We expect that regardless of who should win the 2019 election, the country will not fall into a full political instability with extremely violent confrontations and the intervention of the military, like in Venezuela or Nicaragua. However, we also expect that the next government of Argentina will be weak, lacking enough financial resources to renovate the country, and will be confronted by a rancorous opposition. If Macri wins the election, he will continue on the path of pro-business reform, under the support of the IMF and on good terms with the major Western countries and the financial community, although we do not expect any major flow of FDI into the country. A December 2018 poll indicates that there will be a political impasse between Macri and the Peronist front.
Also, although a Macri second- term government will have a positive impact on the regulatory and business climates, there will always be bitter, persistent opposition by the unions and other social groups who oppose Macri’s pro-business agenda.
Under a populist alternative government, we expect that Argentina will roll back Macri’s tax and labor legislation and pro-business reforms; the dangers of nationalization and anti-international business measures will be real and there will be a tense relationship with the IMF and the country’s international partners (with the only possible exception being the Chinese).
The Notebooks corruption scandal should also be monitored as a factor that will weaken the stability of the FPV and the Kirchners’ opposition to Macri, but that will also create tensions between the judiciary and the executive and will block public procurement in the country for years.
All things considered, we believe that Macri will have a 50% possibility of winning a second term as president of Argentina.
On the international scene, the deteriorating economy and political stability of Brazil as well as the trade dispute between the United States and China that will open up new opportunities in the Chinese market for Argentinean soya is worth noting.
Last updated on 14 February 2019
