On visiting Buenos Aires to research a Euromoney article about Argentina’s financial system, capital markets activity and macro-economic environment, two things soon become clear. The first is that while people are happy – keen even – to take meetings, nearly all conversations have to be off-the-record. The second, not unrelated, fact is that discussion about Argentina’s economy is the reverse of James Coville’s famous second bulletpoint in his succinct three-point strategy message that hung in the Little Rock headquarters of President Clinton’s 1992 presidential election campaign: ‘The economy, stupid’. In Argentina, it’s politics that is central to understanding the economy.
Unfortunately, the politics aren’t easy to read. When in October the incumbent president Cristina Kirchner lost in the primaries of the parliamentary elections asset prices jumped. The Congressional elections that take place on 27 October will provide a clearer view of Kirchner’s presumed dwindling electoral appeal – and therefore political base – but the prospect of a third term for the President – which would have necessitated a constitutional change to the current two-term limit – now seems remote.
“There is no more chance that [Kirchner] will continue in the government after 2015,” says one CEO of a local bank. “She’s never said that she has realised this is the truth, but she is convinced of it.” Her current health problems (the President was released from hospital on 13 October following surgery for a cranial blood clot and ordered to rest for at least one month) complicate the situation further, but Argentineans are preparing for political change after the next presidential elections in December 2015. International investors are also taking notice – the country has to date been grouped with Venezuela as the remaining dysfunctional, over-regulated and mis-managed Latin American economies, but political change could lead to economic normalisation and Argentina – despite all its distortions and problems – remains an attractive proposition. The stock market’s Marvel index is up 127% in the past year, with most of that jump taking place in the last couple of months. An international bank tells Euromoney it is preparing for a delegation of international equity investors who are visiting the country in the following week, which is the first such visit in six years. Bond prices – notoriously volatile – have also spiked on the prospect of a new government’s possible desire to solve the legal issues with the holdout investors and conclude Paris Club negotiations with a view to re-entering the international capital markets.
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