Has Argentina’s Embattled President Macri Finally Bottomed Out?

Has Argentina’s Embattled President Macri Finally Bottomed Out?

If Mauricio Macri is reelected in October it would basically mean two things: The International Monetary Fund is no longer a death knell to the leader who signed the loan in the first place, and Cristina Kirchner and her quasi-communist, closed door, protesters-in-the-street politics are officially in Argentina’s past.

Polling data is beginning to show that Macri bottomed out in April, when he was polling in the 30s. He is now rebounding.

The latest Management & Fit poll out of Argentina shows the Alberto Fernandez-Cristina Kirchner ticket ahead, but they have topped out at around 43%. Macri is just a point or two behind. Former Economic Minister Roberto Lavagna polls at around 7%.

The same poll shows Macri winning in the second round, while others show a very tight race in the November run-off. Even though Fernandez is on the ticket as the president who will debate with Macri for voters, most Fernandez voters are only voting for him because of Cristina.

Meanwhile, Maria Eugenia Vidal from Macri’s Cambiemos Party and head of the almighty province of Buenos Aires, is beating her rival with only about a week of campaigning.

The Cambiemos party was recently renamed Juntos por el Cambio (Together for Change).

Cristina is no fan of Vidal. She recently pointed out that Vidal was a divorced, single mother, trying to score points with devout Catholics in her base who have, by and large, moved on from the taboo of divorcees and the church.

“She is having a hard time playing second fiddle to Fernandez,” says Kevin Ivers, vice president and Latin America expert at DCI Group in Washington, D.C. “She vacillates between being in the limelight and being out of the limelight. Right now she is in hiding.”

Vidal took Buenos Aires away from the left-wing Peronists, a province they depend on as a lifeline to win back the full kingdom of Argentina. It is plausible that Macri wins a second term and the popular Vidal, barring an upset, takes his place after his term is up.

Macri recently replaced his vice president with a more pragmatic Peronist senator, Miguel Angel Pichetto. He will be Macri’s running mate now in an effort to win the more conservative members of the massive Peron faction in Congress.

According to the Management & Fit poll, published in the Clarin newspaper on Sunday, economic optimism is still terrible but on the rise. Some 33.9% said they were optimistic about the economy, up from 33.4%. Counting the margin of error, that’s relatively flat.

Economic confidence was up, and people surveyed also felt more secure on the job.

The peso is no longer on its way to 80 to the dollar, as many contrarians predicted in the first quarter of 2019. The exchange rate is currently 42 to the dollar. Inflation is still ridiculous, in the 50s. Real interest rates are around 10%.

Last week, Moody’s changed Argentina’s credit rating outlook from stable to negative because Macri is still fighting for his political life against the Fernandez ticket.

Moody’s pointed out that even if Macri won in a squeaker of a second round, he might have the deck stacked against him in Congress.

That means the reelected government’s ability to continue implementing its structural reform program under the guidance of the IMF is uncertain.

A shift in fiscal policy would threaten that program and dampen the Argentine government’s access to market funding from domestic and foreign lenders, increasing the possibility of yet another debt restructuring for Argentina. This is probable even under Macri, Moody’s analysts believe.

Some in the market think otherwise.

“We are encouraged by the progress Argentina has made in stabilizing the currency, which has lowered the inflation rate and will lead to growth in real incomes,” says James Barrineau, co-head of emerging-market debt for Schroders in New York. “That is the key variable markets seem rightly focused on now. We disagree with the Moody’s outlook given the improvement in key variables and the better outlook politically (for Macri),” he says.

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