New President, Old Cycle

Can Argentina's Cristina Fernandez de Kirchner avoid

another economic bust?
Tuesday, October 30, 2007; Page A14

CRISTINA FERNANDEZ de Kirchner was elected president of Argentina on Sunday in

a relatively free and fair vote. That's not to be taken for granted; not only has Argentina
suffered from chronic political turmoil in the past, but several other Latin American
governments, led by Hugo Chavez's Venezuela, are working to dismantle the liberal
democracies established throughout the region in the 1980s. Ms. Fern¿ndez de Kirchner
was nominated by her husband, the outgoing president Nestor Kirchner, who poured state
resources into her campaign. Yet she could have won without the extra help: The
Kirchners are riding a wave of popularity born of rapidly rising incomes for Argentines
during the past four years.

Certainly, Argentina has changed significantly since the last time a woman became
president in succession to her husband. Isabel Peron, who took office in 1974, presided
over economic catastrophe and a virtual civil war before being deposed in a military
coup. Democracy has now endured nearly a quarter century, the military is confined to its
barracks, and violent revolutionary movements are a distant memory. But Argentina --
and Ms. Fernandez de Kirchner's Peronist party -- still have not learned the lessons of the
country's history. That could make the coming years more turbulent.

For the last century, Argentina has lived by a cycle of economic boom and bust, driven
by prices for its agricultural exports, by the fondness of its governments for populist
policies and by its resistance to playing by the usual rules of global financial markets.
The boom under Mr. Kirchner, which followed the devastating bust of 2001, follows the
usual pattern: It has been fueled by high prices for Argentine beef, wheat and soybeans,
and by Mr. Kirchner's stiffing of international creditors, vast government spending, and
controls on energy and food prices. The predictable result has been disinvestment in the
energy sector that already has caused brownouts and mounting inflation that is probably
double the official estimate of 9 percent annually.

The Kirchners managed to get through the election season by manipulating the inflation
figures and bullying supermarkets into keeping prices down. Now Ms. Fern¿ndez de
Kirchner, who conducted her campaign without participating in a debate or even holding
a news conference, must make a crucial decision. She can use her mandate to deliver the
tough medicine the economy needs -- including energy price and interest rate increases, a
revaluation of the currency and a reconciliation with the International Monetary Fund,
which holds the key to renewed foreign investment. Or she can pursue her husband's
populist course until it produces another crash. Ms. Fernandez de Kirchner is a seasoned
politician with more interest in the outside world than her predecessor. But it will be a
pleasant surprise if she avoids repeating history.