Argentinean President Dies, Business Rejoices
Rarely do you see it put in such crass terms. On Wednesday Néstor Kirchner—former Argentinean president, projected contender in next year’s elections, and husband of current president Cristina Fernández de Kirchner—died suddenly of a heart attack. Business rejoiced.
A Reuters article headlined “Argentine assets rise on death of ex-President Kirchner” read:
A market holiday in Argentina muted local prices, but investors immediately bid higher Argentine credit-related and equity-related assets trading in global markets following the news Kirchner, 60, husband to current President Cristina Fernandez, died suddenly on Wednesday....
“Sincerely, for Argentina and from a market perspective there is nothing better than knowing that Kirchner will be out of the presidential race of next year. For years his confrontational, resentful style towards investors, companies and bond holdouts deprived Argentina of much-needed capital,” said Roberto Sanchez-Dahl, who oversees $1.1 billion in emerging market debt for Pittsburgh-based Federated Investment Management.
Despite fund managers’ claims, Kirchner was no raving radical. Social movements in Argentina tended to have conflicted relationships with the Kirchners. And even those foreign analysts who have followed the strategy, popular in the Bush White House, of dividing Latin American progressives into a “good” left (Chile, Brazil, Uruguay under Vázquez) and a “bad” one (Venezuela, Bolivia, Ecuador) have sometimes been ambivalent about how to classify Kirchner’s Argentina.
However, the accomplishments that Néstor Kirchner will be remembered for, at least on the international scene, are progressive ones. On the human rights front, he supported the repeal of amnesty laws that protected military officers guilty of grotesque abuses during the country’s “Dirty War” in the 1970s and early 80s. His willingness to see captains of the past dictatorship brought to trial stood in bright contrast to the behavior of previous administrations, and it opened the door to high-profile prosecutions.
Kirchner’s most consequential policy decisions, moreover, were economic. I have previously written:
In 2003 the left-leaning Néstor Kirchner took office in Argentina—in the aftermath of the 2001 collapse of the country’s economy and the popular uprisings that forced several successive governments from power. The neoliberal policies supported by the IMF and implemented by President Carlos Menem in the 1990s were widely seen as responsible for the collapse. Since then, Argentina has set an important example by breaking with the IMF and playing hardball with international creditors.
In 2003, the country made a credible threat of defaulting on its payments to the IMF—something previously unheard of for middle-income countries. In response, the Fund backed away from demands for austerity and higher interest rates. It did so for fear that other countries would follow Argentina in defaulting. The exchange shook the international standing of the IMF and allowed Argentina to finalize a renegotiation of over $100 billion in foreign debt in 2005. The renegotiation drastically reduced the value of the country’s outstanding obligations to private creditors.
The strategy worked, allowing his government to negotiate a very favorable restructuring of its loans. Argentina standing up to the IMF was like an underdog knocking down the schoolyard bully. The aura of invincibility surrounding the Fund was dispelled, and the institution will likely never again inspire the same begrudging awe.
Given that there is no international mechanism for countries to declare bankruptcy, and that the poor in many nations are held hostage by international creditors who ruthlessly demand payment even for clearly illegitimate debts, the president’s stand was a pivotal one. Mark Weisbrot comments on the same key moment in his remembrance of Kirchner at the Guardian:
His role in rescuing Argentina’s economy is comparable to that of Franklin D Roosevelt in the Great Depression of the United States. Like Roosevelt, Kirchner had to stand up both to powerful moneyed interests and to most of the economics profession, which was insisting that his policies would lead to disaster. They were proved wrong, and Kirchner right....
Argentina went on to grow at an average of more than 8% annually through 2008, pulling more than 11 million people, in a country of 40 million, out of poverty. The policies of the Kirchner government, including the central bank targeting of a stable and competitive real exchange rate, and taking a hard line against the defaulted creditors—were not popular in Washington or among the business press. But they worked.
Of course, the very same policies earned him scorn among money managers, who continue to frame events entirely in terms of losses to well-heeled investors. As the Reuters article states of Kirchner:
His combative and outspoken criticism of big business and political rivals did not endear him to international investors. He refused to settle with hold-out investors who sued the government over the 2002 default, keeping Argentina from freely raising capital in the international markets.
“This reduces political risks. If there is a possibility that this could lead to a more market-friendly and transparent leadership in time, that could be beneficial for economic policymaking,” said Richard Segal, analyst Knight Libertas in London.
Seeing such analysts dance on Kirchner’s grave is hardly the most dignified sight one could imagine. Then again, for those trying to measure their lives by service to justice, rather than service to money, the celebration of the bankers upon your death may be a most fitting homage.
© 2008 Foundation for the Study of Independent Social Ideas, Inc.