Government seeks policy accord with opposition

Government seeks policy accord with opposition

On May 2nd the government released a proposal for a government-opposition accord on the broad economic policy framework. The government's proposal comes in the aftermath of substantial market volatility in April, which in large part reflected investor concerns over the policymaking outlook,amid rising political risk.

The ten-point accord includes commitments to achieve and maintain fiscal equilibrium; maintain central bank independence; promote exports; strengthen the rule of law; reform the labour and pension systems; reduce tax pressure; guarantee the transparency of public statistics; improve the provincial finances; and guarantee debt-service payments to Argentina's creditors.

The agreement has two main purposes: it is, first of all, attempting to demonstrate to investors the government's commitment to macroeconomic stability, a business-friendly environment and an agenda of structural reform. But there is also a clear political motivation for the proposal, which sets the president, Mauricio Macri, apart from his main challenger, the left-wing former president (2007-15), Cristina Fernández de Kirchner, and at the same time throws down the gauntlet to Mr Macri's challengers in the political centre-ground. The question for key centrist presidential challengers is whether to reject the proposals and alienate voters for refusing to negotiate, or accept them and provide the government with a political victory.

Influential Peronist politicians, including the governor of Salta province (and presidential hopeful), Juan Urtubey, and the leader of the Peronists in the Senate, Miguel Pichetto, rapidly agreed to support the initiative. But many political opponents disagreed, on the basis that such an agreement should be the outcome of longer negotiations. Peronist presidential hopefuls, including Roberto Lavagna and Sergio Massa, subsequently presented their own ten-point plans; the latter (whose presidential campaign is foundering and who appears to be seeking a rapprochement with Ms Fernández) also asserted that Ms Fernández should be part of any national policy debate. The government responded that it would convene all the main presidential candidates, along with governors, unions, business chambers and Church representatives.

Impact on the forecast

Although the government has proved adept at negotiating with the opposition during Mr Macri's first term, its chances of successfully agreeing—and implementing—a deal here seem slim, if only because its timing is off. Assuming Mr Macri is re-elected, a more credible, lasting consensus on policy could be possible. In any case, the government's willingness to push forwards with negotiations will on its own produce some political benefit to the government, and put the opposition on the back foot.

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