MercoPress. South Atlantic News Agency

Macri vows to win a second term in October despite Sunday's trouncing

“I trust we will have a more even election in October that will allow us to go to a second round. Those who don’t want to go back to the past will join us,” Macri said

Argentina's president Mauricio Macri vowed on Monday to win a second term despite a surprisingly strong performance by the opposition in the primary election that set off a shockwave through markets, crashing the peso currency and sending stocks and bonds tumbling.

 Macri said he would “reverse” the result of Sunday’s primary, but acknowledged that a weaker peso triggered by the surge in support for Peronist opposition candidate Alberto Fernandez and his running mate former President Cristina Fernandez would fuel inflation.

“I trust we will have a more even election in October that will allow us to go to a second round. Those who don’t want to go back to the past will join us,” Macri said at a news conference, adding that he was not considering a cabinet reshuffle.

Alberto Fernandez, a former cabinet chief, dominated the primary vote by a much wider-than-expected 15.5 percentage point margin over the president.

Fernandez has said he would seek to “rework” Argentina’s US$ 57-billion standby agreement with the International Monetary Fund if he won October’s general election. But despite Macri’s struggles to turn the economy round, investors see the Fernandez ticket as a riskier prospect.

Argentine stocks were among the top losers on the Nasdaq index, and the local Merval stock index closed 31% weaker. Falls of between 18-20 cents in Argentina’s benchmark 10-year bonds and century bond left them trading at around 60 cents on the dollar or even lower. Meanwhile the country risk according to the JP Morgan index, skyrocketed 68.2% to 1.467 basic points.

Morgan Stanley downgraded its recommendation for Argentina’s sovereign credit and equities from “neutral” to “underweight” and said calculations suggest the peso could fall another 20%.

Argentina’s central bank intervened, selling US$105 million in the foreign exchange market to defend the peso in the face of the massive sell-off. The auction used the bank’s own reserves for the first time since September of last year, traders said.
The peso weakening was dramatic but Win Thin, global head of currency strategy at Brown Brothers Harriman in New York, said he does not expect an emerging markets-wide contagion beyond perhaps Brazil and Uruguay given that the peso is not heavily traded.

Edward Glossop, Latin America economist for Capital Economics, predicted even higher inflation in a country that has fought against chronic rising prices for decades. It is “completely feasible” for the peso to drop to as low as 70 per U.S. dollar, Glossop said.

Alberto Fernandez said the market reactions were in response to Macri’s failures on the economy.“Markets react badly when they realize they were scammed. We are living a fictitious economy and the government is not giving answers,” he said in a radio interview Monday morning.

Voters were given a stark choice to stay the course of painful austerity measures under Macri or return to economic policies that are heavy on state involvement. Cristina Kirchner imposed strict currency controls that slammed investment during her 2007-2015 administration. She fought with the farm sector over export taxes and presided over a multi-year standoff with bondholders that kept Argentina locked out of the international capital markets.

Fernandez prevailed on Sunday in the majority of the country’s provinces, but one of the starker differences was seen in the poor suburbs of Buenos Aires. What particularly dented Macri’s support were newly impoverished Argentines who were more energized to vote to punish him at the polls, political analysts said.