By Rosalba O'Brien and Magdalena Morales
BUENOS AIRES (Reuters) - Cristina Fernandez began a second term as Argentine president on Saturday, vowing to make the economy more competitive by fine-tuning the offbeat, high-growth policies that please voters but spook investors.
The center-left leader won a landslide re-election in October to four more years in office on the back of sizzling economic growth and a wave of sympathy following the death last year of her husband and predecessor as president, Nestor Kirchner.
Still dressed in mourning black, an emotional Fernandez received the presidential sash from her daughter as cheering supporters threw ticker tape inside Congress, where she defended Argentina's model versus that of developed countries.
"They govern with growth targets for the financial sector and ... we govern with growth targets for work and employment. These are at the center of our government and this will continue," Fernandez, 58, said in her speech.
"Our national project will continue until not one poor person remains."
High inflation, capital flight and tight finances are raising concerns about the sustainability of Fernandez's big-spending policies as a worsening global outlook weighs on grain prices and reduces demand from neighboring Brazil.
Fernandez acknowledged Argentina would need to improve its competitiveness and announced she would create a government office to do so, but she appeared to rule out a sharp devaluation of the peso.
Investors big and small have been betting on a faster rate of currency depreciation to make local industry more competitive since inflation of roughly 25 percent has raised costs and made producing in Argentina less viable.
"Competitiveness is the great challenge we will face in the period ahead. Improving competitiveness will not happen by joining those who devalue or by joining those who increase the debt load but rather by adding value, innovation, science and technology," she said.
Fernandez has shunned credit markets and reduced the country's debt burden, although many analysts think she may have to tap markets next year as the trade surplus narrows and foreign reserves available for paying debt dry up.
PRIORITIES
In her inaugural speech, Fernandez urged Congress to pass laws to limit foreign land ownership and crack down on tax cheats. She will also be eager to usher the 2012 budget through before the end of the year. With a majority in Congress again after a two-year lapse, that should not be a problem.
She has already made several policy adjustments. Days after she was re-elected with 54 percent of the vote, Fernandez took measures to boost dollar supplies on the local market and imposed currency controls to cool demand.
Those measures were designed to counter surging capital flight and bolster the central bank's reserves.
She also has started dismantling multibillion-dollar state subsidies on water, natural gas and utility bills.
Deeper public spending cuts or caps on wage demands likely will lead to struggles with the powerful trade unions that provide key support for Peronist politicians like Fernandez.
Fernandez indicated in her speech she may take a harder line with the unions. She said recent strikes in Santa Cruz province cost the country $820 million.
"With us there is the right to strike, but not blackmail or extort," Fernandez said, urging union and business leaders to act responsibly in the run-up to annual wage talks.
"We need you to make an effort in a complicated world," she said.
A more market-friendly approach was evident in her choice of former Finance Secretary Hernan Lorenzino as economy minister, which analysts said could signal a drive to return to global markets by addressing lingering fallout from the 2002 debt default.
Amado Boudou, the former economy minister, took office as Fernandez's vice president.
"What's happened so far has been reassuring for those who thought something scary would happen in the second term," said political analyst Federico Thomsen.
ARM-TWISTING
Thousands of supporters, many of them young people, gathered outside the pink presidential palace where rock and folk musicians led the inaugural festivities as the president presided over a jubilant swearing-in ceremony of her ministers.
Regional leaders such as Brazilian President Dilma Rousseff attended Saturday's inauguration. Venezuelan President Hugo Chavez, who had been due to make his first official trip abroad since cancer treatment, canceled at the last minute.
Also present was controversial price watchdog Guillermo Moreno, known for arm-twisting company executives into lowering prices and increasing exports. He was sworn in again as commerce secretary and is seen having greater influence over trade flows in Fernandez's new administration.
During her stormy first term, Fernandez nationalized private pensions, fought with farmers over export taxes and ignored international arbitration awards to private firms hurt during the 2001/02 economic crisis.
Opposition lawmaker Juan Pedro Tunessi said Fernandez's inaugural speech included a "capricious interpretation of reality, which denies inflation and wants to make us believe the world is falling apart and Argentina is the only place where things are going well."
(Additional reporting by Hilary Burke and Luis Andres Henao; Editing by Peter Cooney)
