Argentina Other


Fernandez de Kirchner wins elections by a landslide but faces challenges ahead

As widely expected, incumbent president Cristina Fernandez de Kirchner obtained a landslide victory in the first round of the presidential elections on 23 October. With a turn-out of 79.3%, Fernandez won 54.1% of the votes, more than 30 points ahead of runner up Hermes Binner, who obtained 16.9%. By obtaining over 40% of the votes with a difference of more than 10% over the runner-up, Cristina Fernandez was able to secure re-election in the first round. Fernandez de Kirchner will officially commence her second term on 10 December. One of the main challenges facing the renovated Kirchner administration will be to rein in public spending, which soared ahead of the elections as the government increased investment in public works, raised retirement pensions and increased salaries for unionized workers. Against this backdrop, on 2 November, the government announced that it will cut utility subsidies for commercial users. The overhaul of the subsidies system will affect financial companies, mobile operators and mining firms and will provide annual savings of USD 142 million. The Argentinean economy is also facing increasing capital flight, amid uncertainties regarding the global economic scenario and investors' lack of confidence in the government's unorthodox economic policy. Accordingly, just a few days after the elections, on 26 October, the government raised to 100% from 30% the percentage of export revenues that energy and mining companies should repatriate, asking companies to comply with the measure within a period of 180 days. Capital outflows totalled USD 9.8 billion in the first half of 2011, which compares with a total USD 11.4 billion for the whole year in 2010, leading the Central Bank to deplete currency reserves in recent months in order to contain the depreciation of the Argentinean peso (ARS). The Bank had already sold USD 3.3 billion only in August and September in order to support the ARS, which at the end of October traded at 4.25 per USD, marking a 6.3% depreciation since the beginning of the year.

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