Lavagna hits at shift to left in Argentina

The architect of Argentina?s economic recovery since its collapse in 2001 has for the first time explicitly criticised President N?stor Kirchner?s shift to the left and his closer relations with Venezuela?s Hugo Ch?vez.

Roberto Lavagna, who could emerge as the main opposition candidate in next year?s presidential elections after being ousted as economy minister, said the government was jeopardising the country?s ability to attract foreign investment.

?There has been a change which I think is not good,? Mr Lavagna said of developments since his dismissal, in an interview with the Financial Times. He highlighted the government?s conflicts with businesses and its strengthening of ties with Venezuela, whose entry into the South American trade bloc Mercosur he fears will jeopardise its democratic, market-oriented foundations.

Discarded by Mr Kirchner after a resounding government victory in mid-term elections last October, Mr Lavagna said: ?What worries me is that there has been an incorrect interpretation of the electoral results ? that now that [Mr Kirchner] has much more power things can be done differently from before, resulting in a clear shift to the left.?

Warning against rising government spending, he called for a ?great emphasis? on increasing private sector investment. He said state investment should be confined to education, health and security.

?The rest should stay in the hands of the private sector,? he said, criticising what he sees as an overuse of state subsidies.

Mr Lavagna returned to the limelight of Argentine politics soon after the apparent launch of Mr Kirchner?s own re-election campaign on May 25 with a massive rally in central Buenos Aires. He has since been busy meeting opposition politicians and has broken his silence to local media, sounding out public opinion to assess his chances of uniting a weak and fragmented opposition. ?It seems there has been a positive reaction,? he said, although it is unclear how much of a challenge he could put up against the extraordinary popularity of Mr Kirchner.

Marking his territory as the ?progressive centre?, he stopped short of openly declaring an intention to run for president in October 2007.

Mr Lavagna attacked the government?s anti-inflation strategy for relying on so-called price agreements, and ignoring fiscal and monetary policy, or the need to promote competition and productivity.

?The business climate has been affected? by the price agreements, he said, adding that relations with Venezuela were making matters worse.

?For the business climate, Ch?vez matters. He wants a socialist economy, and that?s fine if he wants to do that [in Venezuela], but I don?t like it, and I don?t think it?s good for Argentina. I don?t want this relationship to influence politics in Argentina.? Mr Lavagna stresses that although investment may have reached historic highs last year, it needs to be 2-2.5 percentage points of gross domestic product higher to keep up with economic growth that is expected by some analysts to exceed 8 per cent in 2006 for the fourth consecutive year.

As for a narrowing primary fiscal surplus, ?the problem is not the absolute level but the overall tendency,? he said.