Dressed in a floppy camouflage hat, the president of Argentina emerged from a leaf-strewn tunnel hidden beneath the forest floor in the most striking photo call of her tour of the Middle East and Asia. Visiting the Cu Cu tunnel complex in Vietnam, built by the Vietcong during the French occupation and expanded during the American invasion, Cristina Fernández expressed her admiration for the “wonderful struggle of the Vietnamese people in search of their independence”. A wistfulness for an old-fashioned imperialist struggle infused her remarks, as she continues to scour horizons both domestic and foreign in search of an enemy to fight.
At home
On the domestic front, the dragon that desperately needs slaying, as even Ms Fernández is beginning to acknowledge, is inflation. The ‘I’ word, rarely mentioned by the Casa Rosada, enjoyed a rare outing on 10 January, as a means of attacking her opponents. The president gave a speech calling for governors and city mayors to delay price rises for municipal services in an attempt to limit inflation. Whilst accepting the fact that price rises were sometimes necessary, Fernández said there should be only gradual adjustments. She singled out for particular criticism the opposition mayor of Buenos Aires, and possible 2015 presidential candidate, Mauricio Macri, for planning a steep increase in metro fares.
The week after the president’s speech, both official and unofficial inflation statistics were published. Individual econometric firms face stiff financial penalties for publishing their own, unofficial data. As a means of circumventing this effective prohibition, opposition legislators have devised a ‘congressional index’, derived from a survey of nine private economists compiled and published by parliamentarians. This put inflation for 2012 at 25.6%. Few, not even the government, gave serious credence to the official statistics, published the following day, which claimed it was 10.8%.
After years of manipulating the data in an attempt to keep salaries and consumer prices from soaring, and shave billions off the payments it makes on GDP-linked bonds, the Argentine government has begun this year’s round of wage negotiations with trade unions accepting the need for at least a 20% hike in salaries. Although the country’s largest trade union, the Confederación General de Trabajo (CGT), split last year into pro and anti-government camps, both sides are entering the discussions calling for a 25% pay increase. However, the government-aligned faction, led by Antonio Caló, has indicated that there may be room for manoeuvre if the government raises the income tax threshold by 20%. Hugo Moyano, the increasingly vociferous leader of the anti-government section of the CGT, has made it clear that he sees a 25% increase in wages as the absolute minimum if the government wishes to avoid major strikes.
Scioli incurs Fernández’s wrath
Daniel Scioli, the governor of Buenos Aires’ province, is a more tangible enemy of the president than runaway inflation. A possible presidential candidate for 2015, Scioli is from the more centrist section of the ruling Partido Justicialista, and increasingly distant from Fernández’s own left-wing brand of Peronism under the Frente para la Victoria. But given Fernández’s lingering hopes of being able to alter the constitution to allow her a third run at the job, Scioli now finds himself in the president’s sights.
Indeed, despite his refusal to break publicly with the president, Scioli has done little to ingratiate himself with Fernández, appearing alongside the opposition mayor of Buenos Aires, Mauricio Macri, at the opening of a waste plant in the first political set piece of the year. As thanks for such a provocative act of disloyalty, Fernández criticised the fact that Scioli continued to hold a bank account in US dollars. Strict currency controls are in place in Argentina, and last year the president asked her cabinet to ‘pesify’ their dollar savings.
Abroad
Argentina also risks international wrath over the manipulation of its official GDP and inflation statistics. At the first IMF conference of the year, Christine Lagarde confirmed that the fund’s executive board would be meeting to discuss the quality of Argentine official data on 1 February. In September, Lagarde warned that the country could face a “red card” for its dodgy statistics. In practice, this could mean the scrapping of its voting rights or even the suspension of its membership. Given Fernández’s predilection for the role of underdog, that may well suit her short-term political interests, though its long-term economic consequences may be severe.
| Voting rights at the IMF, % of total votes | |
| Argentina | 0.87 |
| Brazil | 1.72 |
| Chile | 0.37 |
| Paraguay | 0.07 |
| Uruguay | 0.15 |
| Other Members | |
| US | 16.75 |
| China | 3.81 |
| India | 2.34 |
| Russia | 2.3 |
| Source: IMF | |
‘Planetary threats’
The president’s political antennae have detected not just “internal and external threats, but underground and planetary” ones, according to a speech she gave to an adoring crowd celebrating the return of the Libertad, the Argentine frigate recently impounded in Ghana. In a ceremony that exhuberantly mixed the martial and the populist, Fernández vowed that her government would “keeping fighting always” as fireworks exploded and airforce jets emitted blue and white smoke swirls above the safely-returned ship. The president also attacked the “savage social predation” of “vulture funds” who continued to demand full repayment of Argentina’s debt.
The Libertad finally left Ghana following the intervention of the UN’s Tribunal for the Law of the Sea, but only after it had been held for 78 days. The Ghanian authorities were following a New York court’s judicial order, issued following a request by Elliott Capital, a private equity fund that holds up to US$1.6bn of Argentina’s debt, that the ship should be held as collateral for the money Argentina owes. Elliot Capital is one of the bondholders that refused to accept the terms of Argentina’s debt write-down in 2002. The firm has form on its attempts to seize Argenine assets. Previously, it tried to seize the presidential plane, Tango 1, when it was due to fly to the US. In order to avoid the risk of being left stranded on the tarmac, Fernández charted a plane for her latest tour round the Middle East and Asia. The next phase of the battle between Argentina and its hold-out creditors is due to take place on 27 February. In the meantime, the Libertad will be on display for holidaymakers in Mar del Plata until 15 February.
The Falklands, redux
Another famous Argentine ship will not be hosting visitors any time soon. Local authorities had planned to turn the Holy Trinity, the destroyer which landed the first Argentine troops during the Falklands War, into a museum. But photos in the Argentine media on 22 January show the ship badly listing to port and taking on a large amount of water; a result of a burst pipe. The navy stated that it had the situation under control and that it was working to restore buoyancy.
Although the sea-worthiness of the Argentine navy is unlikely to be tested any time soon, at least in regard to the Falklands/Malvinas, Fernández has returned repeatedly to the theme of the disputed islands since the start of the year. On 3 January she wrote an open letter to the UK Prime Minister, David Cameron, demanding talks over the islands’ sovereignty. Cameron asked Fernández to respect the results of a referendum on the islands, due on 11 March, which is expected to show that around 98% of the population want to remain under UK stewardship. Any change to the status quo seems extremely unlikely, but the little spat provided a welcome respite to both leaders’ domestic woes.
- Blue dollar blues
The ‘blue dollar’, the black market rate for a US dollar, hit an unprecedented AR$7.54 in late January. Currency controls, limiting the amount of dollars an individual can purchase, has led to a vibrant illegal market in the US currency, particularly during the holiday season. Legally, Argentines are only permitted to buy US$100 per day per person. While the official rate is under AR$5 to the dollar, the unofficial rate looks set to climb ever higher.
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