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Bad policies sink Argentina's economy
Miami Herald
July 03, 2008

These should be the best of times for Argentina. Its economy has enjoyed five years of more than 8 percent annual growth, it is a leading exporter of food products at a time when commodities command record prices around the world, and President Cristina Fernandez de Kirchner's Peronist party boasts a majority in both houses of Congress. So why is the country in such a mess?

The answer can be found in the style and substance of President Fernandez's government, in particular the dispute with the nation's farmers brought on by a tax on commodity exports. The tax itself is a bad idea, putting a ceiling on farmers' profits at a time when the cost of fertilizer, land and practically all other costs are caught in an inflationary spiral.

No more high hopes

In addition, the way in which the government imposed this unfair tax -- by decree, without consulting either the legislative branch or farmers themselves -- invited the strikes, roadblocks and other forms of protest that have gripped the nation and paralyzed the government.

Just over six months into a new administration, a president elected with high hopes has turned into a major disappointment. Her levels of popularity have plunged below 25 percent in some polls. Ms. Fernandez has blown it, and she has no one to blame but herself -- and her husband, former President Nestor Kirchner.

During his nearly five years in office, President Kirchner governed Argentina in a remarkably imperious manner. He began the disastrous policies she has followed by raising export taxes on soybean products to 35 percent from 27 percent, just weeks before leaving office in December. His wife raised those taxes further to about 45 percent.

His way of dealing with opposition lawmakers was to bully or ignore them. He sent mobs to attack protesters, and demonized the news media when it suited his political purposes. By renouncing Argentina's foreign debt, he ensured that the next government would inherit the deserved mistrust of foreign creditors.

Food supply disrupted

Ms. Fernandez's governing style is in the same wretched tradition. Like her husband, she does not seem to understand the globalization phenomenon or basic economics. She imposed price controls on milk and produce, as if inflation could be banished by decree. Meanwhile, the farm strike has helped to disrupt global food supplies because Argentina is a leading exporter of wheat, beef, soybeans and other products.

Ms. Fernandez seems to understand her dire predicament. She has asked Congress to endorse her economic policies, a face-saving way of backing down that opens the door to compromise. It also holds the promise of starting to undo the damage of half a year of bad government.