FOREIGN POLICY CHALLENGES

Uncertain outlook before the presidential election

This year, Argentine foreign policy will be facing a number of challenges. One of them will be posed by the country’s own domestic politics, on account of the presidential election.

The opinion pollsters’ client list will include those foreigners who deal with this country as diplomats, investors or trading partners. Argentina has never been a model of foreign policy continuity like, say, Brazil. But, what adds to the foreigners’ uncertainty is the fact that government and opposition send different — and quite contradictory — signals about their views and plans.

True, foreign policy is not at the top of the local political agenda. But the gap between the two sides seems to be exceptionally wide. And as ever, the opposition is quite vocal in its criticisms of the Government’s policies. This increases the foreign players’ uncertainties. In some cases, this will send to the “wait and see” freezer some issues which should be sorted out sooner rather than later.

In terms of timing, the most immediate issue is that of the holdouts — vultures. The expiry of the RUFO clause triggers expectations. The government’s message so far seems to be “no policy changes.” But some think that this statement is more cosmetic than real and that — using an equally cosmetic mechanism — the government plans to solve the issue. Over and above these funds, which are the direct players, a number of possible investors and/or lenders are waiting to see the outcome of this story before making decisions about their future relations with Argentina. Given the state of the country’s kitty, this seems to be quite important. The problem is that the opposition seems to be in total disagreement with the government over this matter. Which adds to the foreigners’ sense of uncertainty.

Then there is the trade and investment agreement with China, voted last week by the Senate. It still has to go through the Lower House but — given the FPV’s majority — there is little doubt about the outcome.

Opposition politicians, commentators and business leaders are up in arms against the agreement. They argue that this deal will trigger an invasion of Chinese manufactures. And that it gives China an unfair advantage in terms of infrastructure projects. In addition, there are claims that Argentina is ceding sovereignty.

The general claim is that the agreement is asymmetric. Which might be true. It should be noted that — given the size of the two countries’ economies — asymmetry is a fact of life. Realpolitik rather than a sense of ideal fairness is the norm in international relations. In addition, the asymmetric relation is not new. In the last five years, Argentina has accumulated a trade deficit of more than U$S 20 billion. But then, the soybean exports to China have been vital for the Argentine economy. And the world economy is not generous in terms of offering foreign trade options.

Precisely because of this, it is unlikely that the Chinese foreign affairs officials will lose any sleep over Argentina’s future policy, regardless of the result of the October elections. But here again, the controversy sends signals to decision-makers in third countries in terms of expectations about Argentina’s policies and alignments.

This seems to be particularly so in the case of Mercosur. Opposition politicians have stated that Argentina should negotiate with China in association with its Mercosur partners. Does this imply that — if and when in government — the opposition will be more active in strengthening Mercosur? Surely Mr. Mauro Vieira, Brazil’ new Foreign Minister has Argentina’s policy on Mercosur and — more specifically — on Brazil as one of the items which he will be following carefully. In fact this goes two ways. The possible changes in Argentina’s main trading partner’s foreign policy is — or should be — one of the items that intrigue the Argentine government. And, the first evidence about this might appear in a few months. One of the key elements in the bilateral commercial relation, the agreement on auto’ trade is due to be renegotiated by mid-year.

Argentina wants changes in the agreement in order to reduce its trade deficit on this particular item. This view is not necessarily shared by the Brazilian industrial sector. It so happens that the car and auto parts industry has a strong impact not only on this country’s economy but also on local politics.

Any increase in unemployment in the industry has a strong impact, not least because of the political — and media — muscle of the trade unions involved.

In this particular case, the outcome of this negotiation will offer some evidence about the future dealings with Brazil’s new Minister for Development, Industry and Trade Armando Monteiro Neto. He used to be the President of the Brazilian equivalent of the Argentine Industrial Union. It will be interesting to watch how he manages the balance between his industrialist allegiances and his new diplomatic role. Or if he decides to postpone the renewal of the agreement for a one-year period, signalling his view that Cristina Kirchner’s is a lame duck presidency.

The list of challenges includes Russia. The heavily publicized strategic partnership comes at a time when Russia — which is in very serious economic trouble — is engaging in a quite aggressive attitude toward the United States and the European Union. Perhaps not the best of strategic partners for Argentina at this moment in time. Not least because Argentina already raises many eyebrows in Washington. And this is likely to get more serious if the Republican Party wins the next presidential election.

@andresfederman

CREDITS: BUENOS AIRES HERALD