Since assuming Office last year after her husband’s second term as leader ended, Cristina Fernandez de Kirchner has made one misstep after another. You may recall that earlier in the year we covered the repeated farmer’s strikes that resulted from her attempt to tax agricultural exports as one of the themes in the Corn market bubble. Her actions at that time helped prevent her nation –the second largest economy in South America, from realizing the full positive impact of the greatest commodity boom the world has seen.
Cristina –known by her first name among supporters, and her husband painted themselves into a corner with reckless debt policies. Their failure to settle with holdout bondholders over the remaining government debt issued before the 2002 default effectively shut them out of the private markets while their decision to print fictitious CPI numbers to hold down interest rate on inflation linked bonds sold domestically shut them out of IMF programs. Only Hugo Chavez, that champion of absurd socialist programs, was a willing lender, at a less-than-comradely 15% coupon.
Observers now expect that, if the legislation is passed, the government will effectively eliminate its debts to the private pension system. For Argentineans who lived through the default in 2002 and the resulting cycle of rampant unemployment and currency devaluation, this will mark the second time they have seen their savings disappear.
As the dominos continue to fall globally we will see more socialists leaders make desperate decisions as they try to stave off the inevitable.