Argentina’s president elect Alberto Fernandez and vice-president Cristina Fernandez wave at supporters at the headquarters of the party in Buenos Aires on October 27, 2019.
ALEJANDRO PAGNI | AFP | Getty Images
Argentina’s Alberto Fernandez and Cristina Fernandez de Kirchner secured a comfortable victory in Sunday’s presidential election, prompting fresh concern about another bout of economic turmoil.
With almost all of Sunday’s votes counted, Fernandez secured roughly 48% of the vote, while the center-right incumbent Mauricio Macri received around 40%.
It marks a return of the left to power in South America’s second-largest country, with many international investors worried about the prospect of a new era of government intervention.
Argentine law states that to win outright in the first round, a candidate needs to secure at least 45% of the vote, or 40% with a 10-point lead over their nearest rival.
In an emotional address to supporters, Macri conceded defeat on Sunday evening. He also congratulated his political rival and invited him to the Casa Rosada presidential palace on Monday to discuss an orderly transition.
Fernandez and his running-mate, former populist leader Cristina Fernandez de Kirchner, will be sworn in on December 10.
“We believe that the new president will seek to implement populist policies, due to his Peronist credentials and closeness to the Kirchners, so markets should brace for more volatility,” Andres Abadia, senior international economist at Pantheon Macroeconomics, said in a research note published Monday.
Financial market risk
Fernandez had been widely expected to win the presidential election on Sunday, following his landslide victory in primaries in early August. Financial markets had been rattled by the August 11 result, with many investors fearful about a populist political shift.
In response to Sunday’s result, Argentina’s central bank said it would sharply reduce the amount of dollars individuals could purchase, amid concerns over outflows of foreign exchange reserves.
The bank said it would limit dollar purchases to $200 a month via bank account and $100 each month in cash until December. It marks a dramatic adjustment from the $10,000 restriction the bank imposed at the beginning of September — when it moved to impose capital controls to prevent a slide in the country’s super-sensitive peso.
President of Argentina and candidate for reelection Mauricio Macri (L) greets supporters of Juntos Por El Cambio after conceding the election against Alberto Fernandez of Frente de Todos in the presidential elections for the period 2019-2023 on October 27, 2019 in Buenos Aires, Argentina.
Marcos Brindicci | Getty Images News | Getty Images
Argentina’s dollar bonds fell on Monday morning, with the benchmark international 2028 dollar bond slipping by as much as 1.3 cents to 39.33 cents to the dollar, Reuters reported, citing Refinitiv data.
The results “confirm that Mr. Macri is not politically finished so he will hand over the government smoothly and will likely seek a comeback in 2023. This suggests that Mr. Macri will try to keep the (peso) under control until December 10,” Pantheon Macroeconomics’ Abadia said.
“Looking ahead, uncertainty and high economic and financial market risk will be the name of the game.”
Macri came to power four years ago promising that his pro-market reforms and business-friendly leadership style would finally rid the country of endless economic turmoil.
But, the outgoing president is now poised to leave office with the economy in a worse state than it was when he inherited it.
To be sure, inflation is running at an annual rate of above 50%, the peso has plummeted, billions of dollars of foreign reserves have fled the country, the economy has been in a deep recession and the country has also had to delay payments on around $100 billion of local and foreign debt.
Fernandez has previously said he wants to renegotiate the terms of Argentina’s historic $57 billion standby agreement with the IMF, aggravating worries of a debt restructuring.
Nicholas Watson, Latin America managing director at the consultancy Teneo, said Monday that international investors were likely to eagerly await “a more detailed plan for how Fernandez intends to deal with the intertwined economic challenges he inherits.”
“The most significant issue is how the president-elect intends to pursue debt re-profiling — and how market-friendly this is likely to be,” Watson said in a research note, before adding who will lead Fernandez’s economic team is the other “big question.”