Peronists Return to Power
Photograph of Argentine President Mauracio Macri. Photo courtesy of the European Pressphoto Agency.
On 27 Oct., Argentina held a Presidential election in which the incumbent President, Mauricio Macri, lost to his Peronist rivals, Alberto Fernández and Cristina Fernández de Kirchner (no relation).
The poll came amid an economic crisis in Argentina, and considerable opposition to both austerity measures and an International Monetary Fund (IMF) loan, negotiated by the Macri administration.
Ms de Kirchner served as President from 2007 to 2015, and it was her policies that most economists blame for the economic woes that Mr Macri faced. Although she ran as the Vice-Presidential candidate and Mr Fernández was the face of the campaign, Ms de Kirchner was, reportedly, the political power behind the ticket.
Mr Fernández and Ms de Kirchner, of the Peronist (a Argentinian brand of Populist-Socialism) 'Everyone's Front' coalition, won with over 48 per cent of the popular vote, beating out Mr Macri's 'Together for Change' coalition who garnered a bit over 40 per cent of the vote, according to the British Broadcasting Corporation.
In August, Argentina held Primary elections (which is generally a good indicator of the result of the general election, as most parties have sorted out their candidate by that time). The Peronist pair swept the primaries, a result that led to the Argentine Peso to plunge against the American dollar, and for Argentine markets to significantly contract, amidst fears of Ms de Kirchner returning to office, according to Bloomberg.
Mr Macri had hoped to confound expectations by launching an aggressive campaign and speak to economic policies. While, on the other hand, Mr Fernández launched a lower scale campaign. Mr Fernández wished to hold onto his lead and allow for Mr Macri to burn out.
Although Ms de Kirchner is the more experienced figure on the ticket, and she likely wields more influence in the Peronist coalition than her counterpart, the Fernández campaign mostly kept her out of the spotlight, due to her association with the economic woes of the administration.
Although Mr Fernández stated to the press that he and his running mate were 'inseperable', a member of the President-elect's inner circle started to The Economist, "He knows he has to cut the cord if he is to stabilise this economy and win time for recovery from this economic mess."
Mr Fernández must now strike a balance between retaining goodwill within his party and taking steps to stabilise the economy.
In July, Mr Macri negotiated a $57 billion loan from the IMF to Argentina, the biggest that the organisation had ever given. However, the move led to incredible political opposition on Mr Macri, as many Argentinians harshly dislike the IMF. This dislike stems from the reforms that the fund pressured the Argentine government to make, which exacerbated the currency and financial crisis in the early 2000s.
However, now that the Peronists have returned to power, the IMF is considering holding back the next tranche of funds and waiting to observe Mr Fernández's willingness to make reforms. While Mr Fernández is more of a centrist figure than his Vice-President-elect, he still must contend with the IMF's mistrust of Ms de Kirchner, as reported by Forbes.
American Secretary of the Treasury Steven Mnuchin stated that the United States (who holds considerable influence within the IMF) expects for the new Argentine government to abide by the IMF deal. The defeat of the pro-business Mr Macri has thrown the future of the IMF bailout into considerable peril, according to Reuters.
Mr Macri and Mr Fernández have formed a transition team in order to keep the economy stable until Mr Fernández can take office in December. Mr Macri and Mr Fernández have agreed on tighter currency controls, limiting dollar purchases to just $200 a month, to prevent a possible run on the peso, according to The Economist.
Despite the Peronist victory in the Presidential election and their control over the Senate, he failed to take control of the Chamber of Deputies, the lower house of the legislature. This result has led for many to question whether Mr Fernández may want to form a coalition or power-sharing agreement with Mr Macri.
This move may not only give him broad support in the legislature, but it may help in stabilising the economy.
Another choice that Mr Fernández will have to make is his choice for a Treasury Minister, a move that will surely define his early economic policy.
The top two candidates for the job are Matías Kulfas and Guillermo Nielsen. While both are prominent members fo the de Kirchner administration, they have very different reputations. Mr Kulfas is a traditional Peronist, and favourite for the position, and is more hostile towards economic institutions than Mr Nielsen. Mr Nielsen has encouraged working with the IMF and operating within financial institutions, his appointment would be more likely to calm investors.
Mr Fernández must now choose his path. He can either go down the route his Vice-President-elect took during her Presidency, or forge his own. The fate of Argentina and developing markets lie in the balance.
Sources:
"Argentina election: Centre-left Alberto Fernández wins presidency." BBC, British Broadcasting Corporation, 28 Oct. 2019,
https://www.bbc.com/news/world-latin-america-50203727
Olivera Doll, Ignacio. "Argentina’s Banks Cut Trading Desk Jobs After Market Plunge." Bloomberg News, Bloomberg L.P., 04 Nov. 2019,
"Argentina gives the Peronists another chance." The Economist, The Economist Group, 31 Oct. 2019,
https://www.economist.com/the-americas/2019/10/31/argentina-gives-the-peronists-another-chance
Fontevecchia, Agustino. "Back In Black: The Return Of Argentina’s Black Market Exchange Rate As Capital Flight Accelerates." Forbes, Forbes Media, LLC, 08 Oct 2019,
Lawder, David. "U.S. expects Argentina to uphold commitment to IMF: Mnuchin." Reuters, Thomas Reuters Corporation, 30 Oct. 2019,