Argentine President Wows Global Investors But Is Losing Confidence at Home
Argentina President Mauricio Macri passed a big test with global investors after his policy responses helped stem the peso’s slide and enabled the country to rejoin a popular emerging-markets index, attracting foreign capital back to the market.
But those same business-friendly stances have enraged many locals and could imperil his chances for re-election next year. Without Mr. Macri in charge, some investors say, they worry that Argentina could revert to the more populist policies that they say upended the economy and led to a massive government default.
“How stable is the political environment? How stable are the reforms that have been enacted?” said David Tawil, president of Maglan Capital, who invests in Argentine stocks.
In the latest sign that a backlash to Mr. Macri’s policies is spooking the markets, the MSCI Argentina stock index dropped 5% on Monday after a union organized a general strike. The union actions disrupted transportation and prevented some businesses from operating after activists blocked roads. Stocks ended lower again in Tuesday trading, falling 1.6%.
The strike’s organizers meant to protest against Mr. Macri’s policies, such as cutting government subsidies and imposing pay caps, that his opponents blame for widespread inflation, higher utility bills, and layoffs.
Voters’ perception of Mr. Macri has declined in recent months: 62% of voters now say their view of the president is “negative,” according to Buenos Aires-based pollster Image and Political Management Consultant. That compares to a March poll when a majority held a positive or neutral view of him.
About three-quarters of Argentines also say the economy is worse than it was a year ago, according to Berensztein, a Buenos Aires political consultancy, while just 65% of those who voted Mr. Macri into power say they would vote for him again. The next presidential election is in October 2019.
Argentina was a pariah among international investors for 15 years following an $80 billion default in 2001. When Mr. Macri came to office in 2016, he settled with investors and returned the country to international debt markets, issuing record amounts of debt in an attempt to rebuild the economy.
Mr. Macri’s drop in approval came after Argentina suffered a market meltdown starting in April. The peso slid more than 30% against the dollar and the central bank raised interest rates to 40% to halt that slide.
Global investors were rattled but backed his approach. Mr. Macri successfully appealed to the International Monetary Fund for a $50 billion bailout package and replaced the country’s unpopular Central Bank governor. His economic policies helped convince index provider MSCI Inc. to readmit the country to its popular emerging markets index, a move that is expected to attract billions of international investment to the country’s stock market.
Most notably, Mr. Macri didn’t follow his predecessors by resorting to currency controls. That was key to MSCI’s decision to upgrade the country, the index company has said.
While those moves appeared to have helped stabilize the currency, they are unpopular with many citizens.
Argentina’s deal with the IMF includes austerity measures that will force the government to spend less. Analysts say that is likely to move the country into a recession at a time when many voters are already unhappy that the administration has reversed populist policies that subsidized the lives of Argentine citizens for things like electricity and transportation.
“Macri’s image has deteriorated a lot, the economic outlook has worsened and Argentina faces a recession of a least two quarters,” said Sergio Berensztein, an independent political analyst based in Buenos Aires.
A large part of the middle class still backs Mr. Macri, mostly because they have bad memories of the previous government, under the Kirschners, said Facundo Mordasini, a political analyst and pollster.
But many voters say they feel worse now than when Mr. Macri came to power.
“I’m having a hard time economically,” said Leandro Velez, 22, a student. “He raised prices for everyone. I don’t know if he’ll make it to the end of the year if the situation continues. Now we’re in debt with the IMF. Who’s going to pay that off, my grandchildren?”