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Opinion

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.

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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.

Default looming

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).




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