Argentina Defence and Security Report 2009

A key issue in late 2008 was how Argentina would navigate through the emerging global economic slowdown, and what social and political tensions its chosen path might generate. Since taking office in the December 2007 elections the new government of President Cristina Fernández de Kirchner had suffered a significant loss of political support and had come under mounting fiscal pressure. Her popularity rating had fallen from over 50% when she took office to 23% ten months later in October 2008. In the most probable scenario for the year ahead, economic growth would disappear or turn negative (in fact BMI was in late 2008 forecasting 0.6% growth in 2009 and 0.9% contraction in 2010).

In the worst-case scenario some analysts were not excluding the possibility of a further debt default in 2009. This was formally denied by economy minister Carlos Fernández who in November 2008 said that ‘the state has the necessary resources to meet its debt obligations even taking into account the difficult conditions in the international financial markets.’ The minister also claimed that the local economy would keep growing although ‘at rates that are possibly not as high as those seen in recent years’. However, the pricing of Argentine bonds suggested that investors did not exclude the possibility of a new default. A hard landing for the economy would have implications for social and political stability: after all, the last default in 2001-2002 was accompanied by the collapse of an elected government and serious rioting, criminality and social disorder.

That said, BMI also notes that Argentina’s defence and security position has undoubtedly improved over the last decade. At the end of 2007 the country had undergone another successful democratic transition with peaceful general elections. Despite criticism of the Kirchner family’s tight hold on political power, (Cristina succeeded her husband, Nestor Kirchner, in the Presidency), various underlying factors were undoubtedly favourable when compared to the country’s recent past.

First and foremost, Argentina enjoyed a period of strong economic growth since 2003, a vitally important counterpoint to the social and economic collapse of 2001-2002. This growth, and the consequent improvement in living standards, helped reduce social tensions and ease the crime wave that had become a serious threat to internal security. Inequalities of income and wealth, together with crime in the major cities, remain an important issue, but these problems are less overpowering and perhaps more manageable now than they were before. The question now is how far these gains will be eroded by a new period of economic difficulty.

Secondly, despite some ongoing regional rivalries, Argentina remains fundamentally at peace with its immediate neighbours, a situation which has not always been the case. There is some concern over growing arms purchases by Chile, but relations are much improved (the two countries almost went to war in the late 1970s). Argentina continues to seek a counterweight to Brazilian regional influence, largely through friendship with Venezuela, but ultimately co-operation rather than competition has predominated along the Buenos Aires-Brasilia axis. An ongoing dispute with Uruguay over cellulose plants on the border between the two remains a significant irritant. Outside the region, we expect Argentina to continue opposing the British presence in the Falkland/Malvinas Islands with some diplomatic vigour, but a return to military action such as during the 1982 occupation, which had disastrous consequences, is not on the cards. Finally, in the critical relationship with the US, pragmatism is likely to dominate.

Third, a country which has suffered serious threats from both domestic and international terrorism, and where there has often been a damaging backlash leading to authoritarianism and human rights violations, is currently enjoying a relatively trouble-free period. The last known domestic terrorist activities occurred in 2005 with small-scale attacks on retail outlets run by US multinationals (Citibank, McDonalds, Blockbuster). The last major attack attributed to international terrorism, the bombing of a Jewish community centre which killed 85 people, took place in 1994. The authorities continue to believe that Lebanon-based Hizbullah, backed by Iran, was involved, although this has been denied. Clearly terrorist groups may be regrouping ‘under the radar’ and the danger from this quarter can never be discounted: but for the immediate future the threat level looks to be low.