Solá responsible for the disappearance of Jorge Julio López two years ago on September 18 in Buenos Aires province. López was a key witness in a human rights case against a provincial police inspector in La Plata. Solá, a pro-Kirchner Peronist who sided with the farmers during the export tariffs crisis, was governor when López disappeared. The heckling comes when Solá has gained media exposure after admitting that he was thinking about running for president in 2011. Solá's statement prompted speculation that he could lead a non-Kirchnerite faction of the Peronist party, and possibly join forces with the centre-right coalition PRO headed by Buenos Aires Mayor Mauricio Macri.(BAH).-