Abstract
A key issue in late 2008 was how Argentina would navigate through the emerging
global economic
slowdown, and what social and political tensions its
chosen path might generate. Since taking office in
the December 2007
elections the new government of President Cristina Fernández de Kirchner
had
suffered a significant loss of political support and had come under
mounting fiscal pressure. Her
popularity rating had fallen from over 50%
when she took office to 23% ten months later in October
2008. In the most
probable scenario for the year ahead, economic growth would disappear or
turn
negative (in fact BMI was in late 2008 forecasting 0.6% growth in
2009 and 0.9% contraction in 2010).
In the worst-case scenario some
analysts were not excluding the possibility of a further debt default in
2009. This was formally denied by economy minister Carlos Fernández who
in November 2008 said that
‘the state has the necessary resources to
meet its debt obligations even taking into account the difficult
conditions in the international financial markets.’ The minister also
claimed that the local economy would
keep growing although ‘at rates
that are possibly not as high as those seen in recent years’. However,
the
pricing of Argentine bonds suggested that investors did not exclude
the possibility of a new default. A
hard landing for the economy would
have implications for social and political stability: after all, the last
default in 2001-2002 was accompanied by the collapse of an elected government
and serious rioting,
criminality and social disorder.
That said, BMI
also notes that Argentina’s defence and security position has
undoubtedly improved over
the last decade. At the end of 2007 the country
had undergone another successful democratic transition
with peaceful
general elections. Despite criticism of the Kirchner family’s tight hold
on political power,
(Cristina succeeded her husband, Nestor Kirchner, in
the Presidency), various underlying factors were
undoubtedly favourable
when compared to the country’s recent past.
First and foremost,
Argentina enjoyed a period of strong economic growth since 2003, a vitally
important
counterpoint to the social and economic collapse of 2001-2002.
This growth, and the consequent
improvement in living standards, helped
reduce social tensions and ease the crime wave that had become
a serious
threat to internal security. Inequalities of income and wealth, together with
crime in the major
cities, remain an important issue, but these problems
are less overpowering and perhaps more manageable
now than they were
before. The question now is how far these gains will be eroded by a new period
of
economic difficulty.
Secondly, despite some ongoing regional
rivalries, Argentina remains fundamentally at peace with its
immediate
neighbours, a situation which has not always been the case. There is some
concern over
growing arms purchases by Chile, but relations are much
improved (the two countries almost went to war
in the late 1970s).
Argentina continues to seek a counterweight to Brazilian regional influence,
largely
through friendship with Venezuela, but ultimately co-operation
rather than competition has predominated
along the Buenos Aires-Brasilia
axis. An ongoing dispute with Uruguay over cellulose plants on the
border
between the two remains a significant irritant. Outside the region, we expect
Argentina to continue
opposing the British presence in the
Falkland/Malvinas Islands with some diplomatic vigour, but a return
to
military action such as during the 1982 occupation, which had disastrous
consequences, is not on the
cards. Finally, in the critical relationship
with the US, pragmatism is likely to dominate.
Third, a country which has
suffered serious threats from both domestic and international terrorism,
and
where there has often been a damaging backlash leading to
authoritarianism and human rights violations,
is currently enjoying a
relatively trouble-free period. The last known domestic terrorist activities
occurred
in 2005 with small-scale attacks on retail outlets run by US
multinationals (Citibank, McDonalds,
Blockbuster). The last major attack
attributed to international terrorism, the bombing of a Jewish
community
centre which killed 85 people, took place in 1994. The authorities continue to
believe that
Lebanon-based Hizbullah, backed by Iran, was involved,
although this has been denied. Clearly terrorist
groups may be regrouping
‘under the radar’ and the danger from this quarter can never be
discounted: but
for the immediate future the threat level looks to be
low.
| 
View Cart
