PRESIDENT Cristina Fernandez rode Argentina's economic boom to power, but now the global crisis is slowing growth and her problems are piling up ahead of this year's mid-term elections. Signs that six years of sizzling growth are ending, several high-profile defections from her governing coalition and a protracted dispute with farmers all weigh on Fernandez as she struggles to reverse approval ratings of around 30 percent. The cooling economy threatens to alter the political landscape for Fernandez, who in late 2007 succeeded her husband, former President Nestor Kirchner. Congressional elections in October could define the political future of the couple – he heads the ruling Peronist Party – who hope to keep a majority in Congress and maintain their control over Argentina's biggest party. “For the the first time since the Kirchners came to power, they are facing a worsening economy, and the economy was always their biggest asset,” said Daniel Kerner, a Latin American analyst at the Eurasia Group risk consulting firm. Argentina's economy grew 7.1 percent in 2008 but it slowed sharply in the last three months of the year, and industrial output fell in January for the first time since October 2002, when the country was still in a deep economic crisis. More and more economists are skeptical of the government's growth and inflation data, saying it is being manipulated for political gain. They say the economy has slowed even more than the figures show, with some predicting it will stagnate or even slip into recession this year. In a sign of the deterioration, two economic pillars have slumped in recent months: commodities exports fell 56 percent in January compared with the same month last year, and auto production was also down 56 percent in February. Fernandez doesn't talk about the slowdown in her public appearances, instead focusing on how the global turmoil began outside Argentina and is not a result of her policies. Farm dispute drags on Fernandez's biggest challenge has been a long-running conflict with farmers over export taxes and government policies that she is struggling to defuse. Four months of strikes and protests last year ended when the Senate voted down her bid to hike taxes on farm exports, handing her a sharp political blow. As the conflict has dragged on, the farmers, complaining of falling commodity prices and a recent drought, have galvanized Fernandez's opponents. The slowing economy leaves Fernandez with little room to maneuver. “The government is in a tough position here: it may not want to engage the rural sector in another drawn-out fight like it did last year,” said Bertrand Delgado, a Latin American economic advisor at RGE Monitor in New York. “On the other hand, it can ill afford to make tax concessions at a time of financial straits.” Yielding ground on export taxes could make the government appear weak at a time when its popularity is already sagging. “That would not be an easy thing for a Kirchner administration, which has used conflict as an instrument as it accumulated power,” said political analyst Rosendo Fraga. Party defections Economic growth of at least 7 percent a year since 2003 helped swell state coffers, enabling the Kirchners to maintain discipline inside the ruling Peronist party. Now that government revenue is falling and some factions of the party are already looking ahead to the 2011 presidential election, Fernandez's hold on the party is being tested. Four leading lawmakers recently defected from the government's coalition, complaining about Fernandez's agriculture policies and her governing style. Among them was Carlos Reutemann, a well-respected senator with presidential ambitions who represents one of the country's most important farming regions. In Congress, a former Fernandez ally, Felipe Sola, joined up with another dissident Peronist to assemble candidates to challenge Kirchner allies in mid-term elections. They are hoping to persuade other Peronists to join them. Federico Thomsen, an Argentine economist who runs a consulting firm, said the government was heading into a “very difficult period.”
