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Fernandez Loses Congress Power in Argentina Election (Update1)
Bloomberg
June 29, 2009

By Bill Faries and Eliana Raszewski

June 29 (Bloomberg) -- Argentine President Cristina Fernandez de Kirchner lost power in Congress after voters angry at her handling of a farm strike, crime and a slowing economy favored opposition candidates in mid-term elections yesterday.

Nestor Kirchner, Fernandez's husband and predecessor, acknowledged this morning that a slate of candidates he led for the lower house of congress in the bellwether province of Buenos Aires was defeated. Partial results indicate the government will lose its majority in both houses of congress, with no party having outright control.

"We've said a number of times that we are going to change history, and that day is today," Buenos Aires province opposition leader Francisco de Narvaez said at a rally last night. "This is a moment to unite, not divide, a moment to join together, not confront."

Fernandez, 56, relied on her coalition's control of congress to back an agenda that included nationalizing $24 billion in private pension funds and the country's flagship airline, Aerolineas Argentinas SA. She angered many supporters when she tried to raise farm export taxes last year, provoking four months of road blockades and protests.

"In a democracy, you win and you lose," Kirchner said at a post-election rally in Buenos Aires. "This was a very close election. We lost by a little bit."

De Narvaez's slate in Buenos Aires had 34.5 percent support compared with Kirchner's 32.2 percent with 70 percent of the votes counted, the interior ministry said on its Web site. The ruling coalition was also trailing in populous provinces including Cordoba and Mendoza and in Buenos Aires city. In Kirchner's home province of Santa Cruz, government candidates were losing by 1,700 votes with 71 percent of ballots counted.

Election Moved Up

Fernandez, who succeeded her husband in December 2007, got congress to move up yesterday's election by four months, arguing it would be "suicidal" to let the campaign drag on while "the world is crumbling into pieces" as a result of the global economic crisis. Opposition leaders said the intent was to hold the vote before Argentines felt the full effects of the crisis.

Kirchner, 59, said during the campaign that the country's economic growth since a 2001 financial crisis was at risk in the mid-term election. He reminded voters that in 2001, when Argentina defaulted on $95 billion of debt and restricted bank withdrawals, then-President Fernando de la Rua was forced to resign amid riots and looting. The following year, the economy shrank almost 11 percent.

"This is not just another legislative election, there are two different models for the country at stake," Kirchner said at a rally on June 17. "We don't want more frozen bank accounts, more financial instability, more unemployed people, more broken industries. This economic model should be a breaking point between the old Argentina and the new one."

Farm Strike

The farm strike did more damage to Fernandez than the country's slowing economy or rising concerns about crime, an issue that de Narvaez campaigned on, pollster Ricardo Rouvier said in a June 24 interview.

Economic growth in Argentina slowed last year to 6.8 percent from an annual average of 8.8 percent during Kirchner's four-year term. Inflation quickened to what private economists such as Jose Luis Blanco, at Tendencias Economicas research, estimate at 22 percent.

Argentina's dependence on agricultural commodity exports such as soybeans and wheat has hurt it over the past year as international prices fell from record highs and the global economic crisis hit. Exports fell 18 percent to $5.1 billion in May from a year earlier, while imports declined 49 percent to $2.7 billion.

Fernandez has vowed that the economy will continue to grow even as organizations including the International Monetary Fund predict a recession. The economy will shrink three percent this year, according to the median estimate of seven economists surveyed by Bloomberg.

Boost Spending

Neil Shearing, an emerging markets economist at Capital Economics in London, said the government may react to its defeat by boosting spending on social programs in an effort to build support ahead of the 2011 presidential elections.

"The government will be desperately scrambling for a way to regain authority and will probably try to do that through populist measures," Shearing said in a telephone interview.

About 28 million people were eligible to vote in yesterday's election, according to the Interior Ministry. Half the 257-seat lower house and a third of the 72-member Senate were up for grabs. The new lawmakers will take their seats in December.

"What we are hearing from all over the country is support for change," said Buenos Aires mayor Mauricio Macri, whose Union Pro coalition was leading in the capital. "To the President, I say to you with total respect that I hope you've heard the message Argentina sent you."

To contact the reporters on this story: Bill Faries in Buenos Aires at wfaries@bloomberg.net; Eliana Raszewski in Buenos Aires at eraszewski@bloomberg.net.

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