◼ POLITICS Bloomberg Businessweek August 19, 201933DATA: INTERNATIONAL MONETARY FUND
knowing how to manage it—and actually playing on
this fear—we are entering a very, very delicate situa-
tion in Argentina for the next several months.”
Macri was elected in 2015 with a mandate to fix
the problems created by the preceding eight-year
administration, which had doctored statistics,
imposed limits on foreign capital, and kept pub-
lic service bills artificially low, leading to a swollen
deficit and an isolated country unable to borrow. He
promised to eliminate poverty and attract a “deluge”
of investments to South America’s second-largest
economy. But after a cautious start that involved tak-
ing on tens of billions of dollars in international debt
to paper over fiscal imbalances, Macri’s approval
deteriorated, as did Argentina’s economy.
After the U.S. Federal Reserve raised interest
rates in 2018, causing a steep slide in the peso,
Macri was forced to negotiate a $56 billion bailout
with the International Monetary Fund, the largest
ever made with the lender. The agreement called
for steep spending cuts and limits on liquidity to
meet fiscal goals. The austerity measures did yet
more harm to Macri’s standing with voters, who
lost faith that his market-friendly approach would
mend the battered economy. Annual inflation now
sits above 50%, and the economy will contract in
2019 for a second straight year.
Fernández, for his part, seemingly embold-
ened by the support, sees no reason to change tack
despite the extreme market reaction. The politician
was a cabinet chief for the late Néstor Kirchner, pres-
ident from 2003 to 2007; Fernández’s running mate,
Cristina Fernández de Kirchner, was Néstor’s wife
and successor. Her administration has been blamed
for much of the mess Macri inherited.
Fernández has been vague about what his eco-
nomic program would look like and elusive about
how he might engage creditors, including the IMF.
But he insists that only government change can
calm the market. Macri, however, has pointed to
the market collapse as an example for voters of
what a return to the past might look like. “Blaming
Kirchnerismo for market turbulence is a high-risk
strategy,” says Nicholas Watson, a London-based
Latin America analyst for Teneo, a management
consultant. “Clearly, a large proportion of the elec-
torate sees Macri as the problem, not the solution.”
Macri could force a runoff if he manages to claw
back enough support from the front-runner and
other lower-tier candidates before the official elec-
tion on Oct. 27 to bring himself within 10 points
of Fernández. As long as Fernández also receives
less than 45% percent of the vote, there would
be a runoff on Nov. 24—giving him more time to
spin his comeback narrative. Still, he’ll have torely on extraordinary turnout and likely reinvent
his original campaign message, which has already
started to drift left.
Many expected Cristina Kirchner to run for pres-
ident, despite being embroiled in corruption probes
dating to her time in office. She denies wrongdoing
and has called the investigation political persecu-
tion. Her seat in the Senate, which she won in 2017,
gives her legal immunity, though that could be
stripped by a two-thirds vote of the upper chamber.
As vice president, she would be head of the Senate,
and by running in the No. 2 position, she’s able to
stay out of the limelight’s harshest glare.
While the market has long feared another
Kirchner administration—a poll in April showing
her narrowly defeating Macri in a runoff sent bond
prices into free fall—part of the extreme reaction
to the primary result can be traced to a false sense
of security created by pre-primary polling. Many
of Argentina’s top pollsters shared their findings
only with paying clients, including large investment
firms, but a few that became public in the weeks
leading up to the primary showed a close race. One
showing Macri ahead by a point led to a small rally
on the last trading day before the vote.
On the first trading day after the vote, Argentina’s
so-called country risk gauge—the extra yield inves-
tors demand to hold government debt over U.S.
Treasuries—surged to a 10-year-high, topping those
of all other emerging markets, and its debt is now
the costliest in the world to insure against default.
Macri himself appeared shaken in his first public
appearance, admitting he’d run a “bad election,”
sheepishly vowing to stage a comeback, and lam-
basting pollsters for their errors.
Barring a miracle for Macri, Fernández will
assume the presidency on Dec. 10. The presi-
dent tweeted a few days after the vote that he and
Fernández had talked and that the presumptive
next leader “showed willingness to try to bring
calm to markets.” What he inherits will depend
more, though, on what he and his rival can do
together in the interim to address default expecta-
tions, the real economy, inflation, savings, and any
number of other factors that could sink the econ-
omy yet further. Markets are wary, but Argentines
have long since grown accustomed to whiplash.
Politics are “a seesaw that comes and goes,” says
Ruben Haleblian, a 70-year-old vendor in an elec-
tronics store in downtown Buenos Aires. “I already
lived it several times.” �Juan Pablo Spinetto and
Daniel CancelTHE BOTTOM LINE A stunning primary defeat for Argentina’s
president has opened the door for the return of protectionist policies,
which stand to throw the economy even further into chaos.2009 20188%0-8● Argentina’s real GDP,
year-over-year change