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INSIGHT
INSIGHT
Aired May 15, 2003 - 17:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JONATHAN MANN, CNN ANCHOR: A man who made a mark, and a mess. Argentina's Carols Menem abruptly aborts his campaign for the presidency, suddenly derailing the country's election.
Impoverished and angry Argentineans now get a leader few of them voted for and few of them know.
Hello and welcome.
Argentina favors dramatic leaders. You could say it got its money's worth in Carols Menem, except that so much money is involved.
Menem is widely blamed for Argentina's crushing debt and its economic collapse. The result has been one kind of chaos. Now he can claim credit for another. Menem's decision to abandon his bid for reelection just days before the second and final round of voting leaves his country one candidate short of a contest, one vote short of a real and much needed mandate.
On our program today, another broken promise to Argentina.
We begin with CNN's Lucia Newman, in Buenos Aires -- Lucia.
LUCIA NEWMAN, CNN CORRESPONDENT: Good afternoon, Jonathan.
Well, the very vast majority of Argentines still cannot believe it, the man who was once seen as their savior, the political leader who had boasted he had never lost an election, was running away, refusing to face the competition.
But then Carlos Menem was always a man of surprises, a man of great achievements, but also of great contradictions. A man who represented a political culture that many Argentines now say has self-destructed, thanks in part to Carlos Menem.
(BEGIN VIDEOTAPE)
(voice-over): Carlos Menem returned to La Rioja Province Wednesday to announce his political retreat. Argentina's once most powerful figure going home a defeated and humiliated man.
He must have thought just how much things have changed.
Just 15 years ago, the former governor of La Rioja became a phenomena. With his unorthodox sideburns and polished style, he was nevertheless heralded into mainstream Argentine politics as the new Juan Domingo Peron, the man who would return Argentina to its former splendor.
Menem soon dropped the sideburns, and his perilous platform, initiating instead a series of unprecedented free market reforms which ended hyper-inflation and spurred economic growth.
CARLOS PEREZ, ECONOMIST CAPITAL FOUNDATION (through translator): The 90's saw a transformation. He inserted us into a globalized economy. He opened up our economy and privatized the state companies.
NEWMAN: It looked like the good times were back for what was once Latin America's most prosperous nation, and President Menem couldn't resist showing off. He surrounded himself with the rich and famous, from Princess Diana to Claudia Schiffer to Madonna and the Rolling Stones.
A president who liked fast cars and the fast life -- while the rich grew richer and the majority, the middle and lower classes, grew poorer.
MARTIN HOUREST, ECONOMIST (through translator): It was a process that multiplied poverty by three and unemployment by four during Menem's decade in power. The unequal distribution of the nation's resources was unprecedented for any nation in Latin America, even one that had just suffered a catastrophe.
NEWMAN: Although Menem was reelected in 1995, he came under increasing criticism for fiscal overspending and plunging Argentina into debt while local industry collapsed under the weight of Argentina's overvalued peso.
And there were the accusations of large scale-corruption, links to drug trafficking and abuse of power in Menem's government.
GRACIELA ROMMER, POLITICAL ANALYST (through translator): Under Menem, there was even less independence between the different powers of the state. He ruled by decree. He's the president who governed with the most number of presidential decrees.
NEWMAN: Still, until almost the end of his administration, Menem was admired by many Argentines who, accustomed to political corruption and favoritism, saw him as a figure bigger than life and above the law.
(on camera): If a large percentage of Argentines applauded rather than censored Menem's alleged behavior, it was, according to analysts, because he personified a society that had lost its way, a society who's ruling class, be they military dictators or political bosses, didn't believe in playing by the rules of the game.
(voice-over): But that began to change. Just as Menem left office in 1999, economic recession led to economic collapse. And Argentines decided they'd had enough of politics as usual.
ROMMER (through translator): There's a very strong demand among citizens for an all-out attack against corruption, for a state that's more transparent and accountable. Menem represents exactly the opposite model of what the majority want now.
NEWMAN: Menem didn't realize that. Even with 60 percent of Argentines living below the poverty line, Menem continued promoting his glamorous image, marrying a former Miss Universe from neighboring Chile.
Two years ago, he was put under house arrest on charges of illegal arms trafficking during his first term, but he was acquitted by Supreme Court judges he had appointed. He went on to run for a third term in office.
Although one out of every four voters cast their ballot for Menem last month, opinion polls consistently showed he was the most unpopular politician in Argentina, making it virtually impossible for him to win a runoff election scheduled for this Sunday.
Menem, defiant until the end, blamed his adversaries for turning the people against him, unable to believe that the era of Argentina politics that her personified was coming to an end.
(END VIDEOTAPE)
But this challenge now for Argentina is just how to create a new political culture that's more responsive and more accountable to the expectations of a country that has just about lost all its faith in its politicians -- Jonathan.
MANN: So, Lucia, is this a done deal? Is Nestor Kirchner now simply preparing to take office, as if the second round was never needed?
NEWMAN: I wouldn't say it wasn't needed, but it is a done deal now, he is virtually -- or rather he is literally the president-elect of Argentina, because according to Argentina's constitution, if one of the two candidates in a runoff doesn't go to that election, than the other one automatically becomes president.
And that has created a certain degree of frustration here -- Jonathan.
MANN: Well, let me ask you about the frustration. You mentioned surprise. I'm curious about whether because Carlos Menem was so unpopular, people are happy that he's not going to be running for office anymore, or people are angry that this second round has now been denied them?
NEWMAN: Well, you might have thought that they would be relieved and said, well, let's jut get this over with. Everybody knew that Nestor Kirchner was going to be the winner.
But as you would perhaps not have expected, they're very angry. They're upset. Many people say that they've been cheated out of their democratic right to go to the polls, that they be the ones to say that they wanted Nestor Kirchner to be their president and not Carlos Menem by simply not showing up for the election.
MANN: Lucia Newman, in Buenos Aires, thanks very much.
We take a break. When we come back, a tarnished legacy and disarray in the party that Peron built.
Stay with us.
(COMMERCIAL BREAK)
MANN: Carlos Menem and Nestor Kirchner are both Peronists. At first glance, though, that seems to be all they have in common. Menem is flamboyant, Kirchner low-key. They both have economic policies that are all over the map.
Welcome back.
That's one of the reasons that observers say there are some troubling similarities between the two leaders. Kirchner ran his home province like a fiefdom, changing the constitution so he could be reelected, intimidating the courts, and using patronage to win support, just as Carlos Menem did.
To talk more about all of this we're joined now by Mark Falcoff, a resident scholar at the American Enterprise Institute in Washington.
Before we go on to the president-elect, let's talk about the ex- president. Carlos Menem has been accused, I guess it was in today's papers in Buenos Aires, of having destroyed every institution in the country while he was president save one, and that institution, the electoral system itself, that newspaper accused him of destroying on this day.
Harsh, but is there anything to it? Has Carlos Menem really left behind a very big mess once again?
MARK FALCOFF, ENTERPRISE INSTITUTE: Well, he certainly hasn't contributed very much in this latest episode, because it seems to me that the important thing in Argentina is to build a sense of credible institutions, and this has been the problem with the country for many years.
I think the decision not to run was a way of depriving the president- elect, as he now is, of the kind of decisive mandate that he really does need to govern, because Argentina is a very, very troubled country with many serious problems. Whoever takes over is going to have a lot on their plate.
MANN: So you're suggesting it wasn't an attempt to avoid humiliating himself. It was in fact a concerted effort to injure his successor here?
FALCOFF: I think it was both. I think it was both. And what is particularly, I would say sad about this whole episode is, I think about all those people that worked to elect President Menem, and got him first past the post in the first round of elections. He wasn't just betraying the whole kind of institutionality of Argentina. He was turning his back on all these people that had worked for him and essentially, like a general abandoning his army in the field just before a decisive battle.
MANN: Now, it's intriguing what you say, because he was first past the post. He did the best, I think, it was in a field of 19 different candidates. How much support did Nestor Kirchner have in that first round? How much support does he bring to the presidency?
FALCOFF: He -- President Menem had about -- I haven't got the exact numbers, but it's something like 23 - 24 percent.
MANN: I think it was 24.
FALCOFF: And maybe 2 percent points behind was Mr. Kirchner, and then of course there were other candidates that had smaller numbers.
But I believe that the 20-some percent that president Menem had in the first round was close to a peak that he could hope to get in the runoff. Maybe he would have picked up I am assuming maybe another 5 or 6 points from some of the other candidates.
But if you look at the rough ideological scores of Menem versus anti- Menem, you could easily see that Kirchner just by default was going to get about 60 percent of the vote, and I think this is the kind of humiliation that President Menem wanted to avoid.
MANN: Now, does Nestor Kirchner have the kind of track record that suggests he will be a good president for Argentina?
FALCOFF: Well, he doesn't have that kind of track record at all. He's the governor of a small province that's rich in oil and gas, Santa Cruz. Those commodities are traded in hard currency. A lot of the money was kept in foreign banks so that it wouldn't suffer the devaluation that Argentina went through last year, and about a quarter of the people in the province work for the state government. It's a small province, about 200,000 people in we're talking about a country of over 35 million.
So as you earlier said, there's really not all that much to distinguish Mr. Kirchner from other Argentine politicians except that he isn't Carlos Menem, and that was the chief strength and his chief appeal that he had at the electorate and has.
MANN: So far, only some 22 percent of the country has voted for him, so he doesn't really have a mandate from the people. What about the political class in Argentina? Is he a popular or well-connected figure to, for example, members of Congress and other people whose support he's going to need to govern?
FALCOFF: I'm afraid I'm going to have to be quite candid here. He was picked by President Duhalde, President Eduardo Duhalde. He was hand picked to succeed Duhalde. His chief virtue was that Duhalde wanted him to be the next president.
And he was not even the first choice of President Duhalde. He went through two other candidates, one of whom chose not to be the government candidate and the next one couldn't apparently get enough political traction to be it. So he was the third choice.
He's a little-known public figure. He has -- the chief advantage I think he had politically in the campaign was he had the support of Roberto Lavonia (ph), the economy minister, who has put an end in the last year to the economic free-fall of Argentina. That was a great asset that he had, in addition to being not Menem.
But he's pretty much a standard Argentine politician of the provincial type. There's nothing about him to suggest any great potential, but on the other hand it has to be said in all honesty that when President Menem emerged in 1990, a lot of us thought this is a guy that's crazy. He's run a crazy show in his province of La Rioja. He's going to ruin Argentina.
And in fact, for the first couple of years, maybe even the first five years of his presidency, he surprised us all. So let's hope that the same thing happens with Mr. Kirchner.
MANN: And yet I suppose you could say that in his time, back in 1990, Carlos Menem was the standard bearer of the Peronist Party, an enormously important institution historically, and even then in Argentina.
What about Mr. Kirchner and the Peronists today? Are they an asset that he brings to office?
FALCOFF: Well, the problem today is that the Peronist Party, as you've indicated, Jonathan, is no longer the same unified political force that it once was. And the result -- there are really many Peronist parties now.
There were in fact three major forces contending in this election under a Peronist label. One was Menem, one was Mr. Kirchner, and one was former president for five days last year, Rodriguez Saa.
So whether anyone can reunify this party is a big question. And, in fact, I've looked into the Congress, and I think it's fair to say there are about 12 different party groups in the Congress. None of them have anything like a majority. And with the Peronist Party split at least in two, two and probably three factions, it's going to be very difficult for Mr. Kirchner to put a legislative majority together.
I think that the Peronist Party as a personalist, verticalist, to use the Argentine term, verticalist, you know, top down, unconditional leadership party, I think that is a thing of the past.
MANN: None of this seems to auger well for the future.
FALCOFF: That's, I'm sorry to say, the case.
MANN: Mark Falcoff, of the American Enterprise Institute, thanks so much for being with us.
FALCOFF: Thank you.
MANN: We take a break. When we come back, using those tools, such as they are, to fix a troubled nation. The difficult job ahead for Nestor Kirchner.
Stay with us.
(COMMERCIAL BREAK)
MANN: An Argentinean financial daily listed the immediate problems the country's new president will face. There were 54 in all and the vast majority have to do with money.
Welcome back.
In the course of the campaign, Mr. Kirchner has explained how he would boost Argentina's economy. He promised to do it the old fashioned way, by spending government money.
But the government of Argentina is broke. It can't pay back the money it owes now, and it can't easily borrow more.
Nestor Kirchner has a problem.
Joining us to talk about that is Dario Epstein, a former Argentinean securities commissioner and a financial advisor to a number of "Fortune 500" companies.
Thanks so much for being with us.
As we were talking with Mark Falcoff, we could see you apparently shaking your head in disagreement, so why don't we start off with that. Tell us what it was that you heard that you took issue with?
DARIO EPSTEIN, FMR. ARGENTINE SECURITIES COMMISS.: Well, actually, it sounded to me like he was too tough on a new president whom we still don't know.
Remember that when President Menem took over the presidency in 1989, he came from a smaller province than Kirchner is coming now, and he certainly had nothing to offer as the president of Argentina.
However, with the support of the Peronist Party, he was able to go through a number of structural reforms to re-launch Argentina in the international arena.
So we should concede Kirchner at least 2, 3, 100 days to let him show to the world, to the community, to the financial community, what he's able to do. I mean, we don't have to be so harsh on him right now.
MANN: Fair enough.
So let me ask you to start out, accentuating the positive, in the course of the last year, stocks and bonds in Argentina have gone up in value. The value of the peso has improved. What kind of economy does the new president inherit?
EPSTEIN: Well, the new president is going to inherit an economy that is at least stabilized. I mean, remember that in 2001 - 2002, Argentina was in a free fall. I mean, it was (UNINTELLIGIBLE) and what President Duhalde did was to try to stabilize the situation, but he didn't go through the major structural changes he has to go through.
For instance, restructuring external debt, the financial form, the financial sector reform, the tax reform and, of course, the prices of -- the tariff of the private sector companies -- sorry, privatized companies.
MANN: This is an enormous job.
EPSTEIN: Actually, it is. And it is something that the former administration hasn't gone through and is what Kirschner will have to face form now on.
MANN: Part of the reason that the former administration didn't do these things was that many of these measures, even the ones that took, were extraordinarily unpopular. Nestor Kirschner is going to be the 6th president in 18 months. There was a succession of them because people simply wouldn't put up with the kinds of demands that the economy and the government were making on them.
Is there political support for the kinds of painful measures that are still ahead?
EPSTEIN: Well, certainly, I mean, if you take into account that Kirschner had been (UNINTELLIGIBLE), has become president with only 22 percent of the vote, that's going to show some weakness.
However, I do believe that if he does take the right steps, he's going to have the necessary support in Congress and in the provinces, mainly coming from the Peronist Party. So this is a kind of disagreement I have now with the former interview.
MANN: Let me ask you though about the impact of all of this in human terms. Approximately 18 percent, nearly 1 in 5 working Argentineans is not working. Nationwide, the numbers are between 50 and 60 percent of the population lives in poverty. Now, structural reform and the important economic measures aside, what about those people? What's going to be done for them and how long will they keep waiting for Nestor Kirschner's help?
EPSTEIN: Right now, I mean, Argentina is in a crisis. We won't discover that, even though we have a change of -- I mean, this is a fact. This is for -- this is a fact. And you can't addresses social problem if you don't get in account the measures of structured change that Kirschner will have to put in place.
And so we're going to have to go back to the economy. Like it or not. So again, Kirschner is going to have to deal with foreign debt. Kirschner is going to have to build a new tax system with -- Kirschner is going to have to deal with domestic savings. And by that I mean to restructure the financial system.
So there are many things Kirschner is going to have to do, and it is impossible to unbundled the economic situation and the economic restructure from the social one, because eventually new jobs will come from a booming economy and, in other words, you're going to have to subsidize the unemployed with government money.
MANN: He has made all kinds of promises in the course of the election. He's promised not to keep paying the debt if it hurts poor people. He's promised to undertake important public spending programs to get people back to work. Has he been promising the right kinds of things though? Is he likely to do the kinds of things that you've described?
EPSTEIN: Again, the kinds of promises you're mentioning, I'm not so - - I'm not being defensive, but I haven't heard those kinds of promises.
What I heard is that he's going to try to put in place an infrastructure plan, and that will demand a lot of money from the international institutions, like the IMF, the World Bank, the IDB, and certainly if he can do that, he's going to have a kind of (UNINTELLIGIBLE) plan to give more jobs to the people and have a bridge, he can implement new policies.
However, the question is, will he have the support of the world bank, of the IMF, of the IDB, of the treasury of the United States and the G7? That's the key question. Do -- I mean, will these institutions and countries help Argentina to turn around or not?
MANN: With that question, we're going to end this and wait to see the answer. Dario Epstein, former Argentinean securities commission, thank you so much for talking with us.
EPSTEIN: Thank you -- Jonathan.
MANN: That's INSIGHT. I'm Jonathann Mann. The news continues.
END
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