June 14, 2019
1. Electoral Panorama
Following the most intense week in politics so far this year, the various political coalitions seeking the Argentine presidency officially sealed their alliances on the deadline this Wednesday. President Mauricio Macri opted to look outside of his Cambiemos coalition for his running mate, choosing – surprisingly – dissident Peronist Miguel Pichetto from the anti-Kirchner Alternativa Federal. Following the announcement, Cambiemos changed its name to Juntos por el Cambio. Other Alternativa Federal members scattered across the political spectrum: Salta Governor Juan M. Urtubey joined presidential candidate Roberto Lavagna to form the Consenso 2030 coalition, where Urtubey will run as vice president. Sergio Massa reached an agreement with former Chief of Staff Alberto Fernández and former President Cristina Fernández de Kirchner to create the Frente Todos. During August’s open, simultaneous and obligatory primaries (PASO), voters will be able to choose between seven coalitions: Juntos por el Cambio, Frente Todos, Consenso Federal 2030, Frente de Izquierda y de los Trabajadores – Unidad, and right-wing coalitions Frente Despertar, Frente Nos and Frente Patriota.
2. Inflation continues to decline
Argentina’s statistical agency (INDEC) released their monthly inflation report, revealing a 3.1% inflation rate for May, a continued decline from the 3.4% rate registered in April. Taking into account May’s numbers, Argentina has experienced a 57.3% inflation rate over one year. Prices in May rose 5.1% in the health sector, 4% in public services and 3.5% in transport.
3. Petroleum producers demand tax, exchange rate and regulatory stability to take full advantage of Vaca Muerta
The Vaca Muerta shale formation was the primary focus of the Argentine business development institute’s (IDEA) summit. Business leaders across many sectors gathered in Neuquén to discuss pleas for economic stability from the oil and gas sector, as well as the possibilities of opening up to new markets. The summit marked the first public appearance of the Macri-Pichetto presidential ticket. In the same vein, Neuquén Governor Omar Gutiérrez, along with the directors of American oil giant Exxon Mobil confirmed new investments into Vaca Muerta. The company will conclude the initial phase and spur petroleum production over the next five years with a USD $2 billion investment. With this investment, the shale oil and shale gas field will experience its eighth massive development.
4. Market reacts positively to Macri-Pichetto ticket
Miguel Pichetto was named President Mauricio Macri’s vice presidential ticket for the upcoming October elections and the Buenos Aires Stock Exchange’s MERVAL index rallied by 6.2%, fueled by advances in shares held by the energy sector and banking entities. The U.S. dollar dropped 2.3% in value to the Argentine peso and closed at ARS $44.88 – a one-day drop of more than ARS $1 in the exchange rate that has not happened since late April. J.P. Morgan’s 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 – dropped 90 points and closed at 853points, shortly after dipping below the 1000 mark on June 3rd. The IMF’s communications director welcomed the news stating, “we are seeing signs that the recession could be slowing down, and we hope for a gradual recuperation over the next few quarters.”
5. Proportion of Argentina’s industrial capacity compared to what is in use reaches 61.6%
According to a monthly report released by Argentina’s national statistical agency (INDEC), the proportion of existing infrastructure for production compared to that which is actually in use fell to 61.6% in April compared to the 67.6% figure registered in April of last year – coinciding with an 8.8% drop in total activity. Nonetheless, the 61.6% figure exceeds the 58.8% registered in March – coinciding with a 2.3% increase in industrial activity over that time period. The industries that experienced industrial capacity above that of the average include basic metals (82%); petroleum refining (72.1%); chemical products and substances (70.5%); paper products and cardboard (68.4%); and non-metallic products (67.2%).