Kirchner’s image thrives on his rough approach

When President Néstor Kirchner snubbed Queen Beatrice during a recent state visit to Argentina the Dutch media were outraged.

The controversial Argentine leader preferred a break in his home province of Santa Cruz in Patagonia to going with the Dutch monarch to the ballet, in the opulence of the Teatro Colón in Buenos Aires.

The incident was symptomatic of Mr Kirchner’s stubborn provincialism and his disdain for diplomatic niceties. But according to a growing number of critics, it also highlighted an aggressive nationalism that is damaging the country’s long-term interests.

Since his election to office three years ago, Mr Kirchner has maintained a fairly conservative approach towards public spending that has kept inflation under control. But his government has repeatedly ridden roughshod over unpopular foreign business interests.

Executives at privatised utility companies – which many Argentines associate with the “neo-liberal” policies of the 1990s that contributed to the economic collapse of 2001-02 – have grown accustomed to rough treatment from ministers. Friction between the government and international companies culminated this year with the nationalisation of Aguas Argentinas, a water company controlled by Suez of France. Last month, a widespread rumour forced Repsol YPF, the Spanish-owned oil company, to reassure employees that it was not about to undergo the same fate.

“The government has violated contracts and has a very confrontational discourse,” says a prominent local businessman. “Clearly its attitude is not good for attracting investment and could even scare off those who are already investing,” .

Signs of growing authoritarianism are manifested in a sometimes intemperate Mr Kirchner opting to “micro-manage” economic matters normally tackled by more junior officials.

Earlier this year he was visibly involved in daily negotiations with dozens of businesses to establish price agreements to control inflation.

In later attempts to control beef prices, Mr Kirchner dramatically banned beef exports for six months and then appealed to his heavily carnivorous nation not to eat beef.

But his confrontational style and robust defence of national interests – visible in negotiations with creditors over Argentina’s international debt and the sudden cancellation of obligations to the IMF in January – are popular with voters.

“Kirchner’s power is fed by his dramatic style in singling out symbolic targets, winning him important public support,” says Graciela Romer, a political analyst.

Indeed, analysts put his personal approval ratings at about 70 per cent. And faced with a weak and fragmented opposition, few question the probability that he will be re-elected next year, barring an unlikely reversal of three consecutive years of goodeconomic growth.

The economy’s recovery has underwritten Mr Kirchner’s popularity and the healthy budget and current account surpluses that Arg-entina now enjoys are almost unprecedented.

With no crisis looming and sound economic fundamentals – in spite of the threat of inflation, which most analysts believe is under control in the short term – investors have been willing to overlook political problems, which are only hampering business investment.

Those sympathetic to the government, such as pollster Artemio López, say the business climate will improve. “Argentina’s treatment of foreign companies “may seem unpleasant to the distant observer but the country is going through a correction process,” he says, explaining that the country was thrown off course by a corrupt and arbitrary privatisation process in the 1990s. “It may take a couple of years for businesses to regain confidence.”

Others are more sceptical, seeing the present trend as part of a deeper historical pattern. “This strong nationalist impulse in Argentina goes way back to the 19th century.

“There’s this idea that foreigners are just there to rip them off,” says David Rock, an historian specialising in Argentina at the University of California.

He points out the similarities with the postwar boom in the 1940s when foreign investment was repatriated under President Juan Peron, the founder of Mr Kirchner’s party, who by the 1950s was forced to try to attract foreign capital again.

Rosendo Fraga, director of the Nueva Mayoría think-tank, classifies Mr Kirchner as a pragmatic populist who is positioning himself be-tween Venezuela’s not-so-business-friendly president, Hugo Chávez, and Brazil’s more moderate Luiz Inácio Lula da Silva.

There will be a big price to pay in the long term if Mr Kirchner’s mix of nationalism and unpredictability continues to undermine business confidence.

If investment continues to lag behind economic growth – analysts say investment needs to increase by several percentage points of gross domestic product to keep up with present levels – the ghost of inflation will return to haunt Argentina, and the markets will be the first to get spooked.