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Alberto Fernandez wins in Argentina

See Video: Fernandez Wins in Argentina as Voters Rebuff Macri's Austerity

- President Macri narrowed voter gap from a poor August primary
- Fernandez faces task of pulling economy out of long slump

By Patrick Gillespie and Jorgelina Do Rosario / Bloomberg

Petroleumworld 10 28 2019

Opposition candidate Alberto Fernandez swept Argentina's presidential election, ousting pro-market incumbent Mauricio Macri and tilting the nation back toward left-wing populism at a time of economic crisis.

Fernandez, a political insider who has never held national office, took 48% of Sunday's vote with 95% of ballots counted, enough to avoid a runoff. Macri secured 40%, and other candidates divided up the rest.

With Fernandez due to meet with Macri on Monday morning to discuss the transition, the central bank issued a reminder of the fragility of the economic situation he will inherit with a late night announcement of tighter currency controls.

Macri congratulated Fernandez in a brief speech at his campaign headquarters. Shortly after, Fernandez, who takes office Dec. 10, addressed jubilant supporters alongside his deputy, former president Cristina Fernandez de Kirchner.

“Hopefully those who were our opponents during these four years are conscious of what they're leaving behind and help us rebuild the country from the ashes,” he sai

Fernandez's win signals the return to national power of Peronism -- an anti-elite political movement that traditionally favors workers over business owners. But while voters rejected the austerity of Macri's government, the outcome was also tighter than expected, reflecting wariness about Fernandez's ability to steer the economy through tricky waters.

The central bank said early Monday it would further tighten limits on the purchases of dollars, to just $200 per month from the $10,000 set on Sept. 1. A central bank spokesman said earlier that financial institutions will open normally.

After a frenzied final few weeks of campaigning Macri managed to narrow the vote gap from a 16 percentage point deficit in a primary in August -- an outcome that spooked markets at the time, sending the peso tumbling and forcing Macri to enact capital controls. His party also fared better than forecast on Sunday in several districts.

The Man Who Would Be Argentina's President Terrifies Investors

“While still a loss, it creates a more balanced Congress and political landscape going forward,” said Jimena Blanco, political research director at consulting firm Verisk Maplecroft in Buenos Aires.

Fernandez's broad promises to improve things will run into immediate difficulty when he is sworn in, given a lack of funds to play with: The economy is contracting, inflation is above 50%, unemployment is more than 10% and a third of the population lives below the poverty line. Investors also expect the government to default at some point

Fernandez, 60, must satisfy the competing demands of far-left factions in his broad coalition that want more social spending, and the International Monetary Fund, which agreed to a record $56 billion bailout last year. The IMF will likely have little appetite to dole out more cash if Fernandez implements policies that risk a balanced budget.

ARGENTINA REACT: Fernandez Win Puts Three Issues in Early Focus

His victory, and the uncertainty around it, comes at a fragile moment for Latin America. A wave of violent, anti-austerity protests has rocked Chile and Ecuador; Peru faces major political uncertainty; Venezuela's economy has collapsed; and the presidential election result in Bolivia has been called into question.

“Fernandez will have to be a little bit humble about the victory,” said Alberto Bernal, chief global strategist at XP Investment in Miami. “The Fernandez win was priced in, but this tight a difference was not priced in.”

A key question will be how Fernandez interacts with his powerful vice president. Kirchner was president from 2007 to 2015 and handed Macri an economy damaged by years of Peronism. She was initially expected to run for the top job, and her influence in the new administration will be closely watched.

Kirchner Could Take Bigger Role if Economy Stagnates: Doubleline

In her time as president, Kirchner raised tariffs, printed money, ignored investors and published economic data that understated inflation and overstated growth. While Fernandez's advisers say he'll control policies -- Kirchner kept a very low profile during the election campaign -- her popularity helped catapult him to victory and her presence concerns investors.

Now a senator, Kirchner faces 11 separate corruption cases. She denies wrongdoing in all of them. Multiple high-ranking officials in her government, including her former vice president, have been convicted on separate graft charges.

Argentina Investors Look Ahead After Fernandez Pulls Out Win

Fernandez has a broad array of advisers, from traditional policy makers to economists who helped implement Kirchner's policies when she was in office.

On the campaign trail he's talked about raising salaries and social security payments, boosting exports, cutting interest rates and lowering inflation, all while reaching a fiscal surplus. He's also spoken about having a “friendly” renegotiation with creditors and the IMF.

Macri's defeat marks a stark finish for a leader who arguably had more international support than any president in recent Latin American history. Elected in 2015, Macri promised to turn around the economy, slash inflation, end poverty and put Argentina back on the world stage with pro-market reforms.

Instead, he struggled to attract foreign investment. His government racked up debt to cover the bloated deficit he inherited from Kirchner.

Argentina's Front runner Signals Bond Haircut of About 20%

The economy did show promising signs in 2017, and Macri's party performed strongly in mid-term elections.

But a record drought, falls in global markets, and zigzagging policies dragged the economy into a currency crisis and recession last year. The election uncertainty only compounded the downturn. Macri's return to the IMF hurt his approval rating, dredging up scars from its last deal with Argentina in 2001, which ended in economic collapse.

Argentina's economy is now likely to have contracted for three of Macri's four years in office. Fernandez will take the reins with no easy choices ahead.

“The dynamic between Macri and Fernandez in the next 45 days will define and set the tone for the months to come,” said Juan Cruz Diaz, director of consulting firm Cefeidas Group. “The strength of the opposition, as a result of a robust electoral performance of Macri, will force Fernandez to negotiate to advance his agenda.”

— With assistance by Sydney Maki, Scott Squires, Carolina Millan, Daniel Cancel, and Ignacio Olivera Doll

Story by Patrick Gillespie and Jorgelina Do Rosario from Bloomberg. / 10 27 2019


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