Argentina – A Mysterious Death, a Major Crisis

The death of Alberto Nisman shortly before the prosecutor was to deliver congressional testimony that included allegations of an offer by President Cristina Fernandez’s administration to protect Iranian agents involved in the 1994 bombing of a Jewish community center in Buenos Aires has unleashed a scandal with deeply sinister implications, and is very likely to influence the outcome of presidential and legislative elections scheduled to take place in October.

On a more prosaic level, the case has shone a bright light on the problem of political interference in judicial affairs. A protest organized by a group of prosecutors in mid-February drew an estimated 500,000 participants who turned out in the pouring rain for a silent march from the Congress to the presidential residence. The administration accused the organizers of attempting a “judicial coup,” a characterization that, given the direct implication of Fernandez in what amounted to a swap of legal immunity for oil underscores the risk of a damaging power struggle between the executive and judicial branches over the coming months.

Polls show that a large majority of Argentines believe that Nisman’s accusations of a government attempt to cover up Iran’s involvement in the 1994 terrorist attack are credible, and Fernández’s political problems have actually boosted investor confidence, amid anticipation of an end to the leftist populism that has prevailed in the country since Fernández’s late husband, Nestor Kircher, was elected to the top office nearly 12 years ago. Growing optimism that the October elections will result in the installation of a more business-friendly government has revived market appetite for Argentine debt, creating a glimmer of hope that Argentina might escape its latest default debacle without incurring long-term damage.

Even before the latest drama, Mauricio Macri, the leading opposition challenger for the presidency (Fernandez is not eligible to stand for another term), has begun pulling away from the leading candidates for Fernandez’s FVP and a rival Perónist faction, benefiting from discontent over deepening economic problems. Of course, there remains a danger that the administration will attempt to preserve the FPV’s congressional dominance and salvage the presidential hopes of Sergio Massa with populist spending measures that only exacerbate the economic woes. Likewise, the risk of serious debt-related problems will increase if the FPV somehow manages to make a pre-election comeback over the coming months.