Argentina: It’s time to take money off the table
Argentina’s politicians have played their cards for the coming presidential election – Cristina Kirchner surprised everyone by lining up behind Alberto Fernandez.
Kirchner is calculating that Peronism will get more voters if she isn’t the lead candidate, given her high rejection rate. That’s logical – and so too was president Macri’s response in choosing Miguel Angel Pichetto, a non-Kirchner Peronist to bolster support to his ticket from the moderate left.
In aggregate, these machinations probably result in a small electoral positive for Macri, which was extended in recent days by positive data regarding inflation and the current account. The market feels like momentum is with the re-election bid.
However, it increasingly looks like the country will default, whoever wins the election in November (or October in the unlikely event a run-off isn’t required).
As everyone knows, if Macri doesn’t win, the chances of default are high. But – and investors will probably increasingly grasp this painful point as the months to the election tick down – another Macri administration would also do well not to have to seek a debt restructuring before the IMF’s deal expires in 2021.
Why? Well, for starters, since the collapse in the peso last year debt-to-GDP has climbed to 86% (and foreign currency debts now represent 80% of the total).