Argentines give Macri nod to press ahead with reforms

Bloomberg

With Sunday’s victory in legislative elections, President Mauricio Macri received the green light from Argentines to press ahead with his reform agenda – and the prospect of another six years to carry it out.
The ruling alliance won in 13 of Argentina’s 24 provinces, including the five largest, in mid-term elections that were seen as a barometer of voter support for his attempt to open up one of the most protectionist economies in the world. Nationally, the alliance obtained 41 percent of the vote.
Macri remains short of a majority in Congress, but he emerges strengthened from the election. In contrast,
the opposition Peronists who may have had ambitions to challenge
him in presidential elections in 2019, were weakened.
“He delivered on the election and the Peronist party is probably more fractured and weaker than it was two years ago,” Jimena Blanco, head of Latin American research at Verisk Maplecroft, said by phone from Lima. “Right now, this really does say Macri can go for another term in 2019.”
Dollar bonds rallied on the prospect of an overhaul of tax and labor laws. The yield on the country’s 100-year note dropped 13 basis points to 6.80 percent, its lowest since being sold in June.
In the key Buenos Aires province, Macri’s candidate Esteban Bullrich defeated all three aspirants to the leadership, including ex-President Cristina Fernandez de Kirchner, the fiercest critic of his reforms. Sergio Massa, a previous presidential candidate and head of another opposition group in congress, came third, while former Interior Minister Florencio Randazzo obtained just 5 percent of the vote.
The alliances of Cordoba Governor Juan Schiaretti and Salta Governor Juan Manuel Urtubey, also suffered damaging defeats, and diminished their chances of bidding for the leadership of a united Peronism.
Fernandez’s insistence on staking her claim as Macri’s principal opponent plays into the president’s hands, said Juan Cruz Diaz, managing director of the Cefeidas Group, a regulatory risk advisory company based in Buenos Aires. Fernandez doesn’t have the support to threaten Macri at a national level and yet will serve to impede new leaders emerging who can rebuild a Peronist movement capable of challenging him, Diaz said.
Macri dodged questions on whether he intends to run in the next elections at a press conference on Monday but said he will call a meeting of governors to discuss plans for reforms. He is expected to submit four bills to Congress in early November to overhaul a tax system riddled with distortions and rein in provincial budgets as well as promote more flexible labor laws in an attempt to bring more workers into the tax-paying economy, a senior member of the government told Bloomberg in September.
With the economy growing after a recession last year, the future is looking brighter for Macri. Yet, Argentina’s economy and its politics are notoriously volatile and a victory in 2019 remains far from certain. Inflation isn’t slowing as fast as expected while there’s a large budget deficit which the government is plugging by issuing dollar-denominated debt, a potentially “toxic combination,” according to
Capital Economics.