Market optimism that Argentina’s next government will move in a more pro-business direction after October elections is exaggerated, according to Lucas Romero, head of Buenos Aires-based polling firm Synopsis Consultores.
Economy Minister Sergio Massa emerged last Friday as the main candidate for the ruling coalition, leading to a boost in bond prices so far this week. Dollar bonds maturing in 2030 have climbed about 2.7 cents to 32.9 on the dollar, the highest level since February.
Massa’s candidacy was seen by some investors as weakening powerful Vice-President Cristina Fernández de Kirchner, who advocates for populist policies. He’s considered a centrist leader who could reverse some of his coalition’s byzantine economic policies if his party pulls off a challenging re-election victory.
But Romero predicts Fernández de Kirchner’s support for Massa and her allies on his ticket will only hinder a pro-market reform agenda. He sees Massa encountering similar infighting over economic strategy that President Alberto Fernández struggled with for much of his presidency.
“Massa will have the same difficulties,” Romero said. Market optimism is overstated “from the perspective that Massa will have his hands freed up. I think the market is underestimating the challenges of governing that this administration will have if it wins an election like this.”
Argentina’s main opposition coalition is expected to receive the most votes during the August 13 primary, according to the most recent Synopsis poll conducted before the June 24 deadline for candidates to announce. Massa’s ruling coalition is second while outsider presidential candidate Javier Milei remains competitive in third place.
Economic policy in Fernández’s government never gained credibility on Wall Street as he and Fernández de Kirchner battled over strategic decisions. For example, lawmakers in Congress loyal to Fernández de Kirchner last year voted against the US$44-billion agreement with the International Monetary Fund that Fernández’s team had spent two years negotiating.
Romero sees Massa encountering the same internal divide and a congress with greater opposition presence that will challenge any legislation he’d seek to push through.
“Today, the market’s priority is to understand whether there’s going to be enough political strength in Argentina to make the decisions that have to be made,” he said.
by Manuela Tobias & Ignacio Olivera Doll, Bloomberg