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Losing friends fast: Argentina's president suffers a painful blow to her credibility
The Economist
July 18, 2008

WHEN Cristina Fernandez de Kirchner selected a turncoat member of the opposition Radical party as her running mate in her successful campaign for Argentina's presidency last year, the choice looked like a canny ploy to win voters outside her Peronist party's working-class base. But now, Ms Fernandez's assumption that her vice-president, Julio Cobos, would show more loyalty to her than he did to the Radicals appears to have been an act of near-suicidal hubris. On Thursday July 17th, Mr Cobos cast his tie-breaking vote in the Senate against a crucial tax bill backed by Ms Fernandez, dealing what looks like a crippling blow to her presidency.

Ms Fernandez has spent the past four months in a fierce battle with Argentina's farmers. They launched a massive protest campaign of strikes and roadblocks after the government raised taxes on soya-bean exports to nearly 40%. The public backed the farmers, and the president's approval ratings tumbled. But Ms Fernandez and her combative husband, Nastor Kirchner, who preceded her as president and now runs the Peronist party, refused to lower the taxes in order to reach a compromise deal.

The two sides were locked in stalemate until the Supreme Court where a majority of the judges were put in place by Mr Kirchner announced it would take a case addressing the constitutionality of the taxes. Their legality was in question because the taxes were implemented via an economy-ministry resolution rather than by the legislature. To avoid a potential judicial rebuke, Ms Fernandez, a former senator, asked Congress to ratify the levies last month.

Ms Fernandez clearly underestimated the pressures on her party's legislators from Argentina's interior provinces, whose districts were staunchly opposed to the taxes. Despite holding comfortable majorities in both houses, her Congressional block had to establish a costly rebate scheme for small farmers in order to win a very close vote in the lower house. The bill then passed to the Senate, where a torrent of defections from Ms Fernandez's supporters produced a 36-36 draw.

The decision thus fell to Mr Cobos, whose relationship with the president has become frosty. Ms Fernandez had barely spoken to him in a month, presumably because she felt he had acted too independently during the conflict. The beleaguered vice-president all but apologised to her as he cast his deciding vote. "The Argentine president will understand me," he said, "because I don't think a law that doesn't provide a solution to the conflict will achieve anything I ask forgiveness if I'm wrong." When Ms Fernandez spoke the following evening, forgiveness was not on the agenda: "Let's hope that those who didn't understand what we said to the people in October [when the election was held] understand some day," she said, leaving little doubt about to whom her words were addressed.

Ms Fernandez's stunning defeat shatters the aura of invincibility that she inherited from her husband, who won a series of contentious political battles during his four years in office. Mr Kirchner regarded dissent as virtual treason, and used his control over spending to keep legislators and local officials in line. But while his approval ratings reached 70%, his wife's are barely above 20%. And while he enjoyed an ample budget surplus, her treasury has been depleted by last year's pre-election spending binge and by rising costs for fuel and transport subsidies. Ms Fernandez actually campaigned as a moderate consensus-seeker; she will have to start governing like one if she hopes to salvage her presidency.

Ms Fernandez has a number of options to restore her credibility with voters. For a start, she could reduce the export taxes herself, rather than waiting for the courts to strike them down now that Congress has rejected them. Additional popular moves would include fixing the official inflation index, which her husband manipulated to reflect less than half the true rate, and replacing some of the pliant ministers she inherited from Mr Kirchner with additional independent technocrats.

Ms Fernandez has three and a half years left of her term, and it is far too early to write her political obituary. But if she fails to learn from her mistakes, she may go down as one of the longest-serving lame ducks in recent democratic history.