Argentina election results open the door for policy change
President Kirchner’s party suffered in Sunday’s congressional elections. Analysts see some near-term changes, even if big adjustments await the 2015 presidential polls
President Cristina Kirchner’s
FPV party lost ground as expected in Congressional elections
Sunday. In addition to reinforcing analysts’ views
that her re-election is unlikely in 2015, it could also bring
more immediate effects for economic policies, observers say.
The president’s party won 33%
of the national vote, and was defeated in the main provinces.
The result followed a 27% result in the August primary
elections. Barclays expects the post-election period to feature
policies aimed at reducing political tensions, as well as labor
and social unrest.
"Authorities will likely follow through
with the policy gyrations that started with [the exploration
joint venture agreed earlier this year with] Chevron and
accelerated after the primary elections," the bank says. "Such
a policy approach is positive, in that it anchors private
sector expectations, lessening concerns about confiscatory
risks and the long-term economic/political outlook."
The shift should lower the private
sector’s net dollar outflows and should continue
to support reserves and markets, it says. Also, lower external
financing costs could allow international market access for
provincial governments. This year, many provinces have accessed
the domestic bond market, often for dollar-linked debt,
departing from a use of the international markets in previous
Chubut did so earlier this month.
Noting "uncertainties about the course of
the economic policies in the coming months," Itaú says
it expects further FX control tightening to stop the drain in
international reserves and an acceleration of the pace of
depreciation of the official exchange rate.
On the negative side, Barclays finds the
government is also unlikely to meaningfully change tariffs
before 2015. A sharp depreciation of the currency is unlikely.
Overall, the bank maintains a "constructive outlook" for
"The prospects of a presidential regime
change in 2015 are a clear credit positive event, which
Argentine assets have clearly been trend pricing-in," Bulltick
Bulltick sees this weekend’s electoral
result as implying opportunity for Argentina to "start from
scratch" to repair its economy and re-engage the international
markets. A new government would likely have more room to make
the tough difficult decisions on public spending, monetary
policy, diffusion of statistics, management of external
obligations, and conversation with external