The Wall Street Journal - 13.08.2019

(Ann) #1

THE WALL STREET JOURNAL. ** Tuesday, August 13, 2019 |A

one of the world’s highest
“I’m afraid that everything
is going to be more expen-
sive,” said restaurateur Do-
mingo Gomez, who wants Mr.
Macri to resign. “Don’t they
understand that the people
don’t want them anymore?”
In a radio interview Mon-
day, Mr. Fernández blamed the
turmoil on Mr. Macri’s govern-
ment, which has taken on bil-
lions of dollars in foreign debt
since taking office in late 2015
on a wave of optimism in Wall
“The markets react badly

tion of financial markets Mon-
day showed that they don’t
trust his adversaries’ policies.
“Today we’re poorer than
we were before the primary
elections” because of the mar-
ket reactions, he said. “The
biggest problem Argentines
have today is that the alterna-
tive has no credibility.”
In Buenos Aires, Argentines
hurting from an economic re-
cession and a surge in prices
were bracing for the impact of
the market turmoil. A weaker
peso often fuels inflation in
Latin America’s third-biggest
economy, currently at 56%,

ment is going to be Peronist.”
Mr. Macri’s only hope now
may be to spin the market
meltdown as a cautionary tale
of what awaits Argentines if
Mr. Fernández wins in Octo-
ber, said Alberto Ramos, chief
economist for Latin America
at Goldman Sachs.
Mr. Macri told reporters on
Monday that he won’t change
his cabinet nor his economic
policies following the primary,
and blamed his electoral per-
formance on the country’s
poor economy. He said the
economy is now poised to re-
turn to growth, and the reac-

further obstacles for Mr. Macri
to hold on to power, analysts
By causing a steep decline
in the peso and stock market,
his loss will force the central
bank to keep interest rates sky
high and strangle economic
growth, making it harder for
Mr. Macri to make his case by
October that the economy is
on the path to recovery.
“This is insurmountable;
they are not going to recover
from this,” said Dardo Gas-
parré, an economist and politi-
cal columnist who writes on
Argentina. “The new govern-

when they realize they were
ripped off,” Mr. Fernández told
Radio 10. “We are living in a
fictitious economy...and the
government isn’t responding.”
Still, Mr. Fernández tried to
ease market concerns, seeking
to reassure jittery Argentines
that his administration would
be responsible stewards of the
economy. “We were never
crazy governing,” said Mr.
Fernández, a former cabinet
chief who is viewed as more
moderate than his running
mate. “We always resolved the
problems that others created.”
Mr. Macri’s standing with
voters suffered after an eco-
nomic crisis that began last
year amid concerns about the
country’s ability to pay its
debts. The peso lost half its
value against the dollar over
about five months, while infla-
tion shot up and joblessness
Some economic indicators
are starting to show small im-
provements, but gross domes-
tic product dropped 5.8% in
the first quarter from a year
earlier, and unemployment is
still above 10%.
Last year, the government
received a $57 billion bailout
from the International Mone-
tary Fund, the fund’s largest
ever, to cope with a currency
On Monday, Ricardo Dabras,
a painter in Buenos Aires,
couldn’t buy material in a
hardware store that refused to
sell products due to the peso’s
collapse. “This is crazy,” he
said. “I don’t know what I’m
going to do.”
Many Argentines fear a re-
turn of those policies that
were implemented by Mrs.
Kirchner and blamed by many
economists for the mess that
Mr. Macri inherited. During
her eight years in power, Mrs.
Kirchner ran large budget def-
icits and nationalized busi-
Her administration, which
ended in 2015, was also mired
in corruption allegations. Mrs.
Kirchner is currently facing
trial for graft, which she de-


Argentina’s stocks staged
their steepest fall in decades
amid investor concerns about
the possible return to power
of the country’s populist Per-
onist movement, which advo-
cates greater state control of
the economy and opposes a
landmark trade deal with the
European Union.
The Merval index in Buenos
Aires closed 38% lower on
Monday after pro-business
President Mauricio Macri was
dealt a resounding defeat in a
primary election Sunday
against Alberto Fernández, a
leftist whose vice-presidential
running mate is former Presi-
dent Cristina Kirchner, a fire-
brand nationalist.
The Argentine peso initially
weakened more than 30%
against the dollar before re-
covering some ground after
Argentina’s central bank
stepped into currency markets
Monday, auctioning off $
million to try to support the
peso. The bank’s benchmark
interest rate jumped to 74.8%,
from 63.7% on Friday.
Stocks had jumped 7.7% Fri-
day on expectations that Mr.
Macri would come in a close
second place in Sunday’s pri-
mary, a mandatory nationwide
vote that determines which
parties will be able to run can-
didates in the October elec-
tion. As parties have already
picked their candidate, the
primary provides a strong in-
dication of voter preference.
Mr. Macri received 32%
support versus 48% for Mr.
Fernández, a far bigger margin
than polls had predicted, set-
ting up the opposition for a
possible first-round victory
against the incumbent in Octo-
ber’s general election. The
negative economic impact of
the vote in Argentina creates


Argentine Markets Dive on Peronist Rise

Populist movement’s

leader beats incumbent

in primary, sparking

new economic worries

Candidate Alberto Fernández spoke to supporters before his Peronists drew more-than-expected votes.




*Scale inverted
Sources: FactSet (Merval);
Tullett Prebon (currency)





10 a.m noon 4 p.m.






10 a.m. noon 4 p.m.

Trade Pact With EU
At Risk After Vote

If elected as the Argentine
leader in October, Alberto
Fernández, is likely to unravel
many of President Mauricio
Macri’s policies, raising doubts
about the future of a trade
deal between Argentina and
three other South American
countries with the European
The deal clinched in June
would create a trade bloc of
nearly 800 million people, rep-

resenting a quarter of the
world’s economy.
Though Brazil has the big-
gest economy in the South
American Mercosur customs
union that made the trade pact,
it was Mr. Macri who was the
most prominent Latin American
proponent. Mr. Fernández, a
leftist who leads the Peronist
movement, has voiced his op-
position to the pact.
Mr. Macri’s possible loss in
October “is very negative” for
the pact, said Benjamin Gedan,
an Argentina expert at the Wil-
son Center, a Washington, D.C.,
policy group.

The deal needs approval by
Mercosur member countries Ar-
gentina, Brazil, Uruguay and
Paraguay, and in Europe, where
environmental advocates have
raised concerns and farmers
worry about competing with
the industrialized farming of
Brazil and Argentina.
“Classic protectionist fears
are resurfacing in South Amer-
ica,” said John Clancy, a former
EU trade spokesman now with
FTI Consulting, a business-advi-
sory firm. “And there are simi-
lar aspects in Europe—that’s
why it becomes such a difficult
deal to see through.”






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