Real Clear World
April 21, 2011
by Jaime Daremblum
In her authoritarian economic policies, her persistent efforts to intimidate opposition journalists and her hostile approach to the United States, Argentine President Cristina Kirchner has effectively governed as a less radical version of Hugo Chávez. Like Chávez, Kirchner has used commodity revenue to fund lavish social spending, and her fiscal profligacy has contributed to rampant inflation. Like Chávez, she has nationalized a host of private companies, deeply alienated foreign investors and spurred capital flight. Like Chávez, she has promoted fierce antagonism toward Washington.
Until recently, however, there was one major foreign policy issue on which Argentina and Venezuela were significantly at odds: Whereas Chávez had established a strategic alliance with the Iranian theocracy, Kirchner had strongly pressured Tehran to cooperate with the official Argentine investigations of two terrorist bombings that struck Buenos Aires during the 1990s - bombings that were almost certainly orchestrated by Iranian agents and proxies.
Yet it now seems that Kirchner has abruptly changed her position. According to a classified document obtained by the Argentine weekly publication Perfil, Foreign Minister Hector Timerman met with Syrian officials this past January and indicated that Argentina was prepared to suspend the bombing investigations "in exchange for renewing and improving trade relations between the countries, which at their height reached $1.2 billion a year."
In other words, Buenos Aires is willing to whitewash two murderous attacks that killed a combined total of 114 people, all in return for more Iranian trade. If Timerman did in fact make such a proposal - thus far, Argentine officials have not denied the story - it reveals both the moral decline and the economic desperation of the Kirchner government.
The two bombings in question hit the Israeli embassy (in 1992) and a Jewish community center (in 1994). To freeze the investigations would be to dishonor the victims, embolden the Iranians and make a mockery of the lengthy Argentine campaign for justice - a campaign that was championed by Kirchner's late husband, Néstor, who preceded her as Argentine president and died of a heart attack last October.
Why would Buenos Aires suddenly feel compelled to make nice with Tehran? Simple: Years of irresponsible fiscal policies and nationalization schemes have exacerbated poverty, produced runaway inflation and done massive damage to the Argentine business environment. During the global boom years of the mid-2000s, both Kirchners used their country's abundant soybean revenue to fund extravagant spending. But when commodity prices plummeted in 2008, Argentina found itself careening toward a crisis.
It had lost access to global capital markets following its 2001 financial collapse, and it had subsequently failed to make good on its defaulted debt. The country could not simply roll over its debt or rely on government bond sales to solve the problem. Cristina Kirchner, elected in 2007, eventually chose to nationalize private pensions. This caused both the Argentine peso and the Buenos Aires stock market to plunge in value. Shortly thereafter, Kirchner nationalized Aerolineas Argentinas, the country's biggest airline, which had been privatized in 1990.
By early 2009, the country was once again on the verge of an economic disaster. Amid its worst drought in decades, Argentine farmers were striking to protest against government agricultural policies, including a deeply unpopular 35 percent export tax. Desperate for revenue, Kirchner rejected efforts to eliminate or reduce the controversial taxes. Since then, her economic management has continued to be thoroughly reckless.
In January 2010, she fired Argentine Central Bank Governor Martín Redrado after he refused to transfer $6.7 billion worth of foreign-exchange reserves to help the government repay defaulted debt. Foreign investors have been alarmed by the persistent falsification of official Argentine inflation data, which began under Néstor Kirchner and has gotten worse during his wife's presidency. "The poverty level is higher now than the worst moments of the 1990s," former Minister of Economy Domingo Cavallo recently told the New York Times. "Without a doubt, inflation is increasing poverty."
In October 2008, the Wall Street Journal editorialized that Argentina "serves as a cautionary tale on how to ruin an economy." Since 2003, its ranking in the "Index of Economic Freedom" - published annually by the Journal and the Heritage Foundation - has dropped from 68th (out of 156 economies) to 138th (out of 179 economies). In the 2011 index, Argentina ranks behind Haiti, China and Cameroon. The World Bank's latest "Doing Business" report places Argentina 115th out of 183 economies. In the most recent World Economic Forum "Global Competitiveness Index," Argentina trails Guatemala, Rwanda, Trinidad and Tobago, the Philippines and Algeria.
While the Kirchners have dramatically weakened one of the biggest economies in Latin America, they have also significantly enlarged their own bank accounts. According to Heritage Foundation scholar James Roberts, the amount of personal assets declared by the Kirchners soared from $2.3 million in 2003 to over $12 million in 2008. Corruption has flourished on their watch. In Transparency International's 2010 "Corruption Perceptions Index," Argentina ranks as more corrupt than Tonga and Zambia. In a secret diplomatic cable published by WikiLeaks, the U.S. embassy in Buenos Aires declared: "Glaring weaknesses in key components of Argentina's anti-corruption architecture point to an emasculated institutional framework incapable of providing needed checks and balances."
Speaking of checks and balances, Kirchner has shown utter contempt for the most basic tenets of press freedom. As Newsweek put it last summer, she has effectively "declared war" on Clarín and La Nación, Argentina's two biggest independent media groups. In 2010, Kirchner tried to shut down the Internet-service provider Fibertel, which is owned by Clarín, and then attempted to seize control of Papel Prensa, a newsprint firm partially owned by Clarín and La Nación.
Like her husband, she "has manipulated the distribution of official advertising to economically sanction critical media and reward those that support the government," according to the Committee to Protect Journalists, which notes that this policy was first "institutionalized" under Néstor Kirchner. In early March, the Argentine Supreme Court delivered a stinging rebuke to the incumbent government - and its predecessor - by ruling that all media outlets were entitled to get official advertising.
When Cristina Kirchner first took office, U.S. relations with Argentina were expected to improve. Instead they have gotten worse, much worse, while Argentine ties to Venezuela have continued to grow stronger. A few months ago, Foreign Minister Timerman caused a stir by suggesting that the United States operates torture-training schools. Just weeks later, in mid-February, Argentine authorities seized the contents of a U.S. military plane that was delivering equipment for a police-training course. This equipment, Timerman argued, was undeclared and thus subject to confiscation. "The United States must understand that they can't send war materials without informing the government," he told CNN.
The Obama administration was not amused. It demanded that the equipment be returned, and a State Department spokesman described Argentina's search of the plane as "unusual and unannounced." Speaking to the Buenos Aires Herald, senior Pentagon official Frank Mora called it a "serious incident," stressing that the United States had "never experienced a similar situation with another country." Such confrontations are "not supposed to happen between two allied countries," Mora added.
On March 10, Argentina judge Marcelo Aguinsky dismissed the case and absolved the U.S. government of any criminal responsibility for the contents of the plane. "The matter investigated does not constitute a crime," he concluded. Indeed, the Kirchner government could easily have resolved the issue in private. Instead, it attempted to embarrass the U.S., thereby triggering a diplomatic firestorm and further poisoning bilateral relations.
Once a regional leader, Argentina now finds itself increasingly isolated in the Western Hemisphere. Its government lies about inflation data and depends on economic largesse from Venezuela's oil-fueled tyranny. Argentina is no longer the "jewel of South America." Today, it is among the "sick men" of South America, both economically and politically. The country can still recover its lost influence, but only if it makes a decisive break with the past eight years of Kirchnerism.
Ambassador Jaime Daremblum is a Hudson Institute Senior Fellow and directs the Center for Latin American Studies.
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