Abu Dhabi, UAEMonday 10 August 2020

Argentina's Fernandez pledges to 'turn the page' as left wins power

New leader vows to take country in vastly new direction to business-friendly reform agenda of predecessor

A homeless man sleeps under posters of newly elected president Alberto Fernandez and his running mate Cristina Fernández de Kirchner as people walk through a central business district the morning after populist was declared the winner in the presidential elections on October 28, 2019 in Buenos Aires, Argentina. Spencer Platt/Getty Images
A homeless man sleeps under posters of newly elected president Alberto Fernandez and his running mate Cristina Fernández de Kirchner as people walk through a central business district the morning after populist was declared the winner in the presidential elections on October 28, 2019 in Buenos Aires, Argentina. Spencer Platt/Getty Images

Argentina’s president-elect Alberto Fernandez vowed on Monday to ‘turn the page’ on the IMF-backed policies of Mauricio Macri, after voters weary of rising poverty and inflation swept the left back to power.

Argentina’s electorate voted overwhelmingly on Sunday to ditch the economic liberalisation and austerity of conservative Mr Macri, which has left the nation on the brink of a $100 billion debt restructuring, and turned towards the Peronist left.

The two leaders talked on Monday about a transition of power, with Mr Fernandez vowing to take the country of more than 44 million in a vastly new direction to the business-friendly reform of his predecessor, a former magnate with close ties to the US.

“We began to turn the page today. This page will be forgotten and we will start writing another story on December 10 when we arrive with Cristina in government,” Mr Fernandez said, referring to his divisive running mate Cristina Fernandez de Kirchner.

The return of the Peronists, and populist former president Ms Fernandez de Kirchner, has startled some in Argentina and beyond, concerned that reforms to open the country more to global markets could be undone.

Markets on Monday were mixed, still uncertain how to respond to the result with many questions unclear.

Argentina’s central bank moved swiftly in the early hours of Monday to tighten capital controls during the transition and the peso closed 0.65 per cent stronger.

In the parallel black market the local currency was more volatile, having fallen as low as 77 to the dollar, while Argentine over-the-counter bonds dipped 1.6 per cent on average.

How Mr Macri and Mr Fernandez work together over the next few weeks will be key. Talks are looming with creditors over $100bn in debts, reserves are dwindling, inflation is sky-high and rising poverty is sparking anger.

“I’m worried because I already went through Cristina’s government and it was very hard for farmers,” said Sergio Storti, 58, a grains and cattle farmer in the bread basket province of Buenos Aires.

Markets are watching closely to see where Mr Fernandez, a dark horse who was a relative unknown until this year, stands on key policies that could affect the peso, which crashed in August after his landslide win in a primary vote.

In a bid to soothe markets, Mr Fernandez and Mr Macri on Monday signalled with their meeting that they would work together during the transition until December.

Treasury Minister Hernan Lacunza said the two leaders had “good dialogue” and there would more meetings between the two teams in coming days.

“There is total willingness from this outgoing government to work together in the transition,” Mr Lacunza said.

Mr Macri later said in a tweet that he and his team would be available to work with Mr Fernandez to ensure a “democratic transition”.

Mr Fernandez’s win shifts the political balance in Latin America, with two of the region’s top three economies – Mexico and Argentina – now led by leftists, as right-wing governments in Chile and Ecuador come under pressure to roll back market reforms.

Mr Fernandez said he would pursue close ties with leftist leaders in Mexico and Bolivia.

The election of Mr Fernandez, who Brazil’s right-wing President Jair Bolsonaro has called a “red bandit", sets the stage for a run-in between South America’s two biggest economies, which could derail their Mercosur trade bloc.

Mr Bolsonaro said during a visit to Abu Dhabi that Argentine voters had made a mistake and he had no intention of congratulating Mr Fernandez.

US Secretary of State Mike Pompeo said that America was ready to work with Mr Fernandez to “address the interests our countries share".

Mr Fernandez faces a major challenge to revive Argentina’s economy, which was in recession for much of the last year, while fending off a rising mountain of debt payments amid concerns the country may be forced into a damaging default.

Investors will be looking for signs of Mr Fernandez’s economic policies, the make-up of his economic team and the role of Ms Fernandez de Kirchner, who was president from 2007 to 2015.

Rating agency Moody’s said on Monday the country was facing “substantial credit challenges” with limited funds.

And the new head of the IMF, Kristalina Georgieva, tweeted that the Fund looked forward to engaging with Mr Fernandez’s administration.

He replied in a tweet saying Argentina “hoped to get out of this crisis as soon as possible and to grow again, so allowing us to fulfil our commitments as well as having a solid economy which benefits us all".

The IMF extended a $57 billion credit facility to Argentina in 2018 to help the country meet its debt obligations.

Some private investors are now concerned the Fund may drive a hard bargain if Argentina is forced into a restructuring.

On the streets, Mr Fernandez's supporters cheered the change in direction on Monday, pointing to economic malaise under Mr Macri, which has hit people’s wallets across the social spectrum as domestic production and consumption waned.

“The truth is that I am happy with the change,” said Ramora Perez, 61, in Buenos Aires.

"We did not want to keep going with the same government and hopefully things change a bit now for everyone because it was bad."

While Mr Macri tried to bring in reforms to lower the deficit and lure foreign investment, his plans were blocked in 2018 by a sharp downturn, while the collapse of the peso increased inflation and pushed up interest rates to world-high levels.

That has caused a rapid rise in issues such as poverty, which is now at above 35 per cent, and hunger and homelessness, factors that are also exacerbating a rise in cases of tuberculosis.

Luis Alberto Coria, 19, a worker in the capital, blamed the government for “bad economic policies.”

“This greatly affected working people and the middle class, practically destroyed it,” he said while sitting in a plaza in the city.

“It is cause and consequence. The results that Macri has been dealt are well deserved.”

Updated: October 29, 2019 05:32 AM

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