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Argentine Elections 2019: Results of the August Primaries

President Macri was soundly beaten in the Argentine primaries on 11 August, gaining only 33% of the vote against nearly 50% for the Alberto Fernandez / Cristina de Kirchner partnership. Without a significant shift in public opinion, Argentina is likely to see a change of government in December and a possible reversion to Kirchnerism. International investors reacted with alarm, sending the Argentine peso tumbling. Economic turmoil will make it all the more difficult for Macri to retrench – and some pundits are predicting the need for a significant restructuring of Argentina’s debt if a major default is to be avoided.

The results of the primaries were a considerable blow to President Macri and his running mate, Miguel Pichetti. Most pollsters had predicted that Alberto Fernandez and Cristina de Kirchner (CFK) would win but by a closer margin, giving Macri the chance to make up lost ground in the elections on 27 October, if only to force a run-off on 24 November. But with a 16 percentage point deficit and facing opponents who gained nearly 50% of the votes, this seems almost impossible. If so, Argentina will have a new government on 10 December when the newly elected President is due to be sworn in (if Macri does not relinquish his office before then).

That said, the primaries are non-binding, intended only to weed out minor candidates and whilst they are regarded as a good test of public voting intentions for the October elections much could happen in the meantime.

The results of the three main contenders for the Presidency were:

• Fernandez / CFK : 49%

• Macri / Pichetto: 33%

• Lavagna / Urtubey: 8%

Other minor candidates all scored under 3%. But even if Macri / Pichetto gained most of their votes (and those of Lasagna / Urtubey) in a run-off, it would not be sufficient to overturn the Fernandez / CFK lead – and the turnout of over 75% of an electorate of nearly 34 million people is unlikely to be much higher, even though voting is mandatory.

The elections for the Governors of the various provinces have, by and large, been held on different timescales from the general elections but the two largest – the Province of Buenos Aires and City of Buenos Aires – will have their elections on 27 October. In the former, the incumbent – Maria Eugenia Vidal, one of Macri’s strongest supporters, who gained a surprise win in 2015 – lost in the primaries to Axel Kicillof by17 percentage points (i.e. 32%) to his 49%. This was a surprise; she had generally been regarded as having a high popularity rating and tagged as a future Presidential candidate. By contrast, in the City of Buenos Aires, Macri’s candidate – the sitting Mayor, Horacio Rodriguez Larreta – won with 46% of the vote against his main rival’s 32%; this could therefore go to a run-off in November unless the figures change on 27 October.

The other key provincial governorships saw wins in Santa Fe by a CFK supporter in June; and in Cordoba in May, the incumbent, a moderate Peronist who had worked well with Macri. Mendoza’s elections for Governor will be held in September.

Financial Reaction

The results triggered a massive fall in investor confidence, alarmed by the prospect of a return to Kirchnerism. The local stock index (Merval) fell by 48% on the following day, the second largest one-day slump in any stock market since the 1950s. The peso fell to around 60 pesos to the US dollar, at one stage losing nearly a fifth of its value. The cost of insuring exposure to Argentine debt tripled, with fears of further debt restructuring and a possible future default. Interest rates in Argentina, already high, rose to 74%. International ratings agencies downgraded Argentina’s credit ratings (S&P from B to B-; Fitch from B to CCC).

The panic subsided a little in the following days. Argentina’s Central Bank imposed a dollar holdings limit of 5% for private banks to slow down the fall of the peso, having already sold some $503m of its central reserves. President Macri, who had reacted badly to the results, was eventually persuaded to reach out to Alberto Fernandez to calm international fears. Fernandez said publicly that he had no intention of defaulting on Argentina’s debt repayments or of reimposing the exchange controls that Macri had abolished on his election in 2015.

But the situation is still precarious: the Central Bank has $66bn in reserves, of which only about $20bn is available for paying off Argentina’s debt and for stabilising the peso; with debt repayments for the rest of 2019 amounting to about $5-10bn, the amount left for quantative easing or intervening in the foreign exchange market is marginal. Over 80% of Argentina’s debt is in foreign currency; any further depreciation in the value of the peso would make repayments that much more expensive and put pressure on the Central Bank to seek a further disbursement of the IMF standby loan or some other restructuring. The next IMF review in mid-September is likely to be an important factor in influencing investor reactions.

Political Reaction

Politically, Macri has suffered from the public opposition to his economic policies. He came in promising a more business-friendly environment, more investment and greater job prospects. But this never happened, despite a $57bn standby arrangement with the IMF, partly because of one of the worst droughts in Argentina’s history in 2017 which seriously affected agricultural exports (Argentina’s principal money earner).

The Argentine ‘man in the street’ has had to endure rising inflation, the loss of public subsidies resulting in higher utility and transport costs, and the abolition of many public sector jobs. Expectations of better times under Macri have not been met: Argentina’s GDP is lower, its public debt has doubled and unemployment is higher than in 2015; the cost of living is higher and over 32% of Argentina’s population now falls within the country’s definition of poverty; inflation stands at about 50%, twice as high as in 2015 – not a good record, even if there have been some signs of recent improvement.

Macri responded to this protest vote by announcing an immediate package of short-term relief measures. These included a 90 day freeze on fuel prices, a 20% increase in the entry threshold for income tax, financial help for those with inflation-linked mortgages, and the removal of VAT from basic foodstuffs (e.g. bread, sugar, milk, oil, flour, pasta, eggs and rice) until the end of December. Whether that is enough to buy him more votes remains to be seen; it is certainly a move that goes against the grain of his economic policies.

Alberto Fernandez has refused to be drawn into debate over the financial crisis. He dismissed calls for comment, saying that he was only a candidate and has publicly rejected suggestions that Macri should step down before serving out his full term; he clearly wants to put Macri under the spotlight on the management of Argentina’s economy.

Future Prospects

Macri will have to work hard to attract support from moderate Peronists; he has been able to do so in Congress, despite not having a majority in either the Chamber of Deputies or the Senate. Much depends on his handling of Argentina’s economy until 27 October; yet the volatility of investor confidence may undermine his efforts.

Macri would also have to entice CFK’s opponents ; she is a divisive figure in Argentine politics. But her decision to run for Vice-President under the well respected Alberto Fernandez was a clever tactical ploy since it removed from Macri the possibility of portraying the election as a contest between a modern, business-friendly leader and an old-style Peronist committed to leftist social welfare policies and economic interventionism (and indicted in 11 corruption charges).

Cynics would argue that CFK would be the power behind the Fernandez throne; she certainly has an enthusiastic following amongst certain sectors of the community, as indicated by the high sales of her recently published autobiography, entitled ‘Sinceramente’. But so far, she has kept a relatively low profile in the hustings, giving the lead to Albert Fernandez.

Fernandez himself found it difficult to work for CFK as her Cabinet chief and resigned after a few months in 2007 becoming one of her strongest critics. Reconciled now for political advantage, it remains to be seen whether he will exercise his authority over the remaining political campaign and set his own agenda if he becomes President. His supporters say that he is not a puppet figure.

Most commentators, however, think it will be difficult, if not impossible, for Macri to haul back sufficient percentage points in October to force a November run-off.

Implications for the Falkland Islands

So far, the Falkland islands have not been a major factor in the Argentine elections, though it is clear that if the Fernandez / CFK partnership wins, the small advances made under Macri are likely to be lost.

Alberto Fernandez, for example, supported a motion by Tierra del Fuego representatives condemning the various treaties and agreements between the UK and Argentina that allowed some progress to be made on matters relating to the Falkland Islands under the so-called ‘sovereignty umbrella’. The agreement to allow a second commercial flight to the Falklands from Sao Paulo (Brazil) on the same basis as that agreed from Punta Arenas (Chile) – due to start in November – could be at risk. So too could be the scientific co-operation on fisheries protection.

The Kirchners introduced sanctions against companies dealing with the Falkland islands and were always confrontational on the issues involved. It remains to be seen whether Alberto Fernandez would adopt similar policies if he were to become President.

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