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Voter opinion polls clearly favour the
Peronist Party, despite the current disenchantment of Argentines with
the traditional political parties. Surprisingly, former president Carlos
Menem, currently under investigation for corruption, is moving up in
voter preferences and is now in number two position. Meanwhile, the
currency has recovered moderately and economic activity is showing small
signs of improvement. |
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Opinion polls favour Peronists
With presidential elections scheduled to be held in March 2003, a new
government will be inaugurated on 25 May 2003. The electoral outlook
remains very uncertain due to the crisis of legitimacy and discredit
that the mainstream political parties are currently experiencing with
voters. Current candidates represent not only the traditional parties
but also a range of new political movements. Opinion polls indicate a
highly disjointed range of voting intentions, with the front-running
candidate currently commanding less than 20% of the vote and the pack of
pursuing candidates close behind. Voter opinion polls in October show
former president, ex-governor of the province of San Luis and member of
the Peronist Party (PJ, Partido Justicialista) Adolfo Rodríguez Saá with
17.0% of the vote. Saá is followed by Carlos Menem, two-time president
and member of the PJ, who moved into second place from the number three
spot in September at 13.0%. Elisa ‘Lilita’ Carrió, the former Radical
Party (UCR, Union Civica Radical) deputy for the Chaco province and now
head of the left-wing Argentines for a Republic of Equals (ARI,
Argentinos por una República de Iguales), dropped to third place with
12.1%. Nestór Kirchner, member of the Peronist Party and the current
governor of Santa Cruz province virtually doubled his share of the vote
and with 11.6% is only slightly behind Carrió. Former Economy Minister,
Ricardo López Murphy, who is running under the independent banner of the
political movement, Recreate Argentina (RA, Recrear Argentina) has
gained some ground but remains well behind the leading candidates with
6.6% of the vote.
If current popularity trends persist, the presidential poll is likely to
be decided in a second round and a future president will only be able to
govern on the ground of carefully crafted coalitions. This will render
the implementation of long-term economic reforms and a strengthening of
weakened political institutions - both key ingredients to a sustainable
economic recovery in 2003 - extremely difficult.
Currency strengthens amid easing of Brazil
contagion and Central Bank intervention
The Central Bank has managed to maintain the peso relatively stable
since June by intervening in the market. Following appreciations of 1.9%
and 2.9% respectively in July and August, the currency depreciated 2.9%
in September amid Brazil election jitters. In October, the peso
experienced its highest monthly appreciation this year, strengthening
6.0% to the US$ in nominal terms. In the first week of November, the
currency depreciated moderately by 0.4% to close at 3.54 pesos to the
US$. Despite the recent rebound, participants believe that the currency
will lose further ground this year, depreciating 14.8% from its current
level. The annual depreciation rate is expected to moderate notably next
year from this year’s.
Controlled public services prices continue to
contain inflationary surge
Consumer prices increased 0.2% in October, a significant slowdown when
compared to the 1.3% rise in September. As a result, the annual
inflation rate reached 39.4%, up from 38.5% in September. The moderate
increase in consumer prices is due to contained service prices, which
profit from a politically motivated reluctance to adjust public service
tariffs to the new realities. The accumulated variation in service
prices since December reached 10.4% versus 67.4% for goods prices.
Nevertheless, the combination of a stabilized currency and suppressed
domestic demand are also containing a more pronounced pressure on
prices, which have shown a steady downward trend in monthly increases
since April of this year. In addition to consumer prices, wholesale
price increases also have moderated. In October, wholesale prices
increased just 0.9% over September, which was down from a monthly rate
of 2.9% in September. As a result, the annual variation in wholesale
prices rose to 120.0%. With only two months to go, participants have
again revised their forecasts for annual inflation this year downward –
by 13 percentage points – from last month. Inflation is likely to
moderate further next year.
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