June 26, 2007 [LINK / comment]

Political setback for Kirchner

Elections for mayor were recently held in Argentina, and President Nestor Kirchner suffered a major embarrassment when the candidate he endorsed in the capital Buenos Aires lost by a 61 to 39 percent margin. The victor was Mauricio Macri, a member of congress who runs the soccer club on which Diego Maradona used to play. Opponents of Kirchner hope that Macri can serve as their leader as the October 28 presidential elections approach. The loser was Education Minister Daniel Filmus. Kirchner has gained a reputation for his political acumen, but staking his reputation on a candidate who attracted so few votes raises big questions about his judgment. See CNN.com.

I underestimated Kirchner when he first took office in May 2003, but over the past four years he has managed to take full credit for Argentina's strong economic recovery. After the government defaulted on much of its foreign debt in late 2002, it was punished by the IMF and was condemned private banks, but in the end didn't really pay a heavy penalty. Because of widespread insurance coverage and the custom of bailing out creditors whose loans to sovereign states go bad (e.g., Mexico in 1995), the larger countries in the developing world can usually get away with it. In effect, Argentina robbed the wealthy industrialized nations by extorting a forcible "loan."