Since Argentine President Mauricio Macri heeded opposition calls to start negotiations on $101 billion of debt with the International Monetary Fund and private creditors, his political rivals have gone silent.
With the government unable to roll over more than 10% of its short-term debt in an auction this week, Macri moved to extend maturities on local notes while starting creditor talks on other bonds. But even if the plan were merely to calm investors worried about an imminent default, as his close advisers claim, it also had a clear political effect and front-runner Alberto Fernandez and his associates aren’t sure how to respond.
Fernandez actually finds himself at a crossroads: By supporting the debt renegotiation, he could embolden Macri’s beaten down election chances; but shunning the move could reek of opportunism and hypocrisy. Macri’s decision to send a bill to Congress to debate the plan to extend local debt maturities will eventually force the opposition to take a stance one way or another.
So perhaps for now the best tact is silence. While a person close to Fernandez acknowledges that “at least” the government is now doing something, they refrain from elaborating on Macri’s strategy, even in private.
Fernandez, the 60-year-old candidate who shocked Argentines and investors alike by taking a commanding 15 percentage-point advantage in an Aug. 11 primary, will conveniently be flying to Spain this weekend to keep a previously agreed upon commitment to teach courses at a university.
His running mate, former President Cristina Fernandez de Kirchner, returned to Argentina Friday from a trip to visit her daughter in Cuba and will appear at a book signing on Saturday in the city of La Plata.
Her words will be watched closely. After all, the fear among investors who have dumped Argentine assets at a historic pace in the past 20 days is precisely that Fernandez will be steered back into imposing the same sort of capital and price controls that flourished under Kirchner.
With bonds at or now below 40 cents on the dollar, there might not be a lot more room to fall before the Oct. 27 election, but a sharp criticism by Cristina -- as she’s known -- of the IMF or bondholders could spark another bout of selling.
For Macri, who is both trying to heal the wounds from the stunning primary defeat and keep the wheels on long enough to finish his term on Dec. 10, it’s unclear how his debt gamble may play out. The currency stabilized the day after the plan was unveiled even as bonds and international reserves at the central bank continued to plunge.
Polls won’t be a reliable gauge after nearly all opinion surveys flopped in the primary.
The road to the actual election and eventual government handover seems longer every day.