Divided Peronism helps Macri's reform efforts in Argentina

By Nicolás Misculin

BUENOS AIRES (Reuters) - Divisions inside Argentina's dominant political movement, Peronism, have weakened its clout in Congress and are helping center-right President Mauricio Macri push through pro-market reforms aimed at restoring economic growth.

Publicly, leaders of the ideologically diverse Peronist factions say they are optimistic about rebuilding alliances but in private they say divisions are likely to remain in place at least through next year's congressional elections.

Followers of former leftist President Cristina Fernandez, allies of moderate leader Sergio Massa, and other senior members of the movement inspired by populist General Juan Peron in the 1940s are fighting for control of the Peronist agenda.

"A united front will be hard next year," said a high-level source from the Peronist Justicialist Party, some of whose members have abandoned Fernandez's Front for Victory faction.

Fernandez's followers, who supported Justicialist Party candidate Daniel Scioli for president last year, will pursue their own agenda, said the source, requesting anonymity to speak freely.

Supporters of Massa, who personally clashes with Fernandez and defected from the Justicialist Party in 2013 to form a new dissident Peronist party, Renewal Front, do not have plans to align with other movements within the opposition either.

"Renewal Front will maintain its identity... those who want to join are welcome," a party source said.

The split helped Macri win the presidency, and continues to benefit him as his center-right PRO party is well short of a majority in Congress and needs some Peronists to vote with him on key reforms.

Since taking over in December, Macri has been able to win Congress’s approval for an agreement to pay hold-out creditors of defaulted Argentina debt, ending a decade of messy litigation. He also passed a key tax amnesty plan the government is counting on to bring in up to $80 billion in revenue.

Macri will need moderate Peronists over the next year to help him approve budget cuts to lower the deficit and end gas and electricity subsidies, a tough sell after 12 years of free-spending populism under Fernandez and her late husband and former President Nestor Kirchner.

Dissatisfaction with Fernandez, who offered generous subsidies but fell out of favor with many Argentines because of her confrontational style and meddling in the economy, helped generate splits in the Peronist bloc.

Fernandez is a divisive figure with high rejection rates, and allegations of corruption in her government and her allies' frequent public appearances have helped split the Peronist movement.

"With fragmented Peronism, governability is not a problem in Argentina," said Pablo Knopoff, director of the Isonomía political consultancy. "That could change if the Justicialist Party achieved some unity."

DIVIDE AND RULE

The government's leader in the Senate, Federico Pinedo, said Macri allies are not worried about Peronism's strategies and instead focus only on the final number of votes received.

The Justicialist Party source, however, said Macri supporters are keenly aware of the divisions and try to exploit them.

"The government applies the golden law of 'divide and you will rule,' the source said.

The economic outlook in Argentina is still tough - the government expects the economy to contract 1 percent this year before growing 3.5 percent in 2017. Inflation soared when Macri undid Fernandez's currency controls, though it is expected to fall to around 17 percent next year.

If Macri, whose approval rating is below 50 percent, loses more support, a united Peronism could deal a harsh blow to his PRO party in congressional elections, weakening its chances of staying in power in 2019. It is not clear if Macri will seek re-election.

According to a poll by local consultancy Ricardo Rouvier y Asociados, 52.8 percent of Argentines view Massa favorably, more than the 47 percent that view Macri that way and 43.1 percent who approve of Fernandez.

The Justicialist Party source said alliances were more important, and probable, at the national level three years from now when Peronists will seek to challenge Macri for the presidency.

In some places, they are in the works already.

Oscar Parrilli, one of Fernandez's closest advisors, said traditional Justicialist Party members and Fernandez loyalists could run together in mid-term elections in the province of Buenos Aires, which circles the capital.

He also said the party has not ruled out backing Fernandez to run again in 2019.

(Reorting by Nicolas Misculin; Writing by Caroline Stauffer; Editing by Kieran Murray)

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