Last summer, pundits were writing the political obituaries of Cristina and Néstor Kirchner, Argentina’s first couple. Their coalition had suffered big losses in national legislative elections. Néstor, the former Argentine president (20032007), had failed in his bid to win a congressional seat, and he had subsequently resigned as leader of the Peronist Party. Cristina, the incumbent president, had seen her popularity plummet. The decline in global commodity prices was causing serious economic pain. Foreign investors were fleeing. All signs pointed to an opposition victory in the 2011 presidential election.
A year later, things look different. Earlier this month, the Wall Street Journal declared that the Kirchners are “enjoying a political resurgence,” thanks to an economic rebound and Argentina’s strong performance in the World Cup. (Two days after the Journal article appeared, Argentina was eliminated from the tournament in the quarterfinals by Germany.) “Mr. Kirchner’s hopes of returning to the presidency have strengthened,” says the Financial Times.
The election is still a long way off, however, and the Kirchners have an Achilles’ heel: high inflation. “After slowing down in the second quarter, inflation appears to be worsening again in Argentina as price hikes become more frequent,” Dow Jones reported last week. “In the quest to maximize short-term growth,” notes Goldman Sachs, “the authorities have become extremely indulgent towards inflation and continue to neglect the consequences of cementing inflation inertia.” Annual inflation is projected to be about 25 percent this year, and perhaps hit 30 percent in 2011.
It is widely believed that the Kirchner government has repeatedly doctored official inflation data to camouflage the severity of the problem. But investors and businesses have not been fooled. Among the major Latin American economies, only Hugo Chávez’s Venezuela has a higher inflation rate. Like Chávez, the Kirchners have indulged in profligate spending, hoping that voters would reward them. The odds are still against Néstor’s winning another presidential term next year. But for now, at least, Argentina’s economic recovery has boosted his hopes.