Global Macro Service > Research Briefings > Argentina

Macri’s wide loss paves the way for a return to populism

President Macri's surprisingly wide defeat in the primary election augurs a comfortable victory for populist opposition candidate Alberto Fernandez. The main unknown now is whether Argentina will get a moderate Fernandez or a 'de facto' Cristina Fernandez de Kirchner (CFK) presidency.

Fernandez started his campaign as a moderate, promising debt reprofiling with no haircuts, but has since proposed much more unorthodox and contradictory policies. A moderate Fernandez government would still imply higher medium-term inflation and lower growth than our current baseline. Haircuts would be difficult to avoid as a weaker peso implies a much heavier debt burden.

A more radical Fernandez with whom the IMF is not willing to work would imply a much worse equilibrium for the economy. And if the rest of the world is unwilling to lend to Argentina, imports (and domestic demand) would need to remain compressed for the government to generate a current account surplus.

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