Tue, Oct 29, 2019 - Page 1 News List

Fernandez wins as Argentine voters reject austerity

Bloomberg

Argentine president-elect Alberto Fernandez was to discuss the transition of power with defeated incumbent, Mauricio Macri, after an election in which voters opted for left-wing populism over pro-market policies to combat the country’s economic crisis.

Fernandez, a political insider who has never held national office, was due to meet with Macri first thing yesterday morning after sweeping to power in Sunday’s presidential election with 48 percent of the vote to Macri’s 40 percent, enough to avoid a runoff.

The fragility of the economic situation Fernandez would inherit was reinforced overnight as the central bank announced tighter currency controls and Argentine bonds dropped in early European trading.

Fernandez, who takes office on Dec. 10, addressed jubilant supporters on Sunday alongside his deputy, former Argentine president Cristina Fernandez, shortly after Macri offered his congratulations.

“Hopefully those who were our opponents during these four years are conscious of what they’re leaving behind and help us rebuild the country from the ashes,” Alberto Fernandez said.

The opposition win signals the return to national power of Peronism — an anti-elite political movement that traditionally favors workers over business owners.

However, while voters rejected the austerity of Macri’s government, the outcome was also tighter than expected, reflecting wariness about Alberto Fernandez’s ability to steer the economy through tricky waters.

After a frenzied final few weeks of campaigning, Macri narrowed the vote gap from a deficit of 16 percentage points in a primary in August — an outcome that spooked markets at the time, sending the peso tumbling and forcing Macri to enact capital controls.

His party also fared better than forecast on Sunday in several districts.

“While still a loss, it creates a more balanced Congress and political landscape going forward,” said Jimena Blanco, political research director at consulting firm Verisk Maplecroft in Buenos Aires.

Alberto Fernandez’s broad promises to improve things would run into immediate difficulty when he is sworn in, given a lack of funds to play with: The economy is contracting, inflation is above 50 percent, unemployment is more than 10 percent and a third of the population lives below the poverty line.

Investors also expect the government to default at some point.

Alberto Fernandez, 60, must satisfy the competing demands of far-left factions in his broad coalition that want more social spending, and the IMF, which agreed to a record US$56 billion bailout last year.

The IMF will likely have little appetite to dole out more cash if Fernandez implements policies that risk a balanced budget.

A key question is how Alberto Fernandez interacts with his powerful vice president. Cristina Fernandez was president from 2007 to 2015 and handed Macri an economy damaged by years of Peronism.

She was initially expected to run for the top job, and her influence in the new administration would be closely watched.

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