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Cristina's travails
Financial Times
July 07, 2008

By Jude Webber

Argentina's President Cristina Fernandez has won a victory of sorts, after legislators narrowly approved her controversial plans to introduce a sliding scale of export tariffs at the weekend. But her difficulties are not over by any means.

First, the government made last minute concessions to farmers that reduce the expected revenues from the new tariffs. Second, farm leaders are still planning to resist the bill in the Senate, where discussion begins (in committee) on Monday. Third, the political alliance that has backed Ms Fernandez as well as the presidency of her husband, N stor Kirchner, is seriously divided. Finally, Ms Fernandez has paid a huge political cost for taking such a hard line in the dispute, with her poll ratings plummeting. The full extent of this loss of popularity will be abundantly clear in next year's mid-term congressional elections.

All of this shows that there is an overriding need for Ms Fernandez to adopt a more conciliatory approach as she refocuses on urgent economic difficulties from which the farm conflict has diverted attention. Inflation is one problem, how to deal with the $6.4bn in defaulted debt to the Paris Club of Western creditor nations another. This latter issue could well come to the fore on Wednesday, when the top US official for the Americas, Tom Shannon, is expected to arrive in Buenos Aires. Martin Lousteau, who quit as economy minister after the farm conflict erupted, had proposed a deal with the Paris Club, contemplating a three-year grace period and payments rescheduled over five years. Ms Fernandez should think about dusting it off.