The night before former Argentine President Néstor Kirchner died of a heart attack—12 days ago—he is rumored to have had a heated argument with the leader of this country's largest labor union, known by its Spanish initials CGT. Some say it's what killed the Peronist strongman.
The dispute is instructive because it highlights the power of Big Labor in this country and explains why, despite the passing of this powerful politician who acted like a mob boss, there is still little hope that Argentina's economy will begin to modernize any time soon. It is also a cautionary tale for Americans who have watched President Obama fuel a resurgence of union might in the United States.
Kirchner had accumulated his remarkable political heft since his election in 2003, in part because Argentina's Congress granted him extraordinary powers in the wake of the peso collapse the year before. Over four years, in matters of both the economy and politics, he continually tightened his grip. After his wife, Cristina Kirchner, won election in 2007, he remained the force behind the throne. It was widely expected that he again would be a candidate for the office in the October 2011 elections.
With his death, pundits immediately began debating whether a weakened Cristina might step aside next year. The hopeful posited that a more moderate Peronist might restore some semblance of the rule of law, which has been almost entirely destroyed under kirchnerismo. Markets rallied on the news of Néstor's passing.
Yet this calculation ignores the outsized power of organized labor here, a reality that confronts every Argentine politician as it did the former president in the days before his death.
The CGT, founded in the 1940s under the dictator Juan Perón, has a long track record of paralyzing the economy to enforce its demands and strangling any administration that dares to go against it. Its strong bond with the Peronist Party is the reason many Argentines have become convinced that only Peronists can govern the country.
Néstor understood both the power and the peril implied by the CGT and he rode the tiger ably, first as president and then as the caudillo-in-chief behind his wife. CGT Secretary General Hugo Moyano performed dutifully for the first couple, including sending out union goons to intimidate farmers during their 2008 strike against government tax increases and blocking the distribution of newspapers critical of Mrs. Kirchner's government in 2009. In return, unionists were allowed to sink their teeth ever deeper into the economy.
But in recent weeks Néstor could see that the beast he had under him was restless. His 2011 candidacy was looking weak and there were rumors that Mr. Moyano, inspired by the success of Brazilian laborite Lula, had his eye on the job. The unionist began testing the limits of his office.
Just days before Néstor's death, Mr. Moyano publicly called for official CGT representation in the three powers of government, i.e., reserved seats in the courts, the congress and the cabinet. It is unlikely Kirchner wanted to give up his power to dole out privileges. So when Mr. Moyano called for a meeting of Peronist leaders in Buenos Aires province, Kirchner undermined the meeting by lobbying party loyalists to boycott it. The angry phone call that ensued from a presumably unhappy Mr. Moyano may have been too much for the 60-year-old workaholic with a heart condition.
Néstor has gone to his final judgment, but the question of who holds the reins that might both contain and channel union power lives on. Last week, the president, whose ability to govern without her husband has been the subject of much speculation since Oct. 27, took both carrots and sticks out of her designer handbag. First her chief of staff reached out to Mr. Moyano, calling the CGT the "backbone" of the Peronist Party. Days later the public learned that a federal judge happens to be investigating corruption charges against the union leader. If he goes to prison it would not be surprising to find that his replacement is more pliable.
Markets are likely to help Mrs. Kirchner maintain power in the months ahead. The U.S. Federal Reserve's latest "quantitative easing" announcement has already boosted soybean prices here, generating a sense of economic improvement. The pain of more inflation, added to the current double-digit rate, will come later. For now there is applause.
She also faces risks. Union leaders have demonstrated that they can exercise power from jail cells. And without her husband to protect her, Mrs. Kirchner may find herself surrounded by ambitious competitors within the party who see this as their moment.
Yet this uncertainty must not be confused with a debate about whether Argentina's rule of law might be restored. The only thing up in the air is who can maneuver most effectively within a country ruled by the ideology of 1930s economic nationalism. It's like a battle of mafia dons. The rest of the Argentine nation remains a spectator.