ASSESSMENTS

In Argentina, an Economic Crisis Portends Political Chaos

Oct 26, 2019 | 13:31 GMT

Argentina’s economic problems have opened the door to a return of populist policies after the presidential election in October.

Demonstrators in Buenos Aires protest against the conservative economic policies of Argentine President Mauricio Macri in August 2019.

(RONALDO SCHEMIDT/AFP/Getty Images)

Highlights

Argentina's worsening financial crisis has increased the chances that a protectionist opposition government will successfully unseat President Mauricio Macri's pro-business administration in the country's Oct. 27 presidential election.
To prevent capital flight amid the peso's slide, the Argentine government may tighten currency controls in the weeks leading up to the election, a measure that would likely remain in place after the vote.
If opposition leader Alberto Fernandez wins the presidency, he will try to renegotiate the austerity measures tied to Argentina's rescue program with the International Monetary Fund.
A return to protectionist policies under a Fernandez-led government would put the future of the Mercosur-EU free trade deal at risk, as well as strain Brazilian-Argentine trade ties.

In the primary presidential vote on Aug. 11, populist candidate Alberto Fernandez, handily defeated the country's conservative president, Mauricio Macri. For months, polls had given Macri a fair chance of winning the Oct. 27 presidential ballot, and Fernandez's victory caught financial markets largely off guard, deepening the country's economic tailspin. Instead of using the upset to fight even harder for his reelection, Macri will spend the next few weeks trying to prevent the country's financial situation from deteriorating further. But in doing so, the Argentine president faces a steep uphill battle. This means that the influx of uncertainty now shrouding country's future will likely only get murkier in the lead-up to the October vote -- and probably long after that, should a protectionist government wind up back in Buenos Aires before the year's end. ...

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