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Incoming Argentinian President Faces Tough Economic Challenges - 2003-05-25

The presidents of several Latin American nations are in Buenos Aires this weekend to participate in the inauguration of Nestor Kirchner as Argentina's newest president. The Sunday ceremony will mark the end of nearly two years of political uncertainty, with many Argentines hoping that the worst of their dire economic crisis is behind them.

Speaking to several thousand supporters in his home province of Santa Cruz this week, Nestor Kirchner promised not to forget those who helped him in his unlikely bid for the presidency. "Things will be much better, so you all can live better, I am absolutely convinced," he said at his farewell rally.

Though the 53-year-old Kirchner has been speaking with confidence these days, he faces tough decisions ahead.

The little-known governor of Patagonia will be taking control of a country that is still very much in the grips of a devastating economic crisis. In the wake of a $141 billion debt default, the value of the peso has plummeted, while crime, hunger and unemployment have soared.

Mr. Kirchner and his new cabinet will need to address its domestic problems, while trying to secure a new aid agreement with the International Monetary Fund and renegotiate a large part of its debt with country's around the world.

"I suspect that the incentives of this government will not be to renegotiate the debt very quickly," says Andrew Powell, a Professor of Finance at DiTella University in Buenos Aires and the former chief economist of Argentina's Central Bank. He says its vital that Argentina act swiftly in repaying its debt to the IMF. Its 100 percent critical in my view. Argentina has to, is supposed to, repay the IMF a certain amount of money before the end of the year. I think it is almost $4 billion. If an agreement isn't found and Argentina doesn't pay, then Argentina will be in default with the IMF. I think that has serious consequences for Argentina."

Serious consequences that could relegate Argentina into an economic abyss by possibly cutting off all sources of international funding.

Mr. Kirchner maintains that Argentina must build from within in order to move past its problems. He has promised to increase public work projects and create millions of local jobs that will come at a considerable cost to the country.

But it is this free-spending rhetoric that has made foreign investors leery. Last year, investors balked at the campaign promises put forth by Luiz Inacio Lula da Silva before he became president of Brazil. Both men have been critical of U.S. policies, but it remains to be seen just how radical an approach Mr. Kirchner will choose to take.

Atilio Boron, a professor of Political Science at the University of Buenos Aires, says "my expectation is Kirchner, facing a dramatic situation like this in Argentina, may also have the same kind of reaction that Franklin Delano Roosevelt had in America and started doing new things, changing the course of Argentine politics and changing the major orientations in economic policy. If he has the guts to do that he will succeed, if he doesn't he will fail and very, very soon."

Mr. Kirchner comes to office after having only received 22 percent of the vote. He was thrust into office after former President Carlos Menem withdrew from a runoff earlier this month. Critics warn that this weak start, coupled with the economic challenges ahead will likely result in a short honeymoon for this new president.