August 16, 2019


1. Electoral Panorama

On Sunday, August 11th, Argentina held its Simultaneous and mandatory open primaries (PASO), where ten national political movements vying for a place in October’s general elections had to win 1.5% of the total national vote in order to participate. Six of the 10 competing movements reached the minimum threshold and will have their presidential and vice presidential candidates competing for head of state in October. Additionally, Sunday also saw gubernatorial elections for the province of Santa Cruz, as well determining which legislators qualify for October. 130 of the Chamber of Deputies’ 257 members will be up for election, as well as 24 of the country’s 72 senators. On the national level, the Peronist Frente de Todos obtained 47% of the total vote, while the incumbent administration, Juntos por el Cambio, received 32%. Frente de Todos, headed by the Alberto Fernández – Cristina Fernández de Kirchner ticket for president won each province save for Córdoba and the City of Buenos Aires, which were carried by Mauricio Macri’s coalition. In third place came Consenso 2030, led by Roberto Lavagna, with 8% of the total vote. Lavagna stated that his movement will attempt to come in second place in October’s general elections. Following the elections, President Macri called all the other candidates. In the president’s conversation with Alberto Fernández, he stated that Fernández was committed to collaborating with the presidency to ensure that the political uncertainty in the electoral process affects the Argentine economy as little as possible.

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2. Post-electoral Economic Panorama

The day after elections, Argentine stocks plummeted an average of 37% in Argentine pesos and 46% in U.S. dollars, while bonds in U.S. dollars tumbled by 15 – 20%. Moreover, the S&P Merval, the Buenos Aires Stock Exchange’s primary index, lost all the gains it had made in 2019 after a 31% drop in just one day. On the other hand, the J.P. Morgan Country Risk Index – which rolls together several variables relating to treasury bonds issued by the U.S. and another country to gauge that country’s attractiveness to investors – reached 1,946 points before falling back down to 1,750 points on Thursday after President Macri announced his goal of stabilizing the country’s microeconomic situation over the next couple months. This means that loans in U.S. dollars in Argentina cost 1,946 points more than what they would cost in the reverse case for a similar security. This is the index’s highest value since March 2009, when there was a massive drop in public debt securities during Cristina Fernández de Kirchner’s first term in office. Last Friday, the index closed at 860 points, which represents a 126% surge in the country’s investment risk. In the three days after the PASO, the Argentine peso depreciated 33.58% to the U.S. dollar, becoming the deepest impact to the currency during Macri’s government, even surpassing the devaluation of the Argentine peso in August 2018, when his government had to refinance its debt with the IMF and shuffle cabinet members. On the other hand, the devaluation of the peso allowed for a small drop in Argentina’s total internal and external debt in dollars from USD $341 billion to USD $325.4 billion. With this in mind, the Macri administration awaits the visit of Roberto Cardarelli, the head of the IMF’s mission to Argentina, next week.

El Cronista: El dólar y el riesgo país no toleran las especulaciones de campaña

3. President Macri announces sweeping economic measures

Last Wednesday, President Mauricio Macri gave a self-critical message of his administration and its performance in the PASO last Sunday. He claimed to understand what Argentines were trying to say by way of their votes and respected their decision to vote for alternatives (differing from his speech on Monday, where he seemed annoyed at those who didn’t vote for him), assuming responsibility for the election and analyzing the country’s current state. Responding to the disappointing electoral results, the president announced that workers in a state of dependence would receive ARS $2,000 (USD $35.32) extra in September and October, since the government will be in charge of personal contributions, and also modified income tax so that a good portion of salaried workers receive the same amount monthly, through the end of the year. Moreover, members of the armed forces will receive a bonus of ARS 5,000 (USD $88.81). In his message, the head of state also announced two extra payments for those who receive a Universal Subsidy per Child (AUH), a subsidy for parents who are unemployed or working in the informal economy, a bump in the minimum wage, an increase in the Progresar scholarship for students and a 90-day price freeze on gasoline. Additionally, Macri announced a plan that would be put into place that allows SMEs to pay their duties to the Argentine revenue service (AFIP) in 10 years, as well as a deferral for companies of this type that are dealing with a complex situation.

La Nación: Mauricio Macri anunció un paquete de medidas económicas y pidió “disculpas” por su reacción tras las PASO

4. Inflation falls in July, but an increase is expected following devaluation of Argentine peso

Argentina’s statistical agency (INDEC) announced that inflation in July reached 2.2%, compared to the 2.7% registered in June – the lowest all year. With this increase, inflation has hit 54.4% over the last 12 months. Nonetheless, given the 33.58% devaluation of the Argentine peso following the PASO, it is expected that inflation will once again rise in August and September.

El Cronista: La inflación de julio fue 2,2%, la más baja de 2019, pero en agosto volverá a subir

5. Macri rallies cabinet to reverse electoral fortunes in October

Between the post-electoral difficulties and sweeping economic announcements, President Mauricio Macri met on Thursday with his entire cabinet and other functionaries at the Centro Cultural Kirchner (CCK). Before an audience of more than 1,000 officials from both the national and local level, Mauricio Macri attempted to show strength following the decisive defeat in Sunday’s PASO and in the middle of an economic crisis and market volatility. Macri stated that he has “70 days to change history” and insisted his staff will work to reconquer the hope of the people. “The only thing I ask is that the pain we have is not a product of our ego, but of the conviction that we are close to achieving a reality that will change people’s lives forever,” he stated.

Clarín: Mauricio Macri: “Por más que el poder actúa como si ya no estamos más, acá estamos”