June 7, 2019
1. Macri receives Jair Bolsonaro for first official state visit
President Mauricio Macri received a strong endorsement from his Brazilian counterpart Jair Bolsonaro, who made his first official state visit to Argentina since his inauguration. On Thursday morning, the heads of state held a press conference where they discussed a variety of topics, including their countries’ bilateral relations, the Vaca Muerta formation’s energy potential, the upcoming Argentine presidential elections and the Nicolás Maduro regime in Venezuela. That afternoon, Bolsonaro signed defense agreements accompanied by the two countries’ ministries of defense at the Brazilian embassy. Finally, Bolsonaro met with key Argentine business leaders with interests in Brazil, along with Argentine Production & Labor Minister Dante Sica and members of Argentina’s foreign affairs ministry.
2. IMF admits it underestimated Argentina’s economic and exchange rate crisis
IMF Director Christine Lagarde admitted that the multilateral entity underestimated the magnitude of Argentina’s economic crisis and made faulty predictions regarding future growth and inflation. Nonetheless, Lagarde insisted that the continued implementation of the IMF’s recovery program, in which Argentina agreed to work towards a zero primary fiscal deficit, will salvage the economy. In its last forecast, the IMF projected a drop in GDP of 1.2% and inflation of 30.5% for 2019. On the other hand, Finance Minister Nicolás Dujovne and Central Bank President Guido Sandleris took off for Japan, where they will meet with their G20 counterparts and Christine Lagarde.
3. Government seeks to spur recovery of industrial sector
Following a revelation that the automotive sector registered a 56% y/y drop, the Macri administration launched a plan that will save consumers ARS $90,000 (USD $2,006) upon the purchase of a new car. The objective is to generate ARS $1 billion (USD $22.3 million) to act as a stimulus for the sector. The administration also upped reimbursements that the industry receives for each export. With the elections fast approaching, President Macri hopes a quick fix will halt the sharp drop in industrial activity, which in April registered twelve consecutive months of decline, according to the Argentine statistical agency.
4. Argentina sued for expropriations during the government of Cristina Fernández de Kirchner
Following a decision by the World Bank’s arbitration court (ICSID) against Argentina for the 2008 expropriation of Aerolíneas Argentinas – forcing Argentina to pay USD $320 million to the plaintiff – MetLife filed a claim in the same court for the 2008 expropriation of the private pension system. The ICSID argued that investor’s rights and future profitability were infringed upon by the slew of nationalizations carried out by the administration of former President Cristina Fernández de Kirchner. It is expected that another ruling against Argentina would spur other financial entities whose participation in the Argentine pension fund ended with the renationalization will also turn to the ICSID.
5. Electoral Panorama
Following Sunday’s elections in three provinces (Corrientes, Misiones and San Juan), attention now turns to four contests this weekend in the provinces of Chubut, Entre Ríos, Jujuy and Tucumán. With the deadline for coalition formation less than a week away (June 12th), the Macri administration will host negotiations with its key coalition ally – the Unión Cívica Radical – to define the presidential ticket. On the other hand, former Economy Minister under Néstor Kirchner, Roberto Lavagna, announced his run for president during the inauguration of his campaign headquarters. In this context, Peronist Senator Miguel Pichetto assured that the anti-Kirchnerist wing of the Peronist Party (Alternativa Federal) will support Salta Governor Juan Manuel Urtubey for the presidency. With Pichetto’s statements, he seemed to cast aside fellow dissident Peronist party Frente Renovador’s leader Sergio Massa as a potential candidate, after Massa revealed negotiations with the Kirchnerists. Additionally, Pichetto accused Lavagna of disintegrating the “third way” since he refused to compete in joint primary contests.