Argentine Political Outlook (Ago-23-19)
Aug-23-19, by Rosendo Fraga

1. Argentina is in a difficult political-institutional transition, whose most useful reference is that of Alfonsin-Menem in 1989. At that time, the triumph of the second on May 14 hastened an economic crisis that triggered hyperinflation and the President was forced to step down earlier in July 10, 55 days later and 4 months before the end of the term. Now Macri has had a tough electoral defeat in the open primaries of August 11. There are almost 70 days to go before the first round (October 27) and 110 days until the end of the term (December 10). The change of context in the last week (August 12 to 19) shows that both terms entail a very long time in both political and economic terms. The central problem is that whoever governs has lost power in real terms - even if the open primaries only had the effect of a "non-binding referendum" - while the winner (Fernández) has nothing but expectation. This is the problem: neither has real power and only an explicit agreement between the two can contain the crisis that has been unleashed by political and economic uncertainty. Roberto Lavagna's proposal to suspend "electoral actions" to discuss and address the economic crisis - the campaign legally begins on September 7 - is sensible, but was not accepted by either of the two candidates that remained in the first two places. 

2. The resignation of the Minister of Finance (Dujovne) is a consequence of the crisis hitting the agreement with the IMF and the position of the Trump Administration with Argentina is uncertain today. On August 15 and 16, President Macri adopted a series of "populist" measures in order to win the election - presumably in the second round that takes place on November 24 - which is almost impossible, given the 15 points of lead by the Fernández-Fernández ticket at the national level and the 20-point lead of Kicillof-Magario in the province of Buenos Aires. The President is thus putting governance at risk and even the completion of the term due to an alternative that lacks real possibilities. The measures adopted imply non-compliance of the agreement with the IMF and this hastened the resignation of Minister Dujovne. The visit of the IMF mission and the disbursement of the next installment is now in doubt. In this context, the appointment of the new Minister of Economy (Lacunza) has not served to calm the markets, which on Monday 19 reacted negatively. Between August 12 and 19, the country risk rose more than 1,000 points. This happens in times when the Trump Administration's position with Argentina is not clear, which is key to the relationship with the IMF. The White House - with many more relevant urgent issues - analyzes whether to continue supporting Macri's unfeasible electoral strategy or start talking with the future President. Its silence - unlike the anti-K verbiage of the President of Brazil - is eloquent about it. 

3. The situation within the ruling party is difficult, everyone formally supports the President, but few believe that the electoral result can be reversed. After the erroneous speeches of Macri on the night of Sunday 11 and Monday 12, two days later at the Kirchner Cultural Center he gathered the "larger cabinet". (More than 1,000 officials). He apologized for the mistakes, but confirmed the decision to win the election. The speeches of Larreta, Vidal, Pichetto and Carrió, among others, supported this decision. But the first two have decided to conduct their own electoral campaigns, without the participation of the President, who with a Political Table that seeks to cut the power of the Chief of Staff (Peña), intends to calm down criticism within Cambiemos. Radicalism has decided to do the same in Mendoza and the party has publicly requested a Macri-Fernández agreement to guarantee governance, which the Administration rejects. The mayors of Cambiemos of the province of Buenos Aires have decided to "municipalize" the campaign, with Vidal's endorsement. Despite this, Macri announces the replacement of Dujovne with Lacunza, as a joint decision with her and the Mayor of Buenos Aires. The freezing of the gasoline price for 90 days has generated strong resistance in the oil provinces and the companies and unions in the sector. On Tuesday 20, the Minister of the Interior (Frigerio) meets with them, seeking to approach positions, when the investment in Vaca Muerta has been jeopardized. There are road blockades in Chubut and Neuquén, in view of an authority that is slow to react. 

4. For his part, the winner, after starting last week saying that the responsibility was of the government, quickly went on to assume a position of moderation, communicating with Macri by telephone. This communication served to generate a truce in the markets on August 15 and 16, which was broken by Dujovne's departure at the beginning of this week. But this contact showed that the only effective way to contain the crisis that threatens governance is the agreement between Macri and Fernández, in the style that allowed Brazil in 2002 to maintain it, when an eventual Lula government generated panic in the markets. Alberto Fernández said he would avoid default, would not close the economy, praised the Supreme Court and sought to calm the uncertainty. One of his economic spokesmen (Nielsen) said that the debt would not be restructured. Cristina on the other hand, remained in the background and travels back to Cuba to return at the beginning of September, when she will resume her campaign focused on the presentation of her book. La Cámpora also maintains a low profile, concentrating on gaining electoral positions. But the Peronist governors self-convened on Wednesday 21 at the Federal Investment Council (IFC). In 2001, at the end of the crisis that ended with the departure of De la Rúa, they met in the same place. They question the "populist" measures of Macri, which have an important fiscal cost for the provinces. The CGT remains prudent in supporting governance, but picket groups have called for a demonstration for Thursday 22 in downtown Buenos Aires, demanding an increase in social assistance, when the Vital and Mobile Minimum Wage Council meets. That same day, the Clarín group holds a conference on governance, with the participation of former Brazilian president Fernando Henrique Cardoso, Alberto Fernández and Mauricio Macri. All three are expected to give lectures, but avoid a group picture. Perhaps it is a sign of the path that can be followed to address the crisis. 

5. To conclude: 

a) Argentina has hit a tough political and institutional situation, worsened by the economic crisis, finding a precedent in the disorganized transition between Menem and Alfonsín in 1989, which should now be averted. 

b) The replacement of the Minister of Finance results from the failure to honor the agreement with the IMF observed in Macri's populist measures, something that Launza's appointment will not solve. 

c) In Cambiemos, Macri's desperate attempt to win the election has led Vidal and Larreta to hold their own campaigns, while governors and companies question the frozen price of gasoline. 

d) Fernandez tries to give signs of moderation in all fronts, with Cristina taking a back seat; but the self-convened governors at the CFI have questioned Macri's populist measures.