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RIO DE JANEIRO (By Alexei Barrionuevo, NYTimes) July 18, 2008 — When Cristina Fernández de Kirchner selected a turncoat member of the opposition radical party as her running mate in her successful campaign for Argentina’s presidency last year, the choice looked like a canny ploy to win voters outside her Peronist party’s working-class base. But now, Ms. Fernández’s assumption her vice-president, Julio Cobos, would show more loyalty to her than he did to the Radicals appears to have been an act of near-suicidal hubris. On Thursday July 17th, Mr. Cobos cast his tie-breaking vote in the Senate against a crucial tax bill backed by Ms. Fernández, dealing what looks like a crippling blow to her presidency.
Ms. Fernández has spent the past four months in a fierce battle with Argentina’s farmers. They launched a massive protest campaign of strikes and roadblocks after the government raised taxes on soya-bean exports to nearly 40%. The public backed the farmers, and the president’s approval ratings tumbled. But Ms. Fernández and her combative husband, Néstor Kirchner, who preceded her as president and now runs the Peronist party, refused to lower the taxes in order to reach a compromise deal.
The two sides were locked in stalemate until the Supreme Court — where a majority of the judges were put in place by Mr. Kirchner — announced it would take a case addressing the constitutionality of the taxes. Their legality was in question because the taxes were implemented via an economy-ministry resolution rather than by the legislature. To avoid a potential judicial rebuke, Ms. Fernández, a former senator, asked Congress to ratify the levies last month.
Ms. Fernández clearly underestimated the pressures on her party’s legislators from Argentina’s interior provinces, whose districts were staunchly opposed to the taxes. Despite holding comfortable majorities in both houses, her Congressional block had to establish a costly rebate scheme for small farmers in order to win a very close vote in the lower house. The bill then passed to the Senate, where a torrent of defections from Ms. Fernández’s supporters produced a 36-36 draw.
The decision thus fell to Mr. Cobos, whose relationship with the president has become frosty. Ms. Fernández had barely spoken to him in a month, presumably because she felt he had acted too independently during the conflict. The beleaguered vice-president all but apologized to her as he cast his deciding vote. “The Argentine president will understand me,” he said, “because I don’t think a law that doesn’t provide a solution to the conflict will achieve anything…I ask forgiveness if I'm wrong.” When Ms. Fernández spoke the following evening, forgiveness was not on the agenda: “Let’s hope that those who didn’t understand what we said to the people in October when the election was held understand some day,” she said, leaving little doubt about to whom her words were addressed.
Ms. Fernández’s stunning defeat shatters the aura of invincibility that she inherited from her husband, who won a series of contentious political battles during his four years in office. Mr. Kirchner regarded dissent as virtual treason, and used his control over spending to keep legislators and local officials in line. But while his approval ratings reached 70%, his wife’s are barely above 20%. And while he enjoyed an ample budget surplus, her treasury has been depleted by last year’s pre-election spending binge and by rising costs for fuel and transport subsidies. Ms. Fernández actually campaigned as a moderate consensus-seeker; she will have to start governing like one if she hopes to salvage her presidency.
Ms. Fernández has a number of options to restore her credibility with voters. For a start, she could reduce the export taxes herself, rather than waiting for the courts to strike them down now that Congress has rejected them. Additional popular moves would include fixing the official inflation index, which her husband manipulated to reflect less than half the true rate, and replacing some of the pliant ministers she inherited from Mr. Kirchner with additional independent technocrats.
Ms. Fernández has three and a half years left of her term, and it is far too early to write her political obituary. But if she fails to learn from her mistakes, she may go down as one of the longest-serving lame ducks in recent democratic history.
The Senate voted 37 to 36 to reject the system of floating-rate taxes that the government of President Cristina Fernández de Kirchner imposed in March without first consulting with her nation’s Congress.
The vote was a stunning turn of events in the four-month-old conflict that has roiled Argentina, one of the world’s major agricultural exporters. And it was a stinging repudiation of Mrs.. Kirchner’s insular and confrontational style of governing that portrayed farm groups as enemies of the state bent on destabilizing her seven-month-old government.
Yet, while the vote means Congress rejected Mrs.. Kirchner’s attempt to make the higher taxes law, it did not revoke the new system, which will remain in place for now, analysts said. That leaves the beleaguered president with a tough political decision: continue to insist on the taxes and risk further political damage to her Peronist bloc’s hold on Congress, or give up the $3 billion to $4 billion in additional revenues a year that the higher taxes are reaping for the treasury.
Whatever she decides, Mrs. Kirchner and her husband, former President Néstor Kirchner, who leads the Peronist bloc, emerge badly wounded from the protracted battle with agricultural producers, analysts said.
“This is a huge blow to the Kirchners, a major defeat on an issue that they framed as a defining moment of their presidency,” said Daniel Kerner, an analyst with Eurasia Group, a political risk analysis consultancy based in New York. “It would be political suicide for them to keep the higher taxes in place now.”
On Thursday, Mrs.. Kirchner did not directly address the Senate vote at her only public appearance, in the northern city of Chaco. But on Tuesday, her husband said that “we will respect the decision Congress makes, whatever it is.”
Julio Cobos, Argentina’s vice president and a former governor of Mendoza, broke the tie after nearly 18 hours of often emotional debate among the senators. His voice weary and sometimes cracking, Mr. Cobos sounded almost apologetic as he explained why he was voting against a measure that Mrs. Kirchner and her husband had fought so hard to defend.
“I don’t believe that a law works that does not offer a solution to this conflict,” Mr. Cobos said. “However history may judge me, I ask for forgiveness if I am making a mistake.”
It was a moment of high drama in Argentina’s capital, Buenos Aires, carried live on national television. While farm leaders called his actions patriotic, his repudiation of his president may have been “the beginning of a political institutional crisis,” said Artemio López, an analyst in Buenos Aires.
For the Kirchners, Mr. Cobos’s vote added insult to injury and was likely to ratchet up pressure on them to moderate their bruising style of politics and seek more consensus heading into Congressional elections next October, said Graciela Romer, an analyst in Buenos Aires.
“This vote showed she has lost power and legitimacy in her own political coalition,” Ms. Romer said. “Everything depends on what path the president chooses going forward. If she deepens the divisive style she has shown, she could have problems running the country.”
The new tax system raised taxes on soybeans from a fixed rate of 35 percent to a rate that has floated with global prices to more than 44 percent. Amid rising costs for farm materials, it provoked a series of crippling strikes that shut down highways for grain trucks bound for export and caused scattered food shortages.
The Kirchners justified the higher taxes as critical to plans to redistribute wealth and hold down Argentina’s food prices. But they stoked tensions by portraying the farmers as a political threat, calling them “greedy” and “coup plotters.”
Last month a series of huge pro-farmer rallies throughout the country finally pushed Mrs. Kirchner, whose approval rating had plummeted to as low as 20 percent, to take the calculated risk of sending the measure to Congress for approval. The president’s Peronist bloc controls both houses of Congress.
But analysts said the Kirchners underestimated the support for agricultural producers both in the provinces and in the capital itself.
“For us, agriculture is the economy,” said Ruben Hugo Marin, a senator from La Pampa who is part of the Front for Victory party that generally supports the Kirchners, in explaining his no vote.
The vote was not expected to be so close in the Senate, but a pro-farmer march on Tuesday in Buenos Aires of an estimated 235,000 people appeared to have an impact. A government rally heavy with trade unions and labor groups drew 100,000 to the city the same day.
Shortly after Emilio Rached, a senator from the province of Santiago del Estero, cast the critical vote that forced the tie, all eyes turned to Mr. Cobos, who took the microphone just after 4 a.m. “The Argentine president is going to understand us, she is going to understand me,” Mr. Cobos said, his hand nervously fidgeting with the microphone “My vote is not in favor, my vote is against.”
Later Thursday, Mr. Cobos explained his vote in a televised interview, saying that Mrs. Kirchner’s unwillingness to make “small modifications” caused him to vote against the measure. “I agree with the distribution of wealth,” he added. But, he said, “I also know that one has to see a reasonable profit. To redistribute wealth, one has to create it.”
