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Argentine Democrats Strike Back
Wall Street Journal
July 21, 2008

By Mary O'Grady

Argentine democrats chalked up a big win last week when the Senate in Buenos Aires voted down a tax bill sent to it by President Cristina Kirchner.

The significance of the defeat for Mrs. Kirchner goes well beyond her fiscal agenda to the heart of the rule of law in one of the most important countries in Latin America. To wit, for the first time in seven years, the office of the Argentine president has been forced to accept limits to its power.

This is great news for a nation that seemed, until last week, to have lost all institutional checks and balances. If some of those institutions are reasserting their power to keep the executive in line, it means that the Argentine democracy still has a pulse.

It is also good for the neighborhood, where young democracies are still being tested. Some, like Chile, Brazil and Colombia, have been strengthening their institutions. But Venezuela, Ecuador and Bolivia have regressed, and under former President Nestor Kirchner and now his wife, Argentina has been slouching in their direction. If the events of last week can pull the democracy out of its death spiral, it is a victory for the forces of good on the entire continent.

Under both Mrs. Kirchner's administration and her husband's before her, government spending has climbed at an alarming rate. But rather than cut the size of the state, the new president decided that soy farmers should foot the bill.

Mrs. Kirchner had assumed that Resolution 125, which proposed to sharply raise export taxes on soy, could be simply imposed by presidential decree in March. But in a political environment already poisoned by inflation and a slowing economy, the president had reached too far.

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In her proposal, the tax take could end up as high as 95% of any marginal increase in farmers' gross income. That produced a backlash from the rural sector, and it didn't take long for the government's urban opponents to join their country cousins in protests. By June it had become clear that she lacked both the constitutional power and the popular support to make such a unilateral ruling.

At that point the president decided to send the bill to the legislature. She expected a rubber stamp from the Peronist Party, which controls Congress. But the public outcry had come to symbolize more than a difference on tax rates. It had set off a national confrontation between proponents of democratic pluralism and supporters of Mrs. Kirchner.

After 17 hours of debate, at 4:25 on Thursday morning, opponents narrowly rejected the bill, with Mrs. Kirchner's vice president, Julio Cobos, casting the deciding vote.

The Senate was responding to pressure from the hundreds of thousands of Argentines who had taken to the streets over this issue. That had not been enough to defeat the bill in the lower house. But the Senate consists of a more ambitious set of politicians, who are also thinking about their own political futures.

This is significant, because it shows that in the president's own party there are serious qualms about whether the heavy-handedness of kirchnerismo should be allowed to continue, and that some of the challengers within the party are in ascendancy. Mrs. Kirchner may have to learn the art of compromise.

It is still not clear whether she will accept such a diminution of power. She has pulled her export-tax scheme for now, but she has not indicated any interest in downsizing her ambitions.

The real problem for this president may be that she is not the one calling the shots. All the evidence instead suggests that her husband never really relinquished power. Given his style and record, it is unlikely that he is ready to do so now, even in the face of this defeat.

Consider the composition of Mrs. Kirchner's cabinet, which has retained many of Mr. Kirchner's most important cabinet officials, including Guillermo Moreno, the minister of commerce. For years now Mr. Moreno has been in charge of arranging "voluntary" price-control agreements with Argentine businesses -- and it has long been rumored that he puts a pistol on the table in those "negotiations." This may well be an urban legend, but it says a lot about the government's reputation with the business community. That Mrs. Kirchner kept him on shows an unwillingness to address the problem.

Mr. Kirchner's hateful rhetoric toward entrepreneurs, producers, the Argentine military, and political adversaries also has continued under his wife's government. Either the new president has no interest in a fresh start that might begin to heal the nation -- or she is not being allowed to try because her husband is still in charge.

In either case, Cristina Kirchner ignores last week's vote at her own peril. Staying her husband's course will only ensure polarization and, as she should have learned last week, that path is a dead end.