Argentina: Politics and Policies
The results of the recently held presidential primaries in Argentina are difficult to read. Although Daniel Scioli (the ruling party’s candidate) obtained more than 38 percent of the vote versus the 30 percent received by Mauricio Macri (the main opposition party), a similar result in the October 25th presidential election will lead to a ballotage. Rules say that to avoid the runoff, Scioli needs to obtain at least 40% of the vote and a 10-point lead versus the second most voted candidate; or he would need to obtain a straight 45% of the vote (independent of the difference with the second most voted candidate).
Clearly, Scioli emerged as the strongest contender for Argentina's presidency. Macri from “Cambiemos” (Let’s Change) is undoubtedly the best positioned opposition leader, led by Sergio Massa, whose party "UNA" received some 20% of the vote. Some political analysts take these results as a sign that argentines definitely want a change in politics and policies—as more than 60% of the electorate voted for alternatives to the ruling party. Financial markets seem to agree with that view, hoping for a runoff between Scioli and Macri which would lead to a victory of Cambiemos. But things are a little more complicated than that. The fight between Macri and Massa for the second place may help Scioli win in the first round, as he could surpass the 40% mark with neither Macri or Massa obtaining more than 30% to force a ballotage. The harder the fight between Macri and Massa, the better for Scioli, who is convinced that avoiding a ballotage is probably his only avenue to become president.
Beyond politics, Argentines in general and businesses in particular are trying to anticipate changes in economic and commercial policy. While there is no doubt that Macri and Massa will change most of the controversial policies applied during the Kirchners’ era—notably unnecessary subsidies, an overvalued exchange rate, and all sorts of trade and financial restrictions—Scioli's approach remains a question mark. Although he is running on the slogan of keeping the status quo making a fierce defense of Kirchners' policies, his economic advisors admit there are macroeconomic imbalances and suggest significant changes to the current policy mix. In sum, more questions than answers; both from a political point of view and from a policy perspective. But I would take some risk and make a personal call: I think that no matter who the next Argentine President is, there will be sizable changes in policies. And in the longer term, those policies should bring opportunities for businesses and for Argentina's people.