Five points on Argentina's elections
President-elect Fernandez faces an economic crisis and a political situation that could quickly turn against him.
Fernandez won by a smaller margin than expected.
With 48% of the vote, Alberto Fernandez topped the 45% barrier he needed to win in the first round. It was a triumph for the alliance of the various factions of Peronismo to organize and deliver their voters to the polls.
Contrary to the opinions of many experts and the published polling, Macri significantly gained after the PASO while Fernandez held steady. Failing to reach the 50% mark in both the PASO and first round, the question of whether Fernandez would have won a second round has the potential to haunt the early months of his term.
It’s now Fernandez’s economic crisis.
Markets expected a much bigger win by Fernandez. Given that expectation, it’s unclear how they’ll move this week, but it’s quite likely that they’ll drop in the coming months as Argentina’s economic crisis plays out and the government defaults on its debts.
The markets initially dropped on Fernandez’s PASO victory, meaning his administration already owns this economic crisis in some way. Argentine citizens, whether or not they support Fernandez, are likely to continue pulling money from the banking system out of fear of a potential collapse. Companies operating in Argentina are preparing for significant and long-lasting currency controls.
Macri is likely to be as courteous as possible during the transition to prevent any potential blame shifting once Fernandez comes to office.
Macri will be a formidable opposition leader and Fernandez may act to neutralize him.
As a minor consolation prize for coming in a close second place, Macri’s coalition will control a significant portion of the lower house of Congress, perhaps enough to block legislation. This should force the new administration to compromise. Macri and his allies have a strong position to take advantage of any weakness.
One thing Macri must fear is a politicized investigation into some aspect of his administration that leads to corruption charges. While nothing has yet come to light, Fernandez very well may try to smear his predecessor as a bargaining chip in negotiations and a distraction from other issues his administration may face including their own corruption problems.
Fernandez confirms a foreign relations shift
While his economic direction remains to be seen, Fernandez appeared likely to move Argentina’s foreign policy in a more radical direction. In the past days, he called for Lula to be freed in Brazil (setting up conflict with Bolsonaro), congratulated Evo Morales on his reelection (something very few governments have done), and indicated he will leave the Lima Group and other efforts to pressure Nicolas Maduro from office (in spite of vague criticisms of Maduro’s human rights record during the campaign).
While this is negative for the region, it may also be a signal that Fernandez is offering Cristina Kirchner’s wing of his coalition the foreign policy agenda in exchange for running a more moderate economic agenda. Then again, perhaps that’s just wishful thinking.
The political environment could turn on Fernandez quickly
Fernandez won with less than a majority. He faces an ongoing economic crisis, one that has yet to bottom out, and has not yet announced a plan to fix it. The global trade war could create a recession or continued low commodity prices, making Argentina’s economy much harder to fix. Argentina’s election confirms a national and continental anti-incumbent sentiment. Fernandez faces a strong opposition coalition. The country’s largest cities including the capital, Mendoza and Cordoba are going to be opposition strongholds. His own coalition includes several populist movements who had no problems protesting Cristina Kirchner to gain leverage during her toughest economic moments. His vice president is notoriously corrupt while many voters remain angry about corruption in the country.
That political environment threatens to swiftly turn on Argentina’s new president-elect. His honeymoon will be short and his political capital limited. Protests are likely as the economy faces a further downturn in 2020.
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Macri’s loss fits an anti-incumbent environment in the region that is also behind many of the protests in other countries. I’ll be writing over the coming weeks about how the events in the fourth quarter of 2019 could spill over into an even more volatile 2020.