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The Tide of "Socialism" In Latin America Ebbs

Just last year, with the price of petroleum licking the $150 dollar mark, Hugo Chavez and a band of Latin populist leaders with big, U.S. shaped chips on their shoulders were scoring victories across the continent.

From Ecuador, to Nicaragua, Argentina and Bolivia, a new breed of anti-Americanism was becoming the norm.  And so was the implementation of retro-1970's style statism, confiscation of "strategic national assets", high taxes for the wealthy and massive subsides for lower income people. 

In other words, the same policies that had taken Argentina from the 8th largest economy in the world after World War II to penury by the late 1980's were being reintroduced.

Last night, in a stunning reversal, the tide ebbed.  The populist - and highly inept - government of President Cristina Kirchner was dealt a blow in the critical mid-term elections which were framed as a referendum on her rule and the shadowy role her husband, ex-president Nestor Kirchner, plays in her administration. 

The Kirchners' highly personalised brand of leadership was pushed back, losing control of both houses of Congress.

Every since Juan Domingo Peron destroyed the Argentine economy in the 1950's, partially distributing and stealing the gold reserves, nationalizing key industries and appealing to class resentment to create deep cleavages that survive today, Argentina has been in the grip of personalities to the detriment of its institutions.

Cristina Kirchner succeeded her husband, Nestor, as president, in a maneuver meant to prolong the power couple in power.  The international economic crisis -which as in Venezuela- tightened the financial reins on a government committed to buying lower class support through confiscatory policies like the high taxation of agricultural exports, failed to keep the country in economic balance, thereby exposing  the fundamental weakness of this "model". 

A tragic blunder - the confiscation of the country's private retirement funds - completely undermined Kirchner in the eyes of the critical middle class and the international investors needed to fund a developing economy.

In the end, the Kirchner policies, like Peron's 60 years ago, made the country poorer, more divided and weaker in the face of international crisis.

While Argentine politics are often played with operatic flair, the next act of the Kirchners is far from certain. 

Will the president be so weakened that she will have to step down early?  Will the new center right party Union-PRO overplay its hand in the next Congress and spark a Peronist back lash?  Will Argentina fall into a deep recession like the one in 2000 that shook the foundations of society itself? All that remains to be seen.

But what seems clear this morning - there is now enough political space in Argentina for a more normal, less personal and perhaps even competent government to rise out of the ashes of this latest Peronist debacle. 

Perhaps a new model to restore Argentine prosperity will emerge.  A model that could inspire some reflection in the other countries that have emulated Chavez and his "socialism".

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