15 October 2018

From an international point of view, we expect that the deteriorating economic situation of Brazil, and the chaotic political election of October 2018, will impact negatively on Argentina, as Brazil is its most important trading partner (negative economic impact) as well as the most important country of the region sharing a large territorial boundary with Argentina (geopolitical destabilizing impact). These negative impacts will not be extreme but should still be taken into account.

The trade dispute between the United States and China will probably produce a positive effect on the Argentinean economy because the Chinese will most likely retaliate in relation to the purchase of soya, of which the United States is an important producer and exporter to China; and if China decides to source soya from Argentina in replacement for the United States, this could have a positive impact on this cornerstone of the Argentinean economy.

From an internal point of view, we expect that President Macri will continue to govern the country until the natural expiration of his mandate on 27 October 2019. We do not forecast any major disrupting political risks that will impact the country in the foreseeable future (i.e. shut down of Mr Macri’s government before its natural expiration).

In October 2019, there will be the election of the new president of Argentina. There will also be the election of the 72 members of the Senate and of the 257 members of the Chamber of Deputies.

Macri will be entitled to run for a second term and will most likely do so. There is a high degree of uncertainty about which political party will put forward the person who will be the main alternative candidate to Macri.  This is because the natural contending political front, the populist Cristina de Kirchner’s Frente para la Victoria (FPV), a coalition of populist parties including the Partido Justicialista (PJ) and other left-wing parties, is currently entangled in the notebooks corruption scandal which might derail it before the next election. Should the FPV not be able to project a strong alternative candidate to Macri, a candidate from some type of populist anti-business political party, most likely from the Peronist tradition, will challenge Macri.

The result of the 2019 election will mostly depend on the trajectory of the economic situation of the country as affected by the international economic scenario (trade disputes, rise of interest rates in major economies, etc.) and the implementation of the reforms agreed to with the IMF. If the Argentinean economy will not deteriorate excessively up to the next election, Macri will be able to fulfil the country’s obligation with the IMF and, at the same time, to maintain the social stability of the country, and this will probably make him win the next election.

If, on the other hand, the economic situation will excessively deteriorate and there will be severe macroeconomic imbalances (especially hyperinflation), with consequent rampant economic poverty and social unrest, Argentineans will turn against Macri and will jump on a populist political front.

Last updated on 15 October 2018

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