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Investment strategy
November 17, 2021
2 mins

Will Argentina’s latest political twist bring economic stability?

November 17, 2021
2 mins
Jorge Amato
Head of Latin America Investment Strategy
SUMMARY

Argentina’s recent mid-term election results have triggered a historic change in the composition of Congressional power. We believe fully re-establishing investor confidence in Argentine markets will take years of consistent, sound economic policy and political stability and it’s too early to view this as a start.


  • Argentines went to the polls on November 14, 2021 to vote on mid-term elections. Voters dealt a blow to the current administration which suggests a fragile and highly complicated economic and political landscape ahead.
  • The Juntos por el Cambio (rebranded from Cambiemos in 2019 and current center-right opposition) won the national mid-terms with 41.89% of the national votes. The ruling Frente de Todos (a coalition of center-left and left wing Peronists and Kirchnerists) received 33.03% of the votes.
  • The resulting shift in the composition of Congressional power saw Frente de Todos dropping from 41 to 35 in the Senate, all to Cambiemos which will now have 31. With this loss of 6 seats, the Peronists (and coalition) will lose control of the 72 seat Upper House for the first time since 1983. In the Lower House, the government coalition lost 2 seats (now 118), while the opposition won 1 (now 116) also losing majority. It implies that the government has effectively lost majority control in both houses, as well as enough seats for quorum, through a series of historical defeats to the Peronist party. This is likely to lead to schisms between the different factions of Peronism itself and within the Frente de Todos coalition, further weakening governability. The current administration’s term ends in 2023.
  • The economic imbalances are unsustainable, either the government changes policy course or they risk losing power. It is too early to say how Frente de Todos will behave going forward after their sound defeat. Early indications post-election were not encouraging with statements from government candidates like “we won by losing while they lost by winning” and Kafkian victory rounds taken by the President and other candidates.
  • The coming weeks and few months are likely to define the last 2 years of this administration. The fact that democracy continues to work in Argentina is good news. That the population is voting against poverty and autocracy as well. However, survival instincts more than the election results are going to be the drivers. Peronism is an ever-morphing movement, it will likely adapt as needed, as it has always done.
  • In the meantime, remaining in power will require, at the very least, sharply moderating some of the misguided policies that continue to generate economic imbalances and consequently social discontent. This could, eventually, bring some oxygen to financial assets. Thus far, market response since Sunday has not been encouraging. This is likely to be the case until investors see some signaling from Cristina that she could be supportive of Alberto Fernandez’ attempt to temporarily mend the economy and support a transition period into the 2023 elections. This is the best case for markets. A less positive scenario would be a “bad breakup” between the President and his V.P. and a radicalization of Kirchnerist harder factions pitting against the government.

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