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.
Comments