Argentina president offers choice: “the nation or the vultures”

Fernández de Kirchner wants to repay creditors at home to circumvent a US ruling

Argentina President Cristina Fernández de Kirchner.
Argentina President Cristina Fernández de Kirchner.EFE

Opinion polls show that Argentina’s president, Cristina Fernández de Kirchner, has improved her public image at home following her legal battle in the US courts with creditors demanding immediate payment.

The same surveys suggest that Argentineans are worried that the current levels of stagflation – an economic slump coupled with 31 percent inflation – will get worse after Argentina failed to meet its payment deadlines. According to the ratings agencies, the country went into default on July 30, after a US judge ruled that Argentina first had to repay speculative funds still owed their full amounts before it could repay other creditors who accepted hefty reductions in 2005 and 2010.

Fernández de Kirchner had wanted to pay the latter first, to prevent them from demanding full payment as the hedge funds (or “vultures,” as she terms them) had done – something that they would be entitled to do under the so-called RUFO clause.

The latest move by the Argentinean president came last Tuesday, when she sent Congress a bill offering the creditors holding restructured debt to be repaid in Argentina, rather than in the US or Europe. This would serve two purposes: it would circumvent the US ruling and it would also force Argentina’s political class to face the dilemma of “nation versus vultures” she has posed.

The president has asked for political unity, claiming that the country’s sovereignty is at risk

Fernández de Kirchner has asked for political unity, claiming that the country’s sovereignty is at risk. But the opposition will not be supporting her, and some questions are even arising among her own ranks. Even so, the president would still have an absolute majority in the lower house and be in a position to get the bill passed in the Senate as well.

But with just a year to go before presidential elections  – in which Fernández de Kirchner cannot run for re-election a second time – new cracks are beginning to show in a movement that has been in power for 11 years. The governors of four provinces with ties to Kirchnerism have recently had confrontations with the president over her intention of reforming hydrocarbon legislation and reducing the amount of income that those provinces get to keep.

Meanwhile, opposition parties are seeking a common stand before the “nation or vultures” dilemma. For varying reasons, they all oppose debt repayment on the basis that it would be bad for Argentina: from Sergio Massa’s Frente Renovador to the conservative Partido Propuesta Republicana (PRO) – in the hands of Buenos Aires Mayor Mauricio Macri, who is also a popular presidential candidate – and the Frente Amplio Unen, a coalition of parties ranging politically from the center-left to the center-right.

The unions are also opposing debt repayment, though their concerns focus on workers’ pockets rather than on the debt crisis per se. Three of the five unions have called a general strike for Thursday to demand an adjustment to income tax that takes inflation into account.

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