This week, Argentina’s President Mauricio Macri
unexpectedly lost a primary vote by a landslide, a foreshadow to his defeat in October’s presidential election and a possible return to the policies of his predecessor, Cristina Kirchner
Following the vote, Argentina’s international bonds and stocks tumbled in London and New York early trading.
“The scale of Macri’s defeat took pollsters by surprise, yet it reflects widespread public dismay at the country’s direction amid recession, austerity and inflation running at more than 50%” (Bloomberg
Argentine entrepreneurs and business owners are voicing uncertainty after voters showed a resounding preference for the left-leaning, populist candidate Alberto Fernández, who received 48% of the votes in primary voting that featured 10 parties with presidential nominees. Fernández’s Vice Presidential candidate is former President Cristina Kirchner, who was widely known for butting heads with investors during her 12 years in the presidential palace, both as President and first lady for her predecessor and late husband, Nestor Kirchner.
“[Cristina Kirchner] nationalized pension funds, imposed currency controls and tampered with economic statistics during her time in office from 2007 to 2015” (The Washington Post
Macri and his running mate, Miguel Ángel Pichetto, received 32%: suggesting their team faces an uphill battle going into the general elections in October.
Investors now face the harsh reality that voters are losing patience with Macri’s market-friendly policies; and are prepared to take a risk on a return of the type of interventionist measures under Kirchner’s administration.
On Tuesday, the currency was trading at about 58 pesos to the dollar: roughly 25% weaker than its Friday close. The devaluation was accompanied by a 38% drop in the Merval stock index and is expected to lead analysts to drastically revise the 2019 inflation outlook of 40% further upward. Last year, inflation reached 47.6%: the highest since 1991. (The Washington Post
As markets respond to the political uncertainty, many small business owners- already crippled by long-running economic struggles under both Fernández and Macri- are once again fearful.