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Argentina does not seem to be able to take a break. With record inflation and a stagnant economy, its financial assets were upset this week, pushing foreign investors to rush for the door.
One of the main factors behind the sudden turnaround in sentiment has been political, as the government of President Mauricio Macri faces the increasingly real possibility that former President Cristina Fernández de Kirchner is on the brink to make a political return.
Here is an overview of this week's market collapse and prospects for Argentina.
What is happening?
Argentine assets were affected three days in a row this week, although prices began to recover on Thursday afternoon. Sales in the emerging markets of the world, triggered by the strengthening of the US dollar, were amplified in Argentina by growing fears over the uncertainty surrounding the October presidential elections.
The gap between interest rates for Argentine bonds and US Treasuries has risen by more than one point, reaching unprecedented highs since market-friendly Mauricio Macri became president. in 2015. At the same time, the peso collapsed, reviving the memory of the monetary crisis of last year, which prompted the International Monetary Fund to intervene with a record rescue plan of 56.3 billion of dollars.
Why now?
Finally, investors seem to have realized the very real possibility that Mrs Fernández could return to power. Ignacio Labaqui, an analyst at Medley Global Advisors, said the markets underestimated both the odds that the fiery populist is a candidate – indeed, she has not yet confirmed that she will stand for election – and that she could win.
Investors were released from the torpor with the publication this week of a survey by local polling firm Isonomia, in which 45% of respondents said they would vote for Ms. Fernandez in the second round of voting against Mr. Macri. percent would vote for. Almost 20% remain undecided.
"The latest polls have frightened investors," said Labaqui, who explained that they were overall optimistic early in the year, although the trend began to reverse with the publication of extremely high inflation figures in January. "[The Isonomia poll] was like shouting fire inside the cinema. This caused panic. [Wednesday] It was a bad day for emerging markets, but every time that happens, it's twice as bad for Argentina because it's more vulnerable. "
What is at stake?
No less than a return of populism in Argentina. The prospect of another presidency for Ms. Fernandez clearly has investors at stake, considering what this could mean for the IMF program and the possibility that Argentina is defaulting on its debt more and more. heavy with sovereign debt. But their fears may become a self-fulfilling prophecy. If market volatility affects the real economy – for example, fueling already extremely high inflation – it could jeopardize Macri's chances of being re-elected in October.
Luis Tonelli, a political analyst in Buenos Aires, pointed out that it would not be the first time that Peronism – which has been the dominant political force in Argentina for 70 years before falling back into opposition – would benefit from the same. an economic crisis.
"Peronism came to power after an economic collapse in 1989 and 2001. It is now a question of whether this evil cycle can be broken and whether the non-Peronist forces can carry out their mandate – or at least if Peronism can return to power without a prior crisis, "he said.
Does Cristina Fernández have a real chance of winning the elections?
If the resounding success of his hit book "Sincerely" really deserves something, then yes. Already sold in bookstores after its release this week, it is a sensation in publishing. Booksellers, who are suffering like everyone else from the current recession in Argentina, have reported to feel "popular"
Pollsters quickly point out that the elections are still far away. "It's a mistake to quickly jump to conclusions about what might happen during the elections," said Juan Germano, director of Isonomia, in the company's recent poll.
He pointed out that during the election of Mr. Macri in 2015, the result of the first round ended up shaping the result in the second round. In 2015, the fact that Mr. Macri received more votes than expected in the first round and his victory in the very important province of Buenos Aires had a considerable impact on the final result.
In addition, 60% of respondents in the Isonomia survey said they had not yet decided how they would vote on that day. And of those who said they were still undecided at the polls, 17% said they would not vote for either candidate, while 60% of them voted for Macri in 2015.
"Journalists, analysts and investors are all trying to figure out what will happen in the elections, but the main players – the voters – have yet to decide," said Germano.
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