Macri’s mid-term elections boost political capital
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Macri’s mid-term elections boost political capital

Markets buoyed by win that eases path for further reforms; all eyes on investment boost needed for gradual fiscal adjustment.

President Mauricio Macri and his team celebrate their election results

The strong performance by president Mauricio Macri’s Cambiemos coalition in Argentina’s mid-term elections on October 22 will increase already-high investor optimism about the country’s financial fortunes for the rest of this parliament and beyond.

Bankers report that investors and issuers had been waiting for a positive signal from the country’s electorate before committing to further debt and equity transactions. In the end, Macri’s coalition won 41% of all available seats, which is up from the 35% of seats it won in the last presidential election, and better than opinion polls and the strong primary performance predicted.

New debt and equity transactions should swiftly follow these results, which point to increased governability for the next two years of Macri’s term and a possible majority position after the next presidential election in 2019. The banks have been positioning themselves for the estimated $3.5 billion in equity issuance (Bloomberg recently reported that Morgan Stanley had relocated the bank’s head of Latin America equities to Buenos Aires from New York) and the volume of debt issuance should remain high.

However, it is the level of foreign direct investment that will be crucial to sparking the growth that will ease Argentina’s fiscal deficit and, as Euromoney reported in September, there are going to be challenging dynamics even with Macri’s position enhanced by the mid-terms. 

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