No love lost in Argentina

In most years, the barometer for Argentina’s economy is the price of its currency, the peso. This year, traders will follow the country’s presidential election opinion polls. In both cases, incumbent Mauricio Macri is losing.

The peso has halved over the past year. Worse, his already low support one recent poll put it at about 36%

could fall further given that former president Cristina Fernández de Kirchner might run against him in October’s national elections. Voters may dislike Argentina’s current plight but expecting them to back the populist Fernández insults them. They have got her number.

Argentine bond prices fell sharply after the publication of Fernández’s autobiography, Sincerely, which hinted at her return. No wonder. Argentina teetered on the brink of collapse when she left office in 2015. She oversaw four recessions during her term, roughly one every two years. Markets shunned the country.

A heavily managed peso, with sporadic devaluations, led to foreign exchange reserves falling 50% to $25bn. Most analysts questioned the economic data released by her government. Indeed, she faces multiple charges for corruption related to projects during her administration.

Macri gets few plaudits given that prices are rising at 55%. However, in other ways his efforts show promise. At least he has the goodwill of international backers. The IMF arrived in 2018 and the country’s fiscal deficit (not including interest payments) has decreased. Indeed, if the country hits its end-of-year target of a zero primary deficit it will have come a long way from 4.2% in 2016. Those changes will do little to please voters, however.

Getting interest rates down from about 70% is a shift that might swing things for him. Macri’s political future depends on such high rates stifling inflation, even if it slows the economy, too. Market panic about Fernández is overdone. Voters will not want her sort of reign again. /London, May 2