The presidential campaign is in full swing. The president’s wife, a senator in her own right, seeks to establish her credentials as a savvy, smart leader who will move the economy forward, help bring people out of poverty and stand up to the policies of George W. Bush. Hillary Clinton? No. It is Argentina’s first lady, Cristina Fernández, favoured to win the October presidential election to succeed her husband, Néstor Kirchner.
The Argentine elections have sparked many comparisons between the two candidates. But on their positions and those of their husbands, there are few similarities.
There is a divide among governments in Latin America and the left is making a comeback, with a backlash against free-market reforms and US policies. The “responsible” camp is led by two socialists who have become very pragmatic. In Brazil, President Luiz Inácio Lula da Silva has followed moderate macroeconomic policies, with some innovative initiatives on hunger, land reform and energy. In Chile, President Michelle Bachelet has successfully led a coalition with the Christian Democrats and achieved strong growth and reductions in poverty. Felipe Calderón, Mexico’s conservative president, is following a similar course.
The “irresponsible” camp is led by Hugo Chávez, the Venezuelan president, seeking to spread his “21st-century socialism” across Latin America with populist, nationalistic policies fuelled by the country’s rising oil revenues. He has nationalised private assets, forced the departure of US companies, cracked down on the media and other opposition outlets and funded his own corps of leftist candidates throughout Latin America. He has proposed a “Bank of the South” to replace the US-backed International Monetary Fund and recommended a change in the constitution that would allow him to serve for life. On Mr Chávez’s side are Bolivia, Ecuador and, of course, Cuba.
Argentina has been teetering on the brink of the Chávez camp and the signals from Ms Fernández are not promising. Since Argentina’s economic collapse in 2001, its government has repudiated billions of dollars in debts to foreign lenders, accepted billions more of Venezuela’s petrodollars and flirted with Mr Chávez’s anti-American policies. Mr Kirchner accepted an offer from Mr Chávez for nearly $4bn to pay off International Monetary Fund debt. In exchange, he lent his support to Venezuela’s bid to join Mercosur, the regional trade bloc, and to Mr Chávez’s proposed Bank of the South. Brazil has thrown cold water on the bank proposal and Mr Chávez has been forced to put off his bond sales, reputedly for lack of buyers.
Ms Fernández has an opportunity to shift course and join the responsible camp. The country is back on its feet with about $44bn in foreign reserves from the boom in commodity prices. In 2006 it recorded a fiscal surplus equal to 3.5 per cent of gross domestic product. It is time the country moved away from Venezuela and joined Brazil, Chile and Mexico. There are several steps Ms Fernández should take. First, Argentina should take no more Venezuelan funds. Second, it should drop its support for a Bank of the South. Third, it should clean up its investment climate so it can re-enter international capital markets.
As the US State department noted in July, Argentine arrears to international creditors and the large number of arbitration claims by foreign companies are “legacies of the 2001/2002 economic crisis that remain to be resolved and adversely impact [on] Argentina’s investment climate”. The costs of Argentina’s move towards the wrong camp are growing. In the face of government harassment, ExxonMobil is considering pulling out of Argentina. Argentina still owes more than $3bn to Americans alone, including private investors, pension funds, university endowments and hedge funds.
Washington would be well advised to press Ms Fernández to move on all three steps and make these issues a priority in its bilateral relations. It should co-ordinate an approach with the Group of Seven leading industrial nations and the Paris Club of creditors to press Argentina to return to negotiations on its defaulted debts and respect international norms in their resolution.
The US should make it clear to Ms Fernández that she would be wise to move away from Latin America’s irresponsible camp if she takes office next year.
* The writer, a former US ambassador to the United Nations, is co-chair of the American Task Force Argentina and a distinguished visiting scholar at the University of North Florida