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Argentina under a New Administration: Implications for the Falkland Islands - May 2020

President Macri was soundly beaten in the October 2019 elections without even the need for a run-off in November. So when Alberto Fernandez assumed office at the Casa Rosada on 10 December with Cristina de Kirchner as his Vice-President, it could only be supposed that Argentina would revert to the more populist policies of old-style Peronism, both politically and economically. The new administration has been faced with an ever deepening economic crisis, made even worse by the restrictions that have had to be imposed to counter the COVID-19 pandemic. The risk of yet another default on Argentina's public debt now seems inevitable. As for the Falklands, Macri's policy of lowering the issue on his government's political agenda (albeit without compromising on Argentina's claim to sovereignty) has been wholly overturned. There is every sign of a reversion to the more confrontational policies that were pursued under the Kirchners' regime.

 

Elections

Elections were held in Argentina on 27 October 2019 to elect the next President, various members of Congress (in the Senate as well as the Chamber of Deputies) and most Provincial Governors (some of whom had already been elected in provincial polls throughout the year).

Presidency: Macri's bid to be the first non-Peronist President to achieve a second term was singularly unsuccessful. He had persuaded a moderate Peronist and Leader of the Senate, Miguel Pichetto, to stand as his Vice-Presidential candidate, in the hope of attracting some support away from his main opponents, Alberto Fernandez (AF) and Cristina de Kirchner (CFK). But as the August primaries had predicted (see earlier news reports on the FIA website), the AF/CFK ticket won handsomely, without the need for a November run-off. The results were: AF/CFK 48%; Macri/Pichetto 40%, with the third ticket of Roberto Lavagna and Juan Manuel Urtubey 6%. So even if Macri had pulled in all of Lavagna's votes, he would still have lost; most of the remaining minority votes (about 6%) would have been more likely to go to AF/CFK.

In the Senate, 24 seats from 8 provinces (including the City of Buenos Aires) were being contested out of 72 seats overall. Macri had never had control over the Senate and AF/CFK retained a strong Peronist majority. In the Chamber of Deputies, where 130 seats from a total of 257 were being contested, the results were much closer. Once the results had been tallied in, AF/CFK could command 120 seats, Macri's party 116 with 21 independents. Sergio Massa, who had once had higher political aspirations, was appointed President of the Chamber of Deputies (he had thrown in his lot with AF/CFK in September in a surprise, tactical move, having been a fierce critic of CFK after a short period as her Cabinet Secretary).

Provinces: broadly, Macri retained support only in the central provinces with a key exception – the Province of Buenos Aires. There Axel Kicillof, a CFK supporter, beat Maria Eugenia Vidal by 52% to 38% of the votes. Maria Vidal had been seen as a rising star, tagged as a future Presidential candidate, but her success in the previous election had been against the grain – BA Province had traditionally been a Peronist stronghold. The swing gave about 1.5 million votes to the AF/CFK ticket: this was a major factor in ensuring Macri's defeat in the Presidential race. Macri did, however, retain control in BA City, where the incumbent, Rodriguez Laretta beat his Peronist challenger by a majority of about 8%. The Province of Tierra del Fuego, which claims to represent the Falkland Islands, elected an even more radical Governor on the issue.

Macri's defeat: Reasons why

Macri's defeat can be put down to one major failing – his inability to control Argentina's inexorable economic decline. Macri had come into power promising more business - friendly policies, more investment and better job prospects. But this never happened, despite a positive welcome from G20 leaders and international investors. Essentially, inward investment was not enough to create the jobs necessary to maintain political optimism domestically. Expectation of better times under Macri had not been met.

By election time, Argentina was in its second full year of recession and set for a third. The Argentine 'man in the street' had had to endure rampant inflation (of around 50%), a major rise in the cost of living, increasing poverty levels and the loss of public subsidies resulting in higher fuel, utility and transport costs. Macri had had to resort to the IMF for a massive standby arrangement of some $57bn to keep public finances in order, reviving popular resentment against the austerity measures imposed by the IMF on previous occasions. The AF/CFK ticket promised a return to the more comfortable policies of public subsidies and protectionism that Peronism had traditionally employed. Macri's attempts to sweeten the pill after the August primaries (by raising income tax thresholds, freezing petrol prices, and removing VAT on foodstuffs) were not enough.

The Falklands had also been a lesser but still important issue in the elections. Macri's softer policies were widely criticised by his political opponents and veterans' groups. AF/CFK promised them a radical change if they were returned to power. In the first TV debate organised before the elections, Alberto Fernandez attacked Macri for prioritising trade with the UK over Argentina's sovereignty claim, stating: “I want us to return to upholding our commitment to sovereignty over the Malvinas.”

New Administration

Alberto Fernandez was sworn in at the Casa Rosada on 10 December 2019. A lawyer by profession, he was elected in 2000 to the BA City legislature before serving as the Chief of the Cabinet of Ministers under the Kirchners (2003 - 2008). He endorsed CFK's successful bid for a second-term as President but ran Sergio Massa's campaign in the 2015 elections (and helped to engineer Massa's decision to endorse the AF/CFK ticket in the 2019 elections). CFK's decision to run as Vice-President to Fernandez was taken to be an acknowledgement of her notoriety in political circles for alleged corruption and economic mismanagement. But it was assumed that she would try to manipulate AF's policy decisions behind the scenes.

AF's first actions as President were to start to roll back Macri's austerity measures, impose taxes on wealth, and restore protectionism. Restrictions were placed on foreign currency purchases and taxes restored on agricultural exports. At the same time, fuel and utility charges were frozen and VAT on foodstuffs removed; government workers were given a pay rise and special payments made to those below the poverty line. He declared that Argentina could not afford to service its international debt, creating the prospect of future default. Subsequently, he announced Argentina's withdrawal from Mercosur's existing and future trade talks since Argentina's protectionist sympathies conflicted with the free trade aspirations of the other members, Brazil, Uruguay, Paraguay and Venezuela (currently suspended).

Economically, AF faced a critical time, which was only to be exacerbated by the Corona virus pandemic. International investor confidence collapsed, with an immediate stock market fall of nearly 5%. International ratings agencies downgraded Argentina to their lowest levels and the IMF forecast a 5.7% reduction in Argentina's GDP in 2020 (following a 2.2% reduction in 2019). Plunging oil prices destroyed hopes of compensating revenues from the exploitation of Patagonian shale deposits at Vaca Muerta. Economic forecasters predicted that the fiscal deficit would continue until at least 2023. The exchange rate plunged yet further (officially 68 pesos to the US Dollar but with a black market rate of 120 pesos).

By the end of 2019, Argentina's total debt burden stood at about $320bn (nearly 90% of GDP). The Government of Argentina (GoA) approached the IMF for a restructuring of its $57bn standby arrangement (of which $44bn had so far been drawn down). Separately, GoA put forward revised (and non-negotiable) terms for $69bn worth of debt held by foreign bond holders, namely a 3 year moratorium on interest payments, a reduction of 5.4% in the capital value of the bonds and no capital repayments until 2026. So far, the major bondholders have rejected such terms (and have threatened to resort to legal proceedings). The possibility of yet another GoA default seems almost inevitable.

Coronavirus: On top of all this, Argentina has had to face down the Covid-19 pandemic. The first death in Argentina was recorded on 3 March 2020. Although by early May, there were fewer than 250 related deaths in Argentina, the GoA responded by ordering a strictly enforced lock-down, not to be reviewed before early May. The damage to Argentina's economy that might result from this could be huge.

Yet, interestingly, AF's handling of the crisis may have strengthened his popularity; his approval ratings now stand at 53% against 43% in September. It has also strengthened his authority over CFK, at least in popular perceptions; her approval ratings have dropped from 44% in September to 28% in early May. He can claim that the post-Macri economic crisis was the result of the virus.

Implications for the Falkland Islands

There has been an immediate shift in GoA policy on the Falklands, reverting to the stronger emphasis on their sovereignty claim, if not yet to the worst excesses of policy under the Kirchners.

In his inaugural address to Congress, AF stressed that his government would comply with the Argentine constitution in pursuing Argentina's 'legitimate and imprescriptable claim' to the Falkland Islands, seeking a peaceful resolution by dialogue under UN Resolution 2065 – the usual Argentine mantra (but with much greater emphasis than Macri would have accorded it).

Subsequently, AF announced three initiatives:

a) the creation of a new National Council to forge a national consensus on strategies to pursue the Argentine claim; the Council would include politicians, academics, legal experts, veterans and representatives of the Provincial Government of Tierra del Fuego (TDF). The inclusion of TDF is a significant change; previously issues of sovereignty had been strictly reserved to the Federal Government.

b) legislation on the demarcation of the external limits of Argentina's continental shelf to reinforce Argentina's right to the mineral and other maritime resources in its maritime area.

c) modification of the federal fisheries regime to strengthen sanctions against ships fishing illegally in Argentina's maritime space, including waters around the Falkland Islands.

The GoA has also recreated the secretariat dealing with issues relating to the Falklands (and Antarctica and South Atlantic), which Macri had downgraded, with Daniel Filmus returning to his previous job as the Secretary (i.e. Minister) in charge. The Argentine Ambassador in London, Renato Sersale di Cerisano, was recalled; so too was the Argentine representative in Geneva, Carlos Foradori, who was the Deputy Foreign Minister who signed the September 2016 Joint Statement, (see text under resources tab). Interestingly, Alicia Castro, who was Ambassador in London under the Kirchners, has been posted to Moscow.

The GoA have also suspended their co-operation with the UK on scientific fisheries research and although they have not taken action against the second flight to Sao Paulo (or the link with Punta Arenas), the matter is moot since all flights have been grounded because of the Covid-19 pandemic. But they have said that any dialogue with the UK would continue to be under the sovereignty umbrella (i.e. without prejudice to the sovereignty position of either party) 'for the time being'.

The GoA also plan to exploit the position after Brexit, when they hope to break the EU position on recognising the UK's Overseas Territories. They are reviving their monthly newsletter on sovereignty issues for distribution by their embassies in order to revive support groups overseas. But they will have been discouraged by Boris Johnson's election with a strong Conservative majority in December and the firmness of his 2019 Christmas message to the Falkland Islanders. They may also have been surprised by the UN Secretary General's address to the Decolonisation Committee in February, when he said that decolonisation should be a process guided by the aspirations and needs of the communities living in the Territories. This may have sparked the renewed debate in the thinking Argentine media over whether they should give credence to the Islanders' wishes or merely their interests. The GoA fails to see that, in seeking to be the sole arbiter of what the Islanders' interests should be, they are suffering from their own form of modern-day colonialism that they condemn elsewhere. The UN's constitution asserts the primacy of self-determination and this is the basis of UK policy in its support of the Falkland Islanders: their wishes only must determine their political future.

The rhetoric has ramped up. Whilst the coronavirus restrictions have limited the usual Argentine demonstrations on anniversaries, sillinesses continue: they denounced the deployment of HMS Forth as replacement for HMS Clyde; they complained that the BAS polar research vessel, the 'Sir Richard Attenborough' had been registered in the Falkland Islands; they objected, unsuccessfully, to the Falklands' women's badminton team being allowed to play in a competition in Brazil; they objected to the Falkland Islands' stand at the annual PRADO rural exhibition in Montevideo; they offered humanitarian flights to 'continental Argentina' plus test kits and personal protection supplies when they heard that the coronavirus had reached the Falklands (only 13 cases by early May and none fatal) and were hurt when these offers were gently refused; yet they were prepared to play politics with the epidemic: Foreign Minister, Felipe Sola, showed off a face mask with an outline of the Falkland Islands against the background of the Argentine flag.

The Islanders are well used to, and can ignore, such gratuitous bandstanding but it remains to be seen whether the December 2019 call by Baroness Hooper, the Honorary President of the All-Party Group on Latin America and Member of the House of Lords, on the new Argentine President in Buenos Aires, or, the March 2020 visit of Wendy Morton MP, the Parliamentary Under Secretary of State for European Neighbourhood and the Americas, who met with members of the new Argentine Government, will have had any moderating effect. Not much, however, has been released about the discussion and the prospects for a reasonable relationship must be small.

 

Photos taken from www.gov.uk

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