The Power and the Money

Who voted for Macri and why? We know the wrong answer, at least

Joint with Leticia Abad.

First things first: Macri won 90% of the Antarctican vote! Sure, that’s only 102 people, but hey, climate change. Just wait until the 2059 election. He also won everything in the Malvinas, getting zero of zero votes. Or did he lose big there? It’s not clear, but the newspapers are reporting it, so I am passing it on.

Second, last night’s result was only mildly surprising. Boz called it that Macri would outperform the polls but not go the distance, and that is what happened. Macristas are furious at Lavagna and Espert, but it’s unlikely that all of the votes for Lavagna would have gone to Macri. This was a clean win for Fernández, and a win is a win. In other words, “Lavagna cost it for Macri” is a wrong answer.

Larreta cleaned up the mayoral election in Buenos Aires City: who could have imagined that “Seven new subway stations in four years!” would have been a winning slogan?* Meanwhile, in Buenos Aires province, Axel Kiciloff won a massive victory. I have met Kiciloff in person. (As has my friend and colleague, Gónzalo Monroy.) Kiciloff is a smart fellow, but his understanding of markets is so weak that I have to wonder how he manages to go shopping.

I spent election day in San Isidro, a small bastion of anti-Peronism, so the traditional method of “Ask random people why they like Kiciloff” didn’t work. Election night was with Macristas in the city, so the method worked even less well.

A conventional wisdom is emerging here that Macri won where the farm sector is important. The only problem with answering “Farmers!” to “Who voted for Macri and why?” to that it is wrong. 

Map 1 shows per capita agricultural exports (including agro-industry). Map 2 shows Macri’s vote share. There is basically no correlation.

I don’t know why a band of provinces across the center of the country went for Macri, but it wasn’t because they voted out of fear of export taxes. An enterprising scholar should investigate this. Has Argentina seen an American-style “big sort”? Is there a cultural component to the anti-Peronista belt?

The same belt went overwhelmingly for Macri in 2015. In 2011, the Peronists won everywhere but San Luis, only with reduced margins. In 2007, the Peronists lost in Córdoba and San Luis. In 2003, there isn’t much of a pattern, but when you go back before that Córdoba and San Luis seem to be perennial bastions of anti-Peronista sentiment, something that has spread to a belt across the center of the country running from Mendoza in the west to Entre Rios in the east. 

Something interesting is happening; I just do not know what. 

* Other than, well, anyone.

Observatorio argentino 45: Maybe Argentines did not care as much about the election as they claimed

The excitement around the recent Argentine election felt unprecedented. Everyone was talking about how fired up people were. Both sides thought this was a critical election. Random people on the subway called it, “The end of the world.” News reports intimated record turnout; that night people feared violence.

Except, well, turnout was bog normal. Completely normal. As in, nothing-to-see-here normal. Turnout was about the same as in 2015 and lower than most postwar elections. See below.

Of course, most postwar elections came in an atmosphere where everyone knew that the military could and would overturn a result that they didn’t like, and where Juan Perón was an active living political force. So maybe the whole postwar period isn’t a fair comparison. But turnout is barely up on 2015 and only a little above 2011. It really only looks good against the astonishingly apathetic election of 2007, where Cristina Fernández first won election in her own right.

I should point out that voting is compulsory in Argentina, although the penalty is risible. Right now, the fine is 100 pesos (about a buck-fifty, more or less). In theory, you’re also banned from carrying out any sort of bureaucratic procedure for a year, which could be a PITA if you, say, plan to buy a house or sell a car or something like that. (Here is the registry of people who didn’t vote.) In practice, it is not clear to me that the disincentive is all that large.

The compulsory rule dates back to 1912. Weirdly, the evidence points to conservative parties favoring the reform as a away to insure that their supporters would get to the polls in the face of fired-up and enthusiastic socialists. (Article 84 of the Saenz-Peña Act of 1912 exempted illiterates and people who lived more than 20 kilometers from the polls from the fines; this was strategic.)

To sum up, the election certainly seemed historic! But the average Argentine voter didn’t really act like it was.

The problem with Chile

Even with the República Argentina on the verge of an historic election, the riots and subsequent demonstrations in Chile have attracted a lot of attention. Below is a much smaller sympathy demonstration getting started in Buenos Aires, organized by the Frente de Izquierda.

Argentines look upon their neighbor to the west with a mixture of contempt and envy. Contempt, because there is a strain of “Why is that place even a country?” You don’t quite get the spontaneous outbursts that Uruguay attracts — random people in restaurants and bars will tell you, unprompted, “That’s a province of Argentina, you know” if you mention having visited Uruguay — but Chile can ignite the same feeling in some Argentines. (They know who they are.) Envy, because that historical accident to the west has become richer than Argentina and a putative “developed” nation while Argentina remains in its malaise.

So there is schadenfreude in excess on this side of the Andes.

That said, it is worth noting that the problem with Chile is simple: taxes and spending. Chile has some nice statistics about this. The Chilean personal income tax system is moderately progressive, although note that the country collects more from the regressive VAT than from progressive income taxes. Still, the bottom 76% of tax units in 2016 earned an average income of US$3,875 and paid nothing.

But look at that household income number! It is not a misprint. It is substantially lower (in nominal terms) than in Mexico. The Chilean state is /much/ more powerful than the Mexican state. So the country appears orderly, even in small impoverished villages and the outskirts of large cities. That gives an impression of prosperity that even places like Monterrey don’t have.

But it is a false impression. In median terms (not average) Mexico is more prosperous. And not by a little, either.

Getting back to Chile, the top 0.43% of tax units in 2016 earned an average income of US$210,236 and paid an average rate of 28%. So what did the government do? Cut the marginal tax rate from 40% to 35%! And this was under President Bachelet, a socialist.

To be fair to Bachelet, the net impact of her reform was to reduce income inequality. The share of national income going to the top 1% dropped from 16.6% to 15.5%. (See page 7 at the above link, a World Bank report entitled “Efectos Distributivos de la Reforma Tributaria de 2014.”) But that was due to a change in corporate and business taxes. Dropping personal rates was a political compromise, but in the words of my friend Gónzalo Monroy, “In the short term, it is about sending the right signal to diffuse social tensions.”

In other words, the government should not have made that political compromise at all. Leave the top tax rate at 40% and raise business taxes. That sends the right signal to diffuse social tensions. In fact, the top rate should be raised to 50%. Raising the tax take on the top 0.43% by another ten points would net the government only US$854 million per year. But the income isn’t the point. Fairness is the point. These are people who have done very well by the Chilean Republic. They can shoulder more.

And considering Chile’s recent economic history, they damn well should shoulder more! Leticia Abad (CUNY) and Peter Lindert (UC-Davis) have tracked the net impact of fiscal transfers across Latin America. Below are their results from Chile between 1965 and 2013.

Look at the numbers! The dictatorship was astonishingly regressive. They rich not only captured most of the benefits from economic growth, they got the tax system to transfer to them even more. But even under democracy, the bottom quintile only became net recipients from the fiscal system in 2005.

And they have benefited little since, with the lion’s share of net transfers going to the upper middle class, those between the 60th percentile and 80th percentile of the income distribution. Chilean democracy is a system to transfer wealth from the rich to the upper middle class. 

Do I think that raising taxes on wealthy Chileans would solve the social problem? Not in the long run. As Leticia Abad says, spending matters.

But in the short run, well, yeah, I kinda do think that raising taxes would go a long way towards cooling social tensions.

Which begs the question of why smart Chilean politicians don’t have the same impression that I do? Either I’m missing something, or Chilean politicians are really bad at politics. Help?

Macri and motivated reasoning

Abad and Maurer here, with some thoughts on the next 50 days. 

President Macri has only one chance at re-election. That is to villify his opponent. The markets tanked when it looked like Fernández might win, he has to say. Fernández will turn us into Venezuela. Fernández is corrupt. And Fernández is a sock puppet for the other Fernández, Cristina, who plans to eventually turn the keys over to her idiot son. 

In other words, he has to go negative in a way that would make Donald Tr ... well, in a way that Donald Trump would be entirely comfortable with doing. 

Now, the polls show that Macri is underwater by a lot; it is that they show Fernández breaking the magic 45% you need to avoid a second round. One poll had it 55% to 33%. Another put it at 49% to 32%. You can see a whole bunch of similar results here from Clarín. Worse yet, most of the public blames Macri for the crisis. 

So villifying Fernández probably won’t work. But it might. There is private polling data (obtained by Leticia Abad) that indicates he could pull it out. And the election is 46 days away (as of September 11), which is a long time in politics. People engage in motivated reasoning all the time. Macri could easily convince himself that mudslinging will work, and even if it doesn’t, he has to try anyway to keep those evil Peronists out of the Casa Rosada.

The thing is, Macri has to avoid that temptation.

Argentina’s creditors won’t talk to Macri unless the next administration gives at least its tacit agreement. Moreover, Argentina would be well-served by having the lame duck president rip off the band-aid. That would not just make economic sense, it would make it much easier politically for Fernández to fight political pressures to make things worse. 

In other words, Macri should admit that he is a lame duck (at least in private) and get Fernández on board. Hell, in the long run it might even get him a good spot in the history books. 

All he needs to do is overcome basic human nature and hope his opponent can do the same.

More on that in our next post ... 

Argentina tries to stem the panic

Leticia Abad and Noel Maurer here again, reporting on some news that while not unexpected, has arrived unexpectedly prematurely. 

Imagine you are a banker in the mid-19^th century. All of a sudden, you observe more and more people demanding that your banknotes be converted to hard currency. After a couple of days, this is getting serious and you see your reserves plummeting: this is a bank run!

If the bank were in a weak position to start with, then this bank run could have been warranted. The banker will stop paying when she runs out of reserves. But sometimes bank runs are just panic for panic’s sake. Then, as a banker you could refuse to convert these notes to restore sanity, to calm people down.

Now, replace “ban”k with Argentina. The bank run is a peso run. Welcome to President’s Macri’s life.

Since the last post, our dear country has not managed to hold a steady course. The Central Bank keeps on hemorrhaging dollars and technically the country has defaulted, well, selectively, according to rating agencies.

Right now, the federal government is facing substantial payments on its dollar-denominated debt over the next few months. (See the below chart.) That means that the federal government will need to dive into the market to get dollars make the payments. (The Argentine federal government, not surprisingly, collects tax money in pesos.) That will lead to one of two things: (1) A further fall in the value of the peso against the dollar, which would be very bad; or (2) A big drain on the Central Bank reserves as the bank provides the government with the dollars it needs, which would also be very bad, since those reserves are falling fast. 

So what to do? 

Well, ask creditors to let you postpone the payments.

On August 28th, to hold on to its foreign currency reserves, the government tried short-term debt management. It unilaterally extended the payment of short-term bonds on August 28th. That lasted a day. Then the government came up with a plan for further extending repayment — or as they call it a“reprofiling.”  (Check #reperfilar for the corresponding memes).

My favorite: Reprofiling is the new “we need to talk.”

The renegotiation applies only to firms; individual creditors will receive payments as expected. This move should free up around $13.4 billions of reserves.

In other words, let’s kick the can down the road!

This strategy to ease the peso run failed quickly. The dollars kept on leaving the Central Bank’s vault.

To quell the panic, the Macri administration’s second move was the national equivalent of having the banks close their doors to depositors during a run. Capital controls ensued, first for foreign banks to repatriate profits. Then yesterday (on Sunday!) the government issued an emergency decree establishing good ol’ capital controls. All firms now require authorization to operate in foreign currency. Individuals have a cap of $10,000 per month on how much money they can change. Today will be the opposite of a banking holiday, withthe Central Bank extended banking hours until 5 pm (normally banks close at 3 pm).

President Macri decided that it’s better to adjust now when he has lots of reserves than adjust later. Will that stop the panic and make Argentine and foreign investors calm down?

It is clear that this is a last resort, as President Macri denounced capital controls during his presidential campaign. Since the primaries, he is facing an uphill battle to, at best, make it to a second election round. Hence, he is trapped between being a president and a candidate. From the quasi-populist policies announced two days after the elections to the imposition of capital controls binding for firms, he is trying to stabilize the country in hopes of attracting more votes. At the very least, he is trying to avoid to leave De-la-Rua-style — i.e., in a helicopter — before the end of his term.

All this, of course, has implications for the election and what the next president will do. Wait for the next post!

Guest post: Gone with the PASO

Leticia Arroyo Abad here, our woman in the Southern Cone.

Argentines have been battling a recession, several mini-crises, and high inflation for a while now. The result was a resounding defeat for the incumbent administration in the recent primary elections.

The primary is called the PASO, for “Primarias Abiertas Simultáneas y Obligatorias.” In English, that’s the obligatory and open simultaneous primaries. Which means exactly what is says. All parties hold presidential primaries on the same day (simultaneous), in which any voter can pick any candidate for the nomination of any party (open), and in which all Argentine citizens are required to vote (obligatory).

Admittedly, the fine is only 50 pesos, which was about US$1.25 before the election, but we Argentines are public-spirited. Or possibly just angry at our politicians. Either way, turnout hit 75%. 

To the shock of precisely no one who was paying attention, unless you include all the people who are paid big money to pay attention, the defeat for the ruling party triggered a massive response in the markets. The following day, “Black Monday”, the peso plummeted to from 45 to 63 pesos per dollar before recovering to around 54. The MerVal index and government bonds suffered massive losses. And things would have been worse had the central bank not intervened promiscuously to prop up the peso. Here are central bank reserves over the past two months:

(Extra credit if you can spot the IMF loan poor President Macri accepted as the markets battered Argentina in mid-July.)

The panic also hit the banking sector. With the plunge of government bonds, a group of foreign banks demanded a buyback from Treasury (as part of an earlier repurchase agreement to boost reserves) that further depleted our national reserves. But hey, what was lost in reserves was more than won in public debt reduction. That is good news, right?

President Macri was not, shall we say, gracious in defeat. With evident anger (or bronca as we say it here), he blamed the electoral results on all Argentines. In a strange technical sense that is true, as in voters do indeed determine election outcomes, but it seemed like he was blaming the crash on the voters ... and that is not generally a good way to win votes. He did apologize for his unfortunate reaction later on.

Trying to get a the solid win over the opposition will be hard, maybe impossible at this point. Nevertheless, Macri is giving it a try. On Tuesday, the President announced a new economic plan. It includes slashing the value added tax on the consumer basket, increasing university grants for students, cutting taxes for small firms, and freezing gas prices, among other things.

The problem is that this administration doesn’t want to be populist. (Or maybe it doesn’t know how?) So the whole package just falls short. And the Argentine people know populism very well; a collection of short-term half-measures is unlikely to fool anyone. Moreover, the government is trying to please God and the devil at the same time. A spending spree, however temporary, will not meet IMF targets. 

Now, as of this past weekend, we have a brand new minister of finance, as the previous one was not happy with the new “populist” detour. Hernán Lacunza believes that the number one priority is to stabilize the peso using the Central Bank’s reserves as “that is what they are for.” 

One week after the shock, Argentina has a new minister of finance, a somewhat stabilized peso, looming IMF targets to meet, and half-baked populist policies to implement. This should keep the President busy but it is highly uncertain that it may buy him another term.

So what will the opposition bring? Well, we can talk about that in another post.

Observatorio argentino 43: Así pasó

In a technical sense, today’s primary elections in Argentina mean nothing. They are, as indicated by the name, primaries in an election where both major candidates are running unopposed for their party’s nomination.

But ... voting is obligatory in Argentina and the voters can vote for any candidate. That means that the primaries are not going to be driven by dedicated partisans. Rather, they are a dry run for the main event on October 27. And the Fernández-Fernández ticket just won an astonishing 47% of the vote. That is a shocker, because the polls indicated a much closer election. 

In Buenos Aires province, Axel Kiciloff, the economic guru behind Cristina Fernández’s policies, won 50% in his race for governor. Admission: I like Kiciloff on a personal level. But investors do not like his record.

What does it mean? A few things. First, there is a real chance that the peso is going to sink. In general, the Fernández ticket has avoided making radical or irresponsible policy statements. But ... they have a track record from their last administration, and it is not a good one. It includes confiscating private pension accounts, generating shortages of imported goods, and lying about basic statistics. Plus, in this campaign there is the recent imbroglio over paying interest on bonds issued by the central bank. The suggestion is not a default. But the Argentine central bank sets interest rates by borrowing from the banks. Take away that tool and the central bank will have to change how it operates, to great disruption. 

Predictions that Fernández-Fernández will be bad for the economy will be self-fulfilling. On Friday the markets were predicting that Macri would do well. This did not happen. That opens the door to a painful reaction today. Such a reaction will deepen the recession. Moreover, as we all know, panics can take on momentum: maybe I do not think that a Fernández administration will be all that bad, but if I think that you think that it will be, then I want to sell my Argentine assets before you do. 

Is there any hope for Macri? Not really. The moderate third-party candidate got only 8% and he lost Buenos Aires province. In other words, CFK is back. 

Observatorio argentino 42: nobody is suggesting another default

I am in Argentina, my favorite country among all countries. Some of you may know that Argentina is in the middle of a presidential election campaign.

Background: The two main tickets are Macri-Pichetto and Fernández-Fernández. Mauricio Macri is the current president. He dumped his previous running mate in favor of a moderate Peronist, in order to (he hopes) siphon off some Peronista votes. Alberto Fernández was the chief of staff under the Peronist presidencies of Néstor Kirchner and Cristina Fernández de Kirchner (CFK). Everyone expected CFK to run for president, but she pulled a fast one and decided to run as Vice-President with Alberto (no relation) fronting the ticket. 

The controversy: Alberto Fernández declared that he was going to finance higher pensions by halting interest payments on “Leliq” bonds issued by the central bank. A firestorm ensued ... although not in the financial markets. They did not care. But the big agribusiness head convened at the La Rural exhibition to denounce default. Pichetto announced that it would cause a currency crisis. Everybody went running for cover.

Except ... well. Here is the thing. Leliqs are seven-day bonds issued by the central bank. Fernández proposed to stop paying interest on new ones. After all, they turn over every week. He did not propose defaulting on outstanding debt.

Now, all is not well with Fernández policy. After all, it is not clear how having the central bank stop interest payments on short-term notes is going to free up money for the federal government. In addition, the central bank conducts much of its monetary policy via the issuance of Leliqs, which it uses to mop up excess liquidity. That will not really work if they pay no interest. So the idea is kinda silly.

But nobody is proposing another default.

Yet.

Observatorio argentino 41b: Veníamos bien, pero pasaron cosas

I think I should use that quote from Macri for all my Argentine posts. 

So what explains the high electricity prices from the new generation tendered in 2017 and 2018? Short version: these were peaker plants intended to provide capacity when demand spiked. (Why demand spiked in the dead of winter, August is winter in Argentina, is another story. Pasaron cosas, I suppose.)

Consider. In the U.S., the capex per  MWh for a natural gas combustion plant is around $882,000. In August 2018, natural gas prices in Argentina spiked up to 5,931 pesos per thousand cubic meters. That is the equivalent of $7.25 per mmbtu, in American terms. If you assume that peaker plants run about 8% of the time, that gives you a cost per kilowatt-hour of 21.7¢!

Now, reading under Resolution 21/2016 makes it look like these guys intended to provide power for more than just peak demand. In fact, these plants provided 6% of Argentina’s power demand, which is twice what you’d expect peakers to provide. So let’s assume that they run 30% of time, which does happen. Costs would come to around 11.5¢. The chart to the right shows the calculations for coal and natural gas, using Argentine fuel prices in August 2018. (For nerds: I have not included cycling costs for a coal plant operating at 30% of capacity, so the real figures for an equivalent coal plant would be much worse. The $35/ton carbon tax does not exist, which is why it is transparent.) 

In short, the high prices are not a scandal; they are just the cost of peakload electricity in Argentina. 

Macri could have been more up front about this and he could have protected poorer Argentine consumers more. But he made a bet that the economy would do well and preferred to rip off the band aid. It is hard to blame him, but as he said, things do happen. 

It is going to be a tough election this year. 

Observatorio argentino 41a: Veníamos bien, pero pasaron cosas

Given that the name of this blog is “The Power and the Money,” I have to write the following post. 

I am sympathetic to President Macri, I really am. He got hit with a crisis not of his making. But in all seriousness, the fellow went into the crisis with far less goodwill than he should have. Here I am going to lay out one of the missteps Macri made; in the next post I will explain why the poor guy probably did not have another choice. In his own words: “Veníamos bien, pero pasaron cosas.”

Which is probably a good a way as any to sum up Argentine history, but I digress.  

One of the big problems Macri faced when he came into office were subsidized electricity prices combined with a growing power shortage. This needed to be fixed. So he raised prices. That angered people, but the only other choice would have been to let the Argentine grid go the way of Venezuela only without the big dams. One of the reforms consisted of Resolution 21/2016, which allowed the country’s independent system operator, CAMMESA , to contract for new capacity. (An alternative link to the resolution is here.) Basically, new generators were given long-term fixed-price contracts and a promise to buy a minimum amount of power. 

Still, you would think that the folks at CAMMESA would want to keep the price of electricity down as much as possible. Sure, it was an emergency, but if prices gotta rise it behooves you to make them rise as little as possible. So obviously one would expect the wholesale price of power from those sources to be in line with fossil fuel generators in other countries. It certainly should have been in line with the unsubsidized cost of fossil fuel electricity inside Argentina. Call it 4¢ per kilowatt-hour, maybe 9¢. (See Table 53.) 

Well, when power prices under Macri rose and kept on rising, the good people at Risk Event-Driven and Distressed Intelligence (REDD) got curious about how much CAMMESA was paying for these new sources of power. And what did they find? Costs of 18.6¢ in August 2018 and 9.3¢ in February 2019. That compares to 5.5¢ and 4.1¢ respectively for other thermal generators in Argentina in the same period. 

You got it. These new plants, with new technology, coming on-line in 2017 and 2018, cost two to three times what other plants cost. To be fair, they only provided about 6% of Argentina’s electricity demand. But, come on, President Macri! This kind of thing is not helping your case. It looks terrible!!

But wait. Might there be an innocent (or at least sensible) explanation? 

CFK is lucky she lost the 2015 election

Back when she was president, Cristina Fernández (CFK), her chief of staff, Aníbal Fernández, claimed that Argentina had less poverty than Germany. A popular Argentine joke is that he forgot to say “east.”

In 2015, it was obvious that Argentina was going to take a while to recover from the mess CFK  left behind. I predicted it back in 2015: “Another commodity-price boom does not look probable. Inflation will have to be contained or run up to Venezuelan levels. In short, the new president is likely to be less-than-popular when the 2019 election rolls around.”

And I suggested that the best thing for CFK was for her allies to lose the 2015 election and come back in 2019 by running against the inevitably painful adjustment. Which is what she is trying to do! 

I still suspect she will fail, but she has a decent shot. The good news is that Axel Kiciloff has been telling people that a new CFK administration will cooperate with the IMF, so there is a chance that she will govern more responsibly than in the past. But that is not how I would bet. 

Observatorio argentino 40: Election update, and a call that panic is not in order

Another Argentine election is upon us. Which means old friends from New Jersey asking me what I think! And so, after telling them, I go to a conference where other people reinforce my preconceived notions. And what better thing to do with your preconceived notions than write a blog post?

Okay, yes, I should tweet. But a blog post is more satisfying.

Currency markets reacted badly to the news that Governor Juan Schiaretti of Córdoba cruised to re-election with 54% of the vote. And it is true that the result bodes ill for President Macri’s re-election: Córdoba gave Macri his vote margin in the first round of the 2015 election (he won 53% in the province) and he went on to nail down 72% of the province’s vote in the second round. 

The currency markets are worrying too much. The results bode ill for President Macri; they do not bode well for Cristina Fernández de Kirchner, aka CFK. 

Governor Schiaretti is a card-carrying moderate. Yes, he is a Peronist, but Peronism is a broad church that cuts across various parties: he ran on the platform of the moderate Alternativa Federal and the Alternativa’s leaders called to congratulate him after his win. 

Moderate incumbents have won most recent provincial elections in Argentina:

• In Neuquén, home of the Vaca Muerta oil field, Governor Omar Gutiérrez easily won re-election. Gutiérrez stomped Macri’s candidate (who got only 17%), but he also stomped CFK’s proxy (25%). (Gutiérrez’s party, the People’s Movement, has ruled the province for 36 years; it ain’t radical.)
• Same result in Río Negro, where Arabela Carreras got 53%, crushing both the Macri-ally and the CFK-supporter. (Re-election provisions in the state constitution kicked the incumbent off the ballot.) 
• In the San Juan open primary, Governor Sergio Uñac net 56% of the vote. Uñac is a Peronist, but a CFK-foe, who has mooted the possibility of running for President or Vice-President as a moderate. 
• Governor Mariano Arcioni crushed the open primary in Chubut.
• In Entre Ríos, the Peronist incumbent steamrollered everyone. While not exactly a CFK enemy, however, Gustavo Bordet is not considered her ally either. 

In other words, there are a lot of moderates in the country. A moderate coalition for President would pull in Peronists, disillusioned Macri voters, the Socialist party (powerful in Santa Fe province) and political refugees from the  Radical Civic Union.

Keep your eye on June 22nd. That is the deadline to file for electoral coalitions. If a credible alternative emerges (maybe one behind Roberto Lavagna), then that will be good for the country. If multiple alternatives emerge, then that will be good for Macri, but will open the door to a CFK return.

Macri needs to gamble on a fragmented opposition and the scariest possible opponent. In that latter, his dilemma is a bit like Hillary Clinton’s. He can only win against a terrifying opponent ... but that terrifying opponent could win and that would be terrible for the country. 

That said, I would be optimistic (as much as anyone can be, it is Argentina after all) that a moderate alternative will emerge. Again, keep your eye on June 22nd. Other key dates are the open primary on August 11th, followed by the main election on October 27th and (if necessary) the run-off on November 24th. Buckle up, but don’t despair.