Key Issues in Argentina's Elections

Argentines vote on Oct. 25 for a new president to replace Cristina Fernandez whose two terms have been characterized by generous welfare benefits, state intervention in the economy and a debt default. Argentina is a famously volatile nation, but a few key issues remain on the electorate's mind before presidential elections on Sunday, Oct. 25th, here are a few of them

Inflation

Spiraling prices have come to be seen as normal in Latin America’s third-largest economy, where annual inflation has stood above 20 percent for the past eight years.

This year’s inflation figure — around 30 percent, analysts forecast — is low compared to the hyperinflation crises of the 1970s and 80s, when Argentines’ salaries got decimated before they could even cash their paychecks.

In 1975, the inflation rate hit 100 percent a day, and in 1989 the annual rate reached 1,923 percent, sparking riots that forced President Raul Alfonsin to resign.

But Argentines have become inured to spending money as they earn it so its buying power doesn’t shrink.

Credit plans that let shoppers buy products in fixed monthly installments are hugely popular, while parking money in the bank is seen as a loser’s bet.

Annual inflation came in at 23.9 percent last year, according to government figures — though private research institutes put it at around 35 percent.

This year it is forecast at 15.6 percent, according to the government.

Presidential hopeful Sergio Massa has said that inflation is the biggest economic challenge Argentina faces.

Foreign Policy

Foreign policy is an issue which sets apart the two favorites.

Macri wants a return to traditional international partnerships with the United States and the European Union. Scioli is likely to push for a continuity of the policies pursued under President Fernandez.

Fernandez has been a strong advocate for a multipolar world and strengthening ties with Russia and China.

And Minister of Economy Axel Kiccillof said that ties between Argentina and Russia were a “fact, not a wish”. Fernandez has also been supportive of Chinese investment in Argentina.

Macri plans to go in the opposite direction, cozying up to the United States as well as rolling back ties with other progressive nations in Latin America such as Venezuela, Bolivia and Ecuador.

Vulture funds

If there was one theme that defines Argentina in 2015, it is the battle with the vulture funds. Argentina’s economy is being held to ransom by a small handful of very wealthy speculators – so-called ‘vulture funds’.

A New York court has awarded two US vulture funds a US$1.3 billion payout on debts bought up after Argentina’s debt crisis of 2001. What’s more, Argentina has been told it is illegal to pay its other debts unless it also pays the vultures.

Under president Fernandez, the country has refused to pay the vulture funds, while attempting to pay the other 93 percent of bondholders, and has had recent successes in United States appeals courts.

Presidential candidate Daniel Scioli echoed the current administration’s position on so-called vulture funds that have sued the nation in U.S. courts to demand payment on their defaulted bonds.

Scioli, outlining his economic policies in a speech Monday, said he’ll continue the fight for “a world without vultures” and would try to meet obligations with 100 percent of Argentina’s creditors under “fair, equal and legal” terms. Argentina, he said, has proven it can access multi-lateral lending without paying hedge funds what they’ve demanded.

Corruption

Corruption, and accusations of corruption are a mainstay in Argentina. Many high ranking government officials as well as opposition have been linked to corruption scandals, but the accusations never stick.

According to leading presidential candidate Daniel Scioli, opposition candidates "are planting seeds of pessimism and discontent in Argentines, who don't want to go back but rather want to move forward.”

And the leading opposition candidate, outgoing Buenos Aires Mayor Mauricio Macri, has had his own corruption scandal in recent weeks. A congressional candidate in his alliance, Fernando Niembro, withdrew from his race amid an investigation into no-bid contracts he was awarded by the city. The scandal had little impact, however, with polls showing at most a 1 percent drop in Macri's support.

Agricultural Taxation

In Argentina, where soybeans help drive the economy, a battle over taxation on the export is a key one. Farmers have accused the government of over taxation, while the government has accused them of hoarding.

Large agriculture has always been a key player in Argentina since it was born, with huge amounts of power lying the riches of the Argentine plains, one of the most fertile places on earth.

Opposition presidential candidates Mauricio Macri and Sergio Massa have said they’ll reduce export taxes to promote investment. Scioli also suggested changes could be in store, saying there was a need to “review the fiscal system” and “think about export tax duties.”

“My goal is to incentivize farmers to sow and produce,” Scioli said, vowing “competitive conditions,” although he also said he would not put forward “demagogic proposals.”

Scioli’s advisers have in the past explicitly endorsed significant cuts and even the complete elimination of export duties to both corn and wheat, saying that farmers are not sowing those crops due to the difficulty in earning a profit, but also declaring that duties on the more profitable soybean should stay in place, as they are a key to the country’s coffers.

The government estimates that farmers are hoarding 18 percent of last season’s record soybean crop of 53.4 million metric tons, or about US$3.7 billion worth of oilseeds.

Cabinet Chief Jorge Capitanich said Jan. 15 farmers are undercutting state financing by hoarding. In the first seven weeks of the year, they sold US$1.8 billion of grains for export, the lowest for the period since 2007. In 2014, they sold US$24.1 billion of grains and oilseed to boost central bank reserves.

Social programs and subsidies

Cristina Fernandez's first campaign for presidency in 2007 was based largely on the promise to expand the economic and social reforms that her late husband Nestor Kirchner started. The most notable being universal child allowance, pension increases, unemployment benefits and utility and transport subsidies.

Mauricio Macri has said he would roll back some of these policies such as transport and utility subsidies, but not privatize oil company YPF, nor Aerolineas Argentinas. However it is tipped that he will also roll back unemployment benefits and not increase the pension at the current rate.

The move of Scioli is not so certain here, but he will not roll back these hugely popular programs as far as Macri, if only for fear of retribution from his supporters and Kirchnerites in his government.