Death of Kirchner Jolts Political and Economic Spheres in Argentina

President Cristina Fernández de Kirchner of Argentina with her husband, former president Néstor Kirchner, who died this week. Jorge Saenz / AP

With the sudden death by a massive heart attack of Néstor Kirchner yesterday at the age of 60, Argentine President Cristina Fernández de Kirchner not only lost her lifelong companion but also a political accomplice. Argentine pundits have long described their pact to remain in power for years to come. So his death was a blow of seismic proportions to South America's second largest nation, and the tragedy has cast a cloud over Fernández's struggling government, and even more, next year's presidential elections, which Néstor was widely expected to campaign for and win. To top it off, all this upheaval came just as this $350 billion economy is emerging from a decade of chronic crises and isolation from the world financial markets.

Unlike many Latin American populists, Néstor Kirchner was not charismatic or given to public display. Gangly, mercurial, and very tall, he preferred working the back rooms to holding forth from the balcony. He cut his teeth in politics in the student movement of the 1970s and then as governor of Santa Cruz, in chilly Patagonia, where he earned the affectionate if unflattering nickname "Penguin." He rose to the national stage only in 2003, during a divisive presidential election, and was thrust into the top job when incumbent Carlos Meném abruptly pulled out of the runoff, apparently bitten by the prospect of losing to this upstart from the frost belt.

What Kirchner lacked in star power he quickly made up for with his mastery of the rugged world of Argentina party politics. He reined in the fractious Peronist movement (and the Partido Justicialista), generously rewarding friends and allies while starving political rivals of official funds and even confiscating property. With opposition parties in disarray, he quickly amassed power in the legislature, among state governments, and leaned on trade unions and the courts. Partly out of conviction, partly to please the crowds, he frequently lashed out at foreign creditors and the International Monetary Fund, blaming them for creating an unsustainable debt bubble, one and a half times larger than the country's GDP. But he also took a step to end the country's pariah status among international lenders, who wanted nothing to do with the country since 2002, when Argentina stopped payment on its $95 billion foreign debt, the largest default in financial history. The Argentine economy began to rebound, lifted largely by the power of agribusiness in the wake of the global commodities boom. This year it is likely to grow at a blistering 9 percent a year, just about the fastest rate in the hemisphere and among the best around the world.

Whether the bonanza can last is another question. Even as he stepped aside, Kirchner was never far from the corridors of power, whispering in Fernández's ear, outmaneuvering rivals, or mobilizing the Peronist movement. It's no secret that the Kirchners dreamed of lingering in power (pundits talk of their 16-year-plan). Now all bets are off.

Fernández acquired much of her husband's hubris, but not his political ability. And even as the economy recovered, her meddling in markets, bungled price controls, and conflicts with farmers over a stinging export tax ended up in protests and shortages in supermarkets. When inflation began to reach double digits, she practically took over the statistics bureau, INDEC, throwing the country into what analysts call a statistical blackout. The once admiring press also turned on her. She fought back, lashing out against the two leading media groups, La Nación and Clarín, in word and in deed. Her latest initiative, now before Congress, is a bill to nationalize Papel Prensa, a paper company (currently owned by Clarín, La Nación, and the government) that supplies most of Argentina's newsprint—a thinly veiled attempt to hush her critics.

Now such belligerence may steal her fury and even force a weakened government to declare a political truce. Dragging in the polls (with less than 50 percent approval ratings), Fernández was almost certain to step aside to allow her far more popular husband to run in next year's elections. Kirchner's death leaves everything up in the air. With opposition parties still weak and divided, a host of Young Peronists, like Buenos Aires province Gov. Daniel Scioli, are now in the spotlight, while ancients like Carlos Meném and his archrival, Eduardo Duhalde, are also jockeying for influence. The death deals another blow to the beleaguered Bolivarian alliance led by Venezuela's Hugo Chávez. Though Argentina was not a charter member, the Kirchners agreed with much of Chávez's populist formula of centralizing political and economic power, intimidating opponents, and hushing the press.

So it's no surprise that some investors took heart at the passing of this hard-knuckled populist. Kirchner's coffin had not even been flown back for the funeral in Buenos Aires yesterday when the Argentine debt bonds and share prices of companies like Tele Argentina and Pampa Energy soared on international bourses. But that may be premature. "What we have now is a political vacuum," says Alberto Ramos, emerging-market analyst for Goldman Sachs. "It's too soon to know which way the wind will blow." Perhaps it's only fitting that Kirchner departs Argentina much as he rose to power, in a cloud of uncertainty.