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Argentina: the battle is joined

Argentina: the battle is joined

Groundswell for a shift to investment and growth

by David Smith in Buenos Aires

Tue 27 Oct 2015

Democracy is alive and well in Argentina, in an economy that for many observers symbolises tomorrow’s opportunity as well as yesterday’s failure. A decisive groundswell of voters spoke out in Sunday’s election for a return to stability, whether in terms of inflation, employment, or common sense economics.

This raises the real prospect of an Argentina open for business and orientated to growth rather than protectionism. But ahead lies a battle, up to the run-off on 22 November, for the future of a country that has been a roller-coaster for so long.

This election is far from over. The outcome is open. Almost 37% of the voters opted for the ruling party nominee, 35% for his opposition rival. The opinions of a sizeable chunk of the electorate are still to play for.

The front-runner, Buenos Aires Governor Daniel Scioli, anointed successor of the Kirchners – the family dynasty, first husband, then wife, that has ruled Argentina since 2003 – was expected to finish well ahead in Sunday’s first round. The polls suggested he might win first time, getting more than 40% with a 10 point margin over his nearest rival, as required by the electoral law.

But Scioli’s main opponent, Buenos Aires Mayor Mauricio Macri, won over many undecided voters in the final days of a bruising campaign – to the undiluted joy of his core, pro-market, pro-business, pro-growth constituency.

For the first time since returning to democracy after the collapse of the military dictatorship in 1982, Argentina faces a final vote next month between two serious rivals and two contrasting agendas on how to lead the country out of debt, skyrocketing inflation and economic contraction.

Scioli is, by his own definition, the candidate of ‘continuity with change,’ aiming to keep on board core Kirchner voters who benefit from subsidies and welfare that touch almost half the electorate, but have driven debt to unsustainable levels. Yet Scioli’s own economists recognise the need to devalue the currency, cut the government deficit and reduce subsidies.

On the other side is Macri, longtime businessman, mayor of a city on the rebound, former head of the Boca Juniors Football team, with vast name recognition nationally. Macri, a pragmatist who has turned ever more to the centre, promises change without pain, emphasising the need ‘to remind the world what an opportunity Argentina represents…an Argentina, where growth and investment are celebrated, not despised.’

A key player will be the third-party candidate, Sergio Massa, once a lead figure for the Kirchners and the Peronists, today a rebel who can go either way. Massa took a sizeable 21% of the vote on Sunday and may yet try to be kingmaker.

The election showed that Argentina, far from being the next Venezuela, is a resilient democracy, capable of halting those in power who might be deluded by their own omnipotence. Whatever happens in the final vote, the battle has been joined in this Latin American bellwether of risk or return, in a way that testifies to the maturity rather than weakness of emerging market economies.

David Smith, OMFIF Advisory Board member, represented the UN Secretary-General in the Americas in 2004–14.

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