Néstor Kirchner became President of Argentina on 25 May 2003. He was the governor of Santa Cruz Province during the 2003 general election, he was elected second to Carlos Menem but became president when Menem refused to go for a required runoff election. It was a government characterized as centre-left. He declined for a second term and was later succeeded by his wife, Cristina Fernández de Kirchner as president, on 10 December 2007.
2003 presidential election
Even though Kirchner ran for presidency with the support of Eduardo Duhalde, he was not the initial candidate chosen by the president. Trying to prevent a third term of Carlos Menem, he sought to promote a candidate that may defeat him, but Carlos Reutemann (governor of Santa Fe) did not accept and José Manuel de la Sota (governor of Córdoba) did not grow in the polls. He also tried with Mauricio Macri, Adolfo Rodríguez Saá, Felipe Solá and Roberto Lavagna, to no avail. He initially resisted helping Kirchner, fearing that he may ignore Duhalde once in the presidency.Fraga, p. 19-20
After the first round of the election, Kirchner visited the president of Brazil, Luiz Inácio Lula da Silva, who received him enthusiastically. He also declared he was proud of his radical left-wing political past.
Although Menem, who was president from 1989 to 1999, won the first round of the election on April 27, 2003, he only got 24% of the valid votes — just 2% ahead of Kirchner. This was an empty victory, as Menem was viewed very negatively by much of the Argentine population and had virtually no chance of winning the runoff election. After days of speculation, during which polls forecast a massive victory for Kirchner with about a 30%–40% difference, Menem finally decided to stand down. This automatically made Kirchner president of Argentina, despite having secured only 22% of the votes in the election, the lowest percentage gained by the eventual winner of an Argentine presidential election. He was sworn in on 25 May 2003 to a four-year term of office.Office of the President. (25 May 2003).IFES Election Guide. Election profile for Argentina.
Amid an intensification of social and political protest following the resignation of Fernando de la RúaHugo Quiroga: La República desolada. Los cambios políticos en la Argentina (2001–2009), Edhasa, Buenos Aires, 2010. and the Avellaneda massacre of 26 June 2002, in which Maximiliano Kosteki and Darío Santillán were killed, president Eduardo Duhalde brought forward the elections to March and April 2003 and later issued Decree 1399/2002, resigning early and irrevocably from the presidency effective 25 May 2003.
To resolve the institutional gap, the Congress approved a modification to the Presidential Succession Law (Ley de Acefalía), establishing that "if a President and Vice President of the Nation have been elected, they shall assume the vacant offices", without that time being considered part of their constitutional mandate.
Policies Economy
The economic policy of the Kirchner government continued the guidelines established by Lavagna under the presidency of Duhalde, maintaining the devaluation of the currency through strong participation by the Central Bank in purchasing foreign currency and promoting economic growth through exports with GDP rates close to 10%. In 2004, only a couple of months after Néstor Kirchner took office, the Central Bank decided to incorporate about 55 tonnes of gold into the nearly nonexistent official reserves, in what was the largest addition of bullion since 1960. After the exit from the 2001 crisis, which marked the end of the regime of Fernando de la Rúa, with a deep recession and historic peaks of poverty and unemployment, an important economic and social recovery was achieved. During the government of Kirchner (2003–2007), poverty fell from 62% to 35%; unemployment from 19.7% to 8.5%; and the Gross Domestic Product (GDP) grew at rates between 8% and 9% per year. Public debt during the administration of Néstor Kirchner had reached its peak between the end of 2001 and the beginning of 2002, with a debt-to-GDP ratio of 166%, but it declined sharply to less than 40 percent.
Year GDP growth 2003 8.8% 2004 9.0% 2005 9.2% 2006 8.4% 2007 8.0%
From the beginning of the government of Néstor Kirchner, the role of the state in the economy expanded compared with its role during the government of Carlos Menem. This was reflected in the nationalization of Aerolíneas Argentinas, Correo Argentino, Río Santiago Shipyard and the creation of ENARSA and Agua y Saneamientos Argentinos. From 2003 to 2007 the country recorded a phase of economic growth with rates around 9% (8.8% in 2003, 9% in 2004, 9.2% in 2005, 8.5% in 2006, 8.7% in 2007, 6.8% in 2008).Crecimiento económico en Argentina according to ECLAC.
Argentina had faced a serious economic crisis in previous years, which led to the 2001 riots and the fall of Fernando de la Rúa. Eduardo Duhalde was appointed president, and with his minister Roberto Lavagna he improved national economy. Although Duhalde had to resign as well, for political reasons, and the economic improvement was not enough to turn him into a popular candidate, by the time he handed government to Kirchner the most critical periods were already endured and the economy was already in a growing tendency.Fraga, p. 24 The growth of Argentina during 2003, an effect of the economic recovery, was the highest in all Latin America.Fraga, p. 43
Kirchner kept the Duhalde administration's Minister of the Economy, Roberto Lavagna. Lavagna also declared that his first priority now was social problems. Argentina's default was the largest in financial history, and it gave Kirchner and Lavagna significant bargaining power with the IMF, which loathes having bad debts on its books. During his first year of office, Kirchner achieved a difficult agreement to reschedule $84 billion in debts with international organizations, for three years.
In the period 2003–2007, Argentine industry grew at an average annual rate of 10.3% in terms of the Physical Volume Index (IVF).Panorama del sector industria, article on the CEP.gov.ar website. Banks once again gained deposits: these increased from 114,462 million dollars in December 2004 to 169,729 million in December 2006, implying growth of more than 48%. Informe Económico de Coyuntura – CPCECABA Nº 272 – March 2007.
In 2004 the national tourism promotion project was approved, a regulation through which the Executive Branch sought to generate a general framework for the development and promotion of activities in the sector, creating incentives and attractions for visitors and residents. Inbound tourism represented 1.6% of GDP in 2004 (exceeding 1.4% in 2002 and the 1% average of the previous decade).IDITS (Instituto de Desarrollo Industrial, Tecnológico y de Servicios): "Informe final del sector turismo" (p. 34). 2006. In 2004, 3.4 million tourists entered Argentina.Instituto Nacional de Promoción Turística INPROTUR, 2008. By 2006 a total of 4.1 million international tourists had arrived, of whom 60% came from neighboring countries. By 2007 more than 5.3 million tourists had arrived, setting a historical record for international arrivals.
As of 2004, the initial indulgence ended, and the economic recovery induced the foreign powers to request a normalization in debt payment.Fraga, p. 44 Although the IMF was highly unpopular in Argentina, Kirchner's good image (nearing 71% by that point) did not lower more than three or five points; with the exception of the far-left, most of the society was concerned with the possible consequences of a complete default.Fraga, p. 55
At the same time a 75% reduction of the debt was proposed, which implied a decrease of 61.35 billion dollars of the principal, reducing it to 20.45 billion dollars. In June 2004 an agreement was reached with international organizations and the governments of bondholders abroad and overdue interest was recognized. On 3 January 2006 Argentina fully paid its debt to the International Monetary Fund (IMF), making an early payment of 9.53 billion dollars,Agencies Télam and EFE. Se canceló la deuda con el Fondo Monetario La Nación, 3 January 2006. Retrieved 24 October 2012. a liability incurred between January and September 2001, with maturities scheduled until 2009.El FMI: cuenta saldada Centro de Implementación de Políticas Públicas para la Equidad y el Crecimiento, 9 April 2007. Retrieved 24 October 2012.
In the first half of 2005, the government launched a bond exchange to restructure approximately $81 billion of national public debt (an additional $20 billion in past defaulted interest was not recognized). Over 76% of the debt was tendered and restructured for a recovery value of approximately one third of its nominal value.
On 15 December 2005, following Brazil's initiative, Kirchner announced the cancellation of Argentina's debt to the IMF in full and offered a single payment, in a historic decision that generated controversy at the time (see Argentine debt restructuring). Some commentators, such as Mark Weisbrot of the Center for Economic and Policy Research, suggest that the Argentine experiment has thus far proven successful.Weisbrot, Mark, "Doing it their own way", International Herald Tribune, 28 December 2006 Others, such as Michael Mussa, formerly on the staff of the International Monetary Fund and now with the Peterson Institute, question the longer-term sustainability of Pres. Kirchner's approach.
In a meeting with executives of multinational corporations on Wall Street—after which he was the first Argentine president to ring the opening bell at the New York Stock Exchange—Kirchner defended his "heterodox economic policy, within the canon of classic economics" and criticized the IMF for its lack of collaboration with the Argentine recovery.La Nación, 21 September 2006. El Presidente tuvo 45 minutos para convencer a los inversores.
External debt During the government of Kirchner, Argentina and the International Monetary Fund (IMF) maintained a tense relationship. As in Brazil, one of the main measures of his administration was to cancel in advance the entirety of the debt with this international organization for an amount of 9.81 billion dollars. The declared objective of both governments was to end the subjection of their respective national economic policies to the indications of the IMF.«Kirchner decidió cancelar ya toda la deuda con el FMI: 9810 millones de dólares» , article in the newspaper Clarín (Buenos Aires) of 16 December 2005.
During 2005 the debt swap was carried out, beginning the renegotiations of the bonds that had been in default since 2001. With the crisis of December 2001, Argentina had entered into suspension of payments (default) on its external debt. This default has been the longest in modern financial history and essentially involved the cessation of payments of capital and interest on public debt securities issued by the state (sovereign debt). By the end of 2004 the total external debt reached 178 billion dollars. During 2003 the government of Néstor Kirchner succeeded in negotiating a rescheduling of obligations with multilateral financial institutions (International Monetary Fund, World Bank, Inter-American Development Bank and others) in what was called the Argentine debt swap, obtaining a 75% reduction of debt, the largest percentage reduction in international economic history.«Argentina pide una quita de la deuda externa del 80 %», article in the newspaper Clarín (Buenos Aires) of 31 August 2003. Debts equivalent to a nominal value of 62.5 billion dollars were restructured, exchanged for new securities with a nominal value equivalent to 35.3 billion dollars. As a consequence of the restructuring, the peso component of the debt increased from 3 to 37%.Canje de deuda soberana: régimen al que quedarán sujetos los bonos elegibles que no fueron canjeados Marval, O'Farell & Mairal, 25 February 2005. Retrieved 24 October 2012.