Argentina's Fernandez to take helm, faces inflation

BUENOS AIRES Dec 6 (Reuters) - Cristina Fernandez de Kirchner takes over from her husband as Argentina's president next week, facing stiff challenges in managing an impressive economic boom that he helped stoke.

Fernandez will become Argentina's first elected female leader when she succeeds President Nestor Kirchner on Monday in an unusual husband-to-wife power handover.

A popular first lady and leftist senator, Fernandez swept to victory in an Oct. 28 election by promising to continue the successful economic policies of her husband, who has overseen more than four years of vigorous growth topping 8 percent a year.

But she also inherits high inflation and acute energy shortages that threaten to hit investment and cool Argentina's biggest economic expansion in 100 years.

"If those two are not addressed, there is a risk that Argentina would experience a significant slowdown and that would completely change the political dynamics in the country," said Daniel Kerner, an analyst at Eurasia Group in New York.

The Kirchners' political success is deeply intertwined with Argentina's dramatic recovery from a 2001-02 economic crisis. Unemployment has dropped to a 15-year low, from more than 20 percent to 8.1 percent, and rapid growth had been fueled by a boom in consumer spending and agricultural exports.

Fernandez, who has drawn comparisons to U.S. presidential candidate Hillary Clinton, is expected to stick to her husband's main policies, emphasizing budget and trade surpluses, a weak currency to stimulate exports and increased state intervention in the economy.

INFLATION THREAT

The roaring economy has, however, sent consumer prices spiraling in a country still haunted by bouts of hyperinflation two decades ago.

The government says inflation this year will clock nearly 10 percent but independent economists and opposition leaders say the data has been manipulated for political purposes and that consumer prices will rise twice that much.

Fernandez defends the government's data and backs the price controls that Kirchner has pressured businessmen to accept in an attempt to tame inflation.

"This policy has been criticized with sarcasm and irony," she said recently, but insisted it was good for the country and said she would broker a "social pact" with business and labor leaders to control prices.

In October, some consumer groups and shopkeepers launched a boycott after tomato prices soared. Kirchner blamed some food price increases on speculation by producers, and urged Argentines to boycott any other products whose prices jump.

Fernandez has suggested she will also rein in government spending and increase the budget surplus to help in the fight against inflation.

Kirchner recently laid the groundwork for her by raising export taxes on petroleum and agricultural exports and tariffs on public transportation to reduce government subsidies.

Fernandez will also confront an energy crunch as surging demand brought on by the economy's red-hot growth has strained supplies.

During an unusually cold southern hemisphere winter, Argentina's government rationed natural gas and power supplies to industry to make sure homes could stay heated. Some analysts expect new shortages as summer temperatures increase demand.

Riordan Roett, director of Latin American studies at Johns Hopkins University in Washington, said other threats to the economy include a possible recession in the United States and any continued global market turbulence.

The economy is "poised on an edge that could tilt either way," he said. (Editing by Kieran Murray)