NEW YORK — The election of Nestor Kirchner as Argentina’s new president offers hope for a national economic and social recovery following decades of government mismanagement. Kirchner will need to back his intentions with prompt implementation of effective policies to convince Argentines that he will indeed overcome the effect of years of public policies that triggered one of the worst crises in the nation’s recent history.
By withdrawing from the final runoff race, former President Carlos Menem ensured that Kirchner would become Argentina’s new president. Kirchner inherits a country in shambles, with a huge foreign debt ($155 billion) equivalent to 126 percent of gross domestic product, according to preliminary estimates for 2002. The debt is projected at 110 percent of GDP for 2003. This puts great pressure on the export sector and challenges the availability of resources for domestic consumption and financing of social programs.
The economic and social situation in the country is characterized by widespread poverty, massive unemployment and a general climate of insecurity in the country’s main cities. More than 65 percent of Argentines now live below the poverty line, and general unemployment is above 24 percent — this in a country that in the first half of the last century was among the 10 most prosperous nations in the world.
Argentines have seen not only production capacity weakened, as measured by a 10.8 percent GDP decrease per capita in 2001, but also a decline in distribution. Although Argentina is still an important agricultural exporter — it can produce eight times more food than is required to sustain its population of 37 million — malnutrition is widespread.
According to the Center for Studies on Infant Nutrition in Buenos Aires, malnutrition now affects more than 2 million children. Poor provinces in the north are particularly affected.
The recovery of the economy and the improvement of safety conditions for the civilian population are among Kirchner’s top priorities. He will need to reach an agreement with the International Monetary Fund, since the current stopgap agreement runs only until August.
There are indications that economic progress in the country in recent months will facilitate talks with the IMF. (Inflation this year forecast at 18 percent, almost half of the 35 percent IMF target.) IMF director Horst Kohler has indicated that the fund is ready to renegotiate a new agreement with Argentina.
Now that the Argentine peso is no longer pegged to the dollar — the exchange rate is now about 2.75 pesos per dollar — Kirchner’s economic team will be faced with the challenge of putting together an aggressive program to foster exports, which have proven to be one of the main contributors to the country’s recent, albeit modest, economic recovery. This would also contribute to less unemployment.
Kirchner has already indicated that he will reorient fiscal expenditures toward an extensive program of public works and loans to small- and medium-size industries, to revamp the country’s neglected infrastructure. He has already had talks with Chilean President Ricardo Lagos and Brazilian President Luis Inacio Lula da Silva on trade issues and on how best to reach an agreement with international creditors without sacrificing economic recovery.
Kirchner must make the cities safe again. With deepening poverty, crime has soared and many suspect that in some cases retired policemen are responsible. He should conduct a thorough investigation of this problem, which has had a profound effect on the morale of Argentines. Buenos Aires, traditionally one of Latin America’s safest cities, had an average of seven murders a day in 2002.
With Kirchner, Argentines may have a president who will lead them out of the morass in which they find themselves. As governor of Santa Cruz province, in southern Argentina, he had a reputation for honesty and good administration.
As he declared shortly before becoming president, “It is critical to return the country to normality, to have common men and women bring institutional quality to the country.”