Published: Wed, August 14, 2019
Worldwide | By Isabel Fisher

Macri's austerity policies prove costly in the primaries

Macri's austerity policies prove costly in the primaries

The peso has lost nearly one-third of its value so far this year, making it the worst performing currency in the world.

The Merval index, the country's most important, dropped 37.93% to 27,530.80 points, or 48% in dollar terms, the worst daily performance in 18 years.

Official results showed that in the primary elections that featured 10 presidential candidates, Macri and his vice presidential running mate, Miguel Angel Pichetto, of the ruling party received just 32.08 percent of the votes, with 98.67 percent of the ballots counted, while Alberto Fernandez and his vice presidential running mate, ex-president and current Senator Cristina Fernandez, of the opposition party Frente de Todos - Front of All - garnered 47.65 percent.

The possible election of Fernandez would reportedly mean a switch to left-of-centre policies that are popular with the majority of voters, but also risk exacerbating what is already record high inflation. An IMF spokeswoman declined to comment on the Argentine primary result, citing a policy of not commenting on political developments.

The markets view Fernández and Kirchner, seen as free-spending left-wing populists, with deep suspicion.

"Recognizing that we have had a bad election, that forces us, starting tomorrow, to redouble our efforts so that in October we will get the support that is needed to continue the change", Macri said.

Voters were given a stark choice: stay the course of painful austerity measures under Macri or a return to interventionist economics under the Peronists.

The former president nationalised pension funds, imposed currency controls and tampered with economic statistics during her presidency between 2007 and 2015.

Morgan Stanley downgraded its recommendation for Argentina's sovereign credit and equities from "neutral" to "underweight" and said calculations suggest the peso could fall another 20%. She feuded with the country's key farm sector over export taxes and presided over a multi-year standoff with bondholders that kept Argentina locked out of the global capital markets. Unemployment and poverty have risen. "Additional promises can be made, but the gap he needs to make up is a very wide one", said Ilya Gofshteyn, senior emerging markets strategist at Standard Chartered Bank.

Sunday's defeat to opposition candidate Alberto Fernandez is a result of the economic hardship South America's second-largest country has endured recently, Macri told reporters at the Casa Rosada presidential palace in Buenos Aires.

An outright election in the first round of the presidential vote demands at least 45 percent of the votes or 40 percent plus a greater than 10-point advantage over the closest rival. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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