G.BREUER
DESDE 1869
G. BREUER's Newsletter
October 2007
Dear Clients & Friends,
We are sending to you the monthly edition of our Newsletter where you will find an update on:
Hoping that you find this issue as interesting as our previous ones, please do not hesitate to contact partners Jorge Otamendi (joo@gbreuer.com.ar) and Alberto Navarro (anavarro@gbreuer.com.ar) for any specific question you may have after reading it or for any other issue you may need advise on.
Best regards,
G. BREUER
25 de Mayo 460
Buenos Aires - Argentina
Tel: +54 114313 8100
Fax: +54-11-4313-8180
This month, the political news is entirely related to the coming October 28th elections.
At this point, the frontrunner continues to be Cristina Kirchner, the wife of the president Nestor Kirchner and obviously representing the ruling political party, which is a coalition of former peronists, former radical party members, and some candidates coming from other political affiliations, mainly from the left-wing side of the spectrum.
The fact that Mrs. Kirchner will win the elections is not in doubt now; it is almost a fact. The real issue at this point is whether she will reach 40% of the votes and more than a 10% difference with the second runner. If Mrs. Kirchner achieves those percentages, then the second round or ballotage could be avoided. Many say that avoiding the second round will be crucial for her, since the second round would join together all voters who oppose her husband’s policies on many fronts –corruption, poor agricultural policies, weak record on inflation, among many others.
Just a reminder, for a candidate to be elected president in the first round, he or she must reach 45 percent or 40 percent of the votes with a 10-point difference over his/her nearest rival. If such minimums aren’t achieved, the two candidates with more votes in their favor will pass to the second round, where the one with higher number of votes will win.
As previously said, Mrs. Kirchner is leading the opinion polls, and the most reliable ones show that she is very close to achieving victory in the first round. But the current tendency is that undecided voters, still a very important number, may not vote for her so the second round is very likely to happen.
If there is a second round, the most likely contender will be Civic Coalition leader Ms. Elisa Carrió, a center-left politician turned center recently, who is confident of a runoff and who expects undecided voters to make a strategic vote in order to preserve a place for the real opposition in the second round.
Interestingly enough, Ms. Carrió has gathered around her many young and proven intelligent politicians and technical experts from diverse political sectors, who have committed to serve as ministers and members of her administration if she wins. Most remarkably, is the case of former Central Bank President, Alfonso de Prat-Gay, who announced that he will serve as Ms. Carrió’s Economy Minister. That name is evidencing that Ms. Carrió is really serious in her move to being the real alternative in this coming elections and that she is taking her chances seriously.
The current administration and the rest of the opposition think alike, since Ms. Carrió is today the enemy to beat by both said sectors: either to win in the first round –for the Kirchners- or to reach the second round –for the opposition. Plenty of attacks are seen these days against Ms. Carrió, but such a position –victim- has served her well in the past.
On Sunday night we will all know the end of this exciting political moment in Argentina.
We mention that the other candidates in the row are the former Economy Minister Roberto Lavagna, who heads the AUNA alliance ticket of Radicals and anti-K Peronist; Ricardo Lopez Murphy from Recrear; and Alberto Rodriguez Saa, from the Frejuli Party, which consisted of liberal Peronist opponents to President Kirchner.
We note below some interesting facts related to the forthcoming elections.
First, this presidential campaign is the coolest so far since the beginning of the last democratic period in 1983. It can be perceived in the streets of major urban centers of Argentina that there is no real interest in the elections and that the general public is not really involved in them like in the past. This is perceived as worrisome by experts, who see a negative message in the fact that politics is of no interest to the general public.
Second, as a result or confirmation of the fact pointed out in the preceding paragraph, this campaign is considered the poorest in decades in terms of ideas. Mrs. Kirchner’s campaign has been very short and almost entirely media-oriented. She avoided presentations and discussions. It almost seems to be an advertisement campaign rather a political campaign. That made that no real debate as to her future government took place in the campaign. We note that many argue that definitions on her side were unnecessary, since few doubt that Mrs. Kirchner’s administration will follow the main lines of Mr. Kirchner’s administration.
Third, for the opposition, this presidential campaign is dominated by issues like crime in Greater Buenos Aires, corruption and inflation. We will deal with the inflation issue in our Economy Section below.
As to the rest of those issues, we mention that all the corruption scandals that took place in the recent past –Skanska, the toilet-gate by former Economy Minister Miceli, and the illegal funds brought from Venezuela, among others- although they served to tarnish the image of the Government, it is unclear whether they will be decisive for voters at the time of choosing a president. Crime certainly is an important issue, but even though it may deprive the government from many votes, it does not seem that it will make it loose the election. Again, this is part of the general apathy that we mentioned above. In other times, any of those issues separately may have turned the result of the election upside down. It seems that it will not happen this time. But we will have to wait until Sunday night.
Even the economy is political in this electoral time. To the Kirchners, this election is about the booming consumer-driven economy and about the benefits of economy growth in general. The President announced that the economy in August grew 9.7% year-on-year. The Argentine GDP has now been growing for 57 months in a row. Unemployment in September, the government said, stood at 7.7%.
And although many of those figures may be argued not to be accurate or excessively optimistic, undoubtedly there is some truth in them.
Most of the opposition presidential candidates, however, have warned that the economy is overheating unnecessarily and for electoral purposes. For instance, Ms. Carrió said that Argentina needs to grow at a lower pace to prevent inflation from spinning out of control next year. And she and Mr. Prat Gay are speaking of a soft landing.
So far, most of the experts agree that no real plan to fight inflation is in place in Argentina, when the problem has been really apparent for some time now. Critics have always said that the aggressive anti-inflation crusade that the President launched in 2005 –such as price accords-, which has been headed by Domestic Trade Secretary Guillermo Moreno, was never successful enough and for sure will no longer be effective with an inflation rate on the verge of being really high.
Currently, the same agreements are being executed between supermarkets and banks, related to some prices of the family shopping basket and lower rates on loans are being studied (i.e. not implemented). Experts say there is no reason to believe this mechanism will be successful this time. Again, it may all last till next Sunday’s elections.
The next president, whoever it is, will face a tough economic reality. Many say that Argentina’s biggest challenge for the forthcoming future will be to translate its high growth into corresponding investment, which is desperately necessary.
Regarding the energy crisis, the next government will have to considerer raising natural gas and electricity utility prices soon after it takes office in December as a way to avoid a new energy crisis.
Mr. Kirchner has avoided mass blackouts in the run-up to an October 28th presidential election by imposing energy restrictions on the industrial sector, where supplies are tight due to rapid economic growth and years of underinvestment to expand production.
Analysts say price freezes have aggravated the problem by deterring the much-needed investments. The energy crunch is seen as one of the biggest threats to Argentina’s continued economic expansion, and it may be a bottleneck –the most evident- for the future president, who will have to deal with the issue very soon rather than later. A hot summer always comes after October in Argentina.
The good thing is that most of the problems pointed-out will be closer to their solution after next Sunday.
You may read the October edition of our Boletín Informativo, G. BREUER’s monthly publication focused on general legal information sent to our Argentine clients & friends.
- For more information on local legislation, you may read the October edition of our Boletín Informativo sent to our Argentine clients & friends.
G. BREUER
25 de Mayo 460
Buenos Aires - Argentina
Tel: +54 11 4313-8100
Fax: +54 11 4313-8180
Please note that the information given in this bulletin is for general purposes only and does not intend to provide comprehensive legal advice on any issue.
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© G. BREUER, 2007