ARGENTINA PONDERS A POST-KIRCHNER WORLD

C O N F I D E N T I A L SECTION 01 OF 02 BUENOS AIRES 000799 SIPDIS E.O. 12958: DECL: 07/07/2029 TAGS: PREL PGOV PHUM ECON AR SUBJECT: ARGENTINA PONDERS A POST-KIRCHNER WORLD REF: (A) BUENOS AIRES 0756 (B) BUENOS AIRES 0750 (C) BUENOS AIRES 0742 AND PREVIOUS Classified By: CDA Tom Kelly for reasons 1.4 (b) & (d). ¶1. (C) Summary and introduction: As Argentines continue to sort through the implications of the June 28 congressional mid-term elections, it is still too early to determine whether president Cristina Fernandez de Kirchner (CFK) and her husband Nestor (NK) suffered a mortal blow or merely a temporary, albeit severe, setback. NK's second-place finish in Buenos Aires province chipped away at his aura of invincibility, but the Kirchners have not been marginalized. They are still center-stage and remain the focus of the political class. We note that doomsday scenarios posited before the elections have not materialized, and that the Kirchners, other politicians and the public at large have reacted calmly to the June 28 election results. (Septel reports cabinet changes announced July 7.) End summary. Post-Election Atmosphere Serene -------------- ¶2. (C) In emboff conversations with political actors and observers, one observation made frequently and with great relief regards the relative tranquility of Argentina's post-electoral panorama. Prior to the June 28 elections, there had been some dark predictions of widespread fraud on voting day, violence, and, in the case of a government defeat, the Kirchners fleeing amid chaos and financial turmoil. Many in the opposition had preemptively insisted that Kirchner allies were plotting to steal the elections via massive fraud. As it turned out, there were only some scattered, isolated reports of organizational shortcomings at the polling stations, but not enough to make a difference. The outcome itself, with decisive defeats delivered to Kirchner allies in six of the seven largest districts, put to rest any question about foul play. ¶3. (C) Kirchner detractors criticize the First Couple for their supposed failure to read correctly the message the voters were sending. Early in the campaign, NK framed the election as a plebiscite on the government's performance. He quickly abandoned the plebiscite term -- a wise move, given that 70% of the voters did not vote for Kirchner-backed candidates. The Kirchners have sought to spin the results in their favor, and CFK has defended their continued political relevance by pointing out that nationwide her allies won more votes than any other single political force (ref A). The Kirchners now seem to be considering their options while Argentines mostly take the electoral results in stride. The Kirchners' Dreary Winter -------------- ¶4. (C) That said, there is no doubt that the Kirchners suffered a major setback. Nestor Kirchner, in particular, won a seat in Congress, but his second-place finish behind political upstart Francisco de Narvaez knocked him off his pedestal. As a result, Kirchner is no longer viewed as the indisputable boss of the coalition or the indispensable leader of the Peronist party. Indeed, the day after the election, Kirchner resigned as head of the Peronist Party (PJ) and turned it over to his running mate, Buenos Aires governor Daniel Scioli, who is now struggling to bring the fractious party under some semblance of control. For the last six years, Kirchner power had relied on an aura of invincibility and shrewd control of the purse-strings. Suddenly, their political capital is evaporating just as the financial resources at their disposal are dwindling as the result of the economic downturn. ¶5. (C) In the wake of the June 28 showdown, there has not been much public discussion of why Kirchner was defeated. Perhaps this is because, ever since the March 2008 outbreak of the Kirchners' protracted conflict with farmers over agricultural export duties, there has been a growing consensus among the political class that Kirchner's fall in popularity is due to his inability thus far to adapt to changing circumstances. The conflict with the "campo" laid bare the Kirchners' rigid, confrontational style and their intransigent refusal to negotiate. And, to the extent that Kirchner had been credited with Argentina's recovery from the 2001-02 crisis, the prospect of lower or even negative growth rates was also eroding his support. BUENOS AIR 00000799 002 OF 002 ¶6. (C) The Kirchners are reportedly not as worried about how to deal with the divided, ineffectual opposition as they are about how to shore up support among their own coalition. Peronist governors and mayors are increasingly looking to Senator Carlos Reutemann (who narrowly won reelection in Santa Fe province) or someone else, maybe even Scioli, to be the Peronist standard-bearer for the 2011 presidential elections. Despite Francisco de Narvaez's current moment of glory for being the one who delivered the decisive blow to Kirchner in the Peronist stronghold of Buenos Aires province, and de Narvaez's insistence that he is a Peronist, there is some grumbling within the Peronist machinery that de Narvaez and his ally, Buenos Aires Mayor Mauricio Macri, are outsiders incapable and undeserving of taking the reins. Realignment Looms, but to Whose Benefit? -------------- ¶7. (C) We would note that it is very early to speculate about ¶2011. Just a year and a half ago, no one here predicted the chain of events that led Vice President Cobos to become the most popular politician in Argentina today. Nor did anyone (except maybe Nestor Kirchner) predict two years before the 2003 presidential election that he would emerge the winner of that race. Now there are almost two-and-a-half years left until the 2011 presidential elections (unless they too are moved up),so predictions should be hazarded with great caution. But, it's the nature of politics to keep tabs on who's up and who's down, and now that the Kirchners appear to be losing their dominant position, it's quite natural for Argentines to look around and see who might fill their shoes. ¶8. (C) In Congress, we note that that the ACS alliance of the Civic Coalition with the Radical Party and the Socialists is the force that grew the most (50% in the Senate and 30% in the Chamber of Deputies) with this election, but the Kirchner coalition remains the dominant force, with 96 of the 257 seats in the Chamber of Deputies and 36 of the 72 seats in the Senate. The other opposition parties are unlikely to close ranks behind the ACS and unify as a single front. Congress will therefore remain splintered. Indeed, it is quite possible that the government will be able to muster a majority in both houses on certain issues. There are still five months remaining before the new Congress is sworn in on December 10. No critical legislation is pending, but we expect the government in September will send this Congress its budget bill for 2010, and if it is not approved, then the current 2009 budget continues. In connection with the budget debate, Congress is expected to take up the issue of renewing the economic emergency law and the "superpowers" that have afforded the government great discretion in fiscal and economic policy for the last few years. Peronist dissidents and opposition leaders are also openly discussing plans to revise the controversial agricultural export duties. These looming Congressional battles will be good tests of the extent to which political forces are realigning, especially the notion that heretofore-loyal Kirchner supporters in Congress will switch sides. Kirchners Weakened but Still Relevant -------------- ¶9. (C) For the time being, the Kirchners do not publicly appear to be chastened or challenged by the June 28 election results. Septel reports cabinet changes announced July 7 which follow other personnel moves that were widely anticipated even before the election (ref C) and do not appear to signal any major shifts in style or policy for the Kirchner administration. For the time being, the Kirchners remain very much center-stage in Argentine politics. Despite attempts by some of their rivals and critics to minimize the relevance of the Kirchners, most political operators are still factoring CFK and NK into their political strategies. KELLY