Bloomberg News

Loyal Argentine VP Is Key to Stability as Boss Fights Cancer

January 03, 2012

(Updates with markets in 14th paragraph.)

Dec. 29 (Bloomberg) -- Argentine Vice President Amado Boudou, who for years antagonized investors in South America’s second-biggest economy, may now become their guarantor of political and economic stability in a nation reeling from its leader’s surprise diagnosis with cancer.

President Cristina Fernandez de Kirchner will take a 20-day medical leave after she undergoes surgery Jan. 4 for thyroid cancer, leaving her former economy minister as caretaker. While investors derided Boudou’s 2008 seizure of $24 billion in pension funds, they prefer him to a power vacuum or constitutional crisis that could have arisen if someone less loyal to Fernandez were standing in, said Mark Jones, a political science professor at Rice University.

“With Boudou there, Fernandez can rest comfortably and focus 100 percent on getting better,” Jones, who has taught at universities in Argentina, said in a telephone interview from Houston. “People are now looking back very favorably on their decision to go with a loyal vice president.”

Fernandez, 58, chose Boudou to join her successful re- election bid this year after feuding with her previous Vice President, Julio Cobos, during her first, four-year term. In 2008, Cobos cast the deciding vote in the Senate that defeated a government plan to raise taxes on agricultural exports and was an outspoken critic of the government’s alleged manipulation of inflation data.

No ‘High Jinks’

A trained economist and bureaucrat, the 49-year-old Boudou also lacks the same weight inside the ruling Peronist Party as another vice president, Daniel Scioli, who served under Fernandez’s husband and predecessor Nestor Kirchner and now is governor of Buenos Aires province. Kirchner died last year of a heart attack.

“Were Cobos still vice president, there would be much more consternation,” said Jones. “Even with someone like Scioli there would be greater concern about maneuvering or high jinks.”

The long-haired, motorcycling Boudou never held elected office before. He energized Fernandez’s campaign this year by playing rock guitar to supporters during rallies. Like his boss, he’s also known to lash out at government critics, including the media. In 2010 he compared journalists from Buenos Aires’ two biggest newspapers, Clarin and La Nacion, to Nazis “who clean up the gas chambers.”

Fernandez, looking in good spirits, praised Boudou while talking about her illness yesterday. During a public appearance at the presidential palace she jokingly warned him “to watch your step” during her convalescence.

Pension Grab

Boudou impressed Fernandez when as chief social security regulator in 2008 he pushed through Congress a plan to nationalize the pension industry to fund public spending during the global financial crisis. The law gave the government control of about a quarter of shares available for public trading and seats on the boards of companies including steelmaker Siderar SAIC and real-estate developer Consultatio SA.

“He was rewarded for that,” Orlando Ferreres, who was deputy economy minister in 1989, said in a telephone interview from Buenos Aires. “He has never thought of doing anything different from what Cristina does.”

Promoted to economy minister in 2009, he was in charge of last year’s restructuring of $12.9 billion in debt left unsettled following the country’s 2001 default on $95 billion in bonds. He also led a failed effort to restructure more than $8 billion in defaulted debt with the Paris Club group of creditor nations, which includes Germany and Japan.

In an April 2010 interview Boudou blamed criticisms of the government’s price monitoring on holders of inflation-linked debt who wanted better returns and said price increases were low for the poorest sector of the population. “It’s understandable that other sectors of the population, especially the middle and upper class, have a perception that prices” are high, he said.

Boudou’s spokesman didn’t return phone calls seeking comment.

Markets Calm

Investors have taken Fernandez’s health problems in their stride. The yield on government dollar bonds due 2017 was little changed today at 10.31 percent as of 10:08 a.m. New York time. Since her landslide re-election Oct. 23, yields are down 68 basis points while the peso has slid 1.6 percent against the U.S. dollar, a smaller decline than every major Latin American currency except Peru’s sol.

One reason for the calm is because Fernandez’s prognosis looks good. Tests show the tumor, which was caught in a regular checkup, is contained and has shown no signs of spreading, government spokesman Alfredo Scoccimarro told reporters Dec. 27. Thyroid cancer is highly survivable, with more than 95 percent of patients living at least 10 years after detection, according to the U.S. National Institutes of Health.

Resilient Economy

Similarly, Argentina’s economy is weathering the global economic slump. While sudden policy shifts and inflation that economists estimate at 25 percent have led foreign investors to shun Argentina in recent years, a strong trade surplus and consumer spending boom fueled 8.3 percent economic growth this year, according to a Bloomberg survey of economists. Growth next year is expected to slow to 2.8 percent.

Still, concern about Argentina’s stability may increase if the president’s condition grows worse or if she is sidelined longer than expected, Daniel Kerner, a Buenos Aires-based analyst at the Eurasia Group, wrote in a research note.

Fernandez’s health came into question this year after she canceled trips abroad and activities three times following bouts of low blood pressure. A prolonged absence may kick off an early succession struggle within the Peronist party, though Boudou wouldn’t be the strongest aspirant, said Kerner. Fernandez is banned by the constitution from seeking a third term.

“There is speculation over whether she will seek to reform the constitution, or push for a yet unknown successor,” Kerner wrote. “At this point we think she will try to push a successor, but this is an evolving story.”

--With assistance from Camila Russo in Buenos Aires and James Attwood in Santiago. Editors: Joshua Goodman, Richard Jarvie

To contact the reporter on this story: Randall Woods in Santiago at rwoods13@bloomberg.net; Eliana Raszewski in Buenos Aires at eraszewski@bloomberg.net;

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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