In Argentina's icy south, a political dynasty fades and a new power rises

RIO GALLEGOS, Argentina, Oct 21 (Reuters) - Alicia Kirchner, an elder of Argentina's most powerful political dynasty, recalls with fondness helping build homes, schools and the first hospital in Rio Gallegos, a small city in the country's windswept Patagonian south.

The Kirchner family, which includes two of the last four presidents in Argentina, have ruled with dominance for decades here in the icy southern province of Santa Cruz, a region they call home, where they own land, investments and hotels.

That dynasty - the leftist core of the powerful Peronist movement - is now waning, a tectonic shift in the country's political power dynamics, with a new force that has burst onto the scene in the form of far-right outsider Javier Milei.

Milei, who wants to "chainsaw" the political status quo, is the favorite to win a first-round general election on Sunday after he scored a shock victory in an open primary vote in August, including taking the biggest vote share in Santa Cruz.

The libertarian economist has ridden a wave of voter anger at inflation set to hit 200% this year and the worst economic crisis in two decades that has left two-fifths of the population in poverty. Many blame the country's recent rulers.

"Milei is a product of discontent," Kirchner, 77, the outgoing governor of Santa Cruz, told Reuters at her official residence, not far from the mausoleum of her late brother and former president Nestor Kirchner (2003-2007).

"What worries me most is people have no hope," she said.

Her sister-in-law Cristina Fernandez de Kirchner, president from 2007 to 2015, was - until recently - the undisputed star of Argentine politics. Fernandez de Kirchner handpicked the current President Alberto Fernandez in 2019 and remains his VP.

But political winds are changing. Fernandez de Kirchner, 70, a divisive figure who has clashed with investors but is an icon of the Latin American left, is stepping out of the limelight and not running for office for the first time in decades.

In Santa Cruz, Milei won 29% of the vote in the primary, well ahead of the ruling Peronist coalition and conservative candidate Patricia Bullrich. The Peronists themselves have seen an internal powerful shift away from the Kirchners, with the ruling party now backing centrist Economy Minister Sergio Massa.

Santa Cruz is a microcosm of the massive political upheaval underway in the country, that threatens to roil markets, impact Argentina's ties with trade partners like China and Brazil, and undo progressive shifts on women's rights and abortion.

Argentina is one of the world's top soy and corn exporters, the biggest debtor to the International Monetary Fund (IMF) with a $44 billion program, and has been luring investment to its huge resources of shale gas and battery metal lithium.

But years of economic malaise, debt and currency crises have hurt local economies like that of Santa Cruz, where poverty has more than doubled since 2018 to some 40%, the state employs over half the workforce, but salaries fall well behind inflation.

"We're all poor here," said 23-year-old Brian Franco, a part-time chauffeur in tourist town El Calafate, who works shuttling visitors to the famous Perito Moreno glacier when he is not repairing washing machines to make ends meet.

This remote town is also where an alleged graft and money-laundering scheme related to the El Calafate hotels owned by the Kirchner family took place. In a separate corruption case last year Fernandez de Kirchner was sentenced to six years in jail, which barred her from holding future office, though this faces a lengthy appeals process.

In the shadow of the Andes, signs of the Kirchner family can be seen around the resort, their name honored in street signs and the orange color adopted by the campaign of their chosen mayor, who has governed uninterrupted since 2007.

But now purple balloons and yellow flags, the colors of Milei's campaign, adorn some houses in the remote enclave.

"Half of those I know vote Milei," Franco said, amid a group of youngsters gathered outside a barbershop. Some had walked four or five kilometers (two or three miles) for a weekend trim, and said local public transport was largely non-existent.

Locals and officials said people's purchasing power has collapsed. Meanwhile, prices of materials for building have soared, slowing local construction.

"There's no money circulating in the streets," said outgoing leftist regional vice governor Eugenio Quiroga, because "people's wages only cover the basics, which is hurting local businesses," - and ultimately public support for the government.

In El Calafate, architect Walter Pieroni said some properties on the edge of the main commercial center could go days without water because of poor planning. Houses stood unfinished too, with owners unable to afford the materials to build on land once handed to them by the state.

"Since August my take home pay has halved. Weeks go by without construction materials arriving. Suppliers won't sell to me because they don't know what price to charge," Pieroni said. "Everyone is tired and that's why Milei is accepted, even if he's extreme."

Around dawn one October morning, Guillermo Carnevale, 58, hunched up against the Patagonian wind and morning chill as he opened his small hardware store.

Carnevale, who lost his job running a local filling station during a long COVID-19 lockdown, set up the shop selling nails, screws and tools that has become a lifeline for his family. He still faces challenges given rising input prices and interest rates at 133%, which block access to credit.

Four years ago he backed Peronist Fernandez in the election, and in 2015 mainstream conservative Mauricio Macri. But now he is a convert to Milei, even running on Sunday as a libertarian mayoral candidate in Rio Gallegos.

"There was hardly any work ... so people started speaking out against the disastrous economic situation, and that formed the base of our libertarian party," he said.

Beyond the tough economic impact, the real tipping point came when his son told him he wanted to move to Spain or Germany for a better life.

"So I told him we'd fix the country."

In Santa Cruz, a province of some 333,000 people, fixing things was once the role of the Kirchners.

Under the Kirchners, an airport was built in El Calafate, roads were paved to the glaciers, and plots of land were distributed to locals. In less than 30 years the population swelled from under 7,000 to 30,000 recorded this year.

The development driven by Kirchnerism was vital for Ana Guerrero's family chocolate business, which opened in the 1960s. "An airport brought visitors, investment, big hotels and with that, more customers," Guerrero said.

But since the start of this year, a lack of central bank foreign reserves for imports and capitals controls making trading more complex have hit her supply of cocoa. She goes for weeks without the key ingredient.

"My providers in Buenos Aires started to send me messages in January to explain why our products hadn't arrived," Guerrero said at her store, scrolling through her phone. "We've reached the point where I can't make plans."

Local businessman Danny Feldman said Kirchnerism has dominated in the region.

"But they created a model that does not work and now our children have no future in this country," said Feldman, who has lived in El Calafate since 1987. "Now I'm voting for change."