Strong economy at issue in Argentina

Marketplace Staff Oct 26, 2007


Doug Krizner: This Sunday, Argentines go to the polls for nationwide elections. The current president, Nestor Kirchner, is stepping aside.
His hand-picked successor is his wife, Cristina. The biggest challenge facing her is not coming from a political opponent. As Rachel Hopkin reports, it’s coming from the by-product of Argentina’s strong economic growth.

Rachel Hopkin: Inflation is a key issue. The official rate is 8 percent, but most people believe it’s twice that. A showdown could come early next year, when union wages are set.

Economist Martin Krause thinks the government will peg increases to that official rate:

Martin Krause: The unions are going to be asking for the real inflation rate. So what is going to come out of that will have an impact for the economy in the future.

So will energy. Years of under-investment have led to shortages and power cuts. Argentina has also had trouble attracting foreign investment.

Martin Krause:

Krause: Foreign investors who look to come in for the first time kind of get scared.

Tackling its debts would help. Mrs. Kirchner may be willing to do that. In 2001, Argentina had the largest debt default in history. Attracting foreign funds has been a problem ever since.

In Argentina, I’m Rachel Hopkin for Marketplace.

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