Argentina Imposes Draconian Capital Controls As Peronists Return To Power After Macri Defeat
It’s time for Paul Singer to start buying up Argentina bonds again, and confiscating ships again.
Late on Sunday, Argentina’s Mauricio Macri conceded defeat in the country’s presidential elections, setting up a return to power for the populist Peronist party that has governed Latin America’s third-largest economy for much of the past three decades. The outcome of the elections became obvious back in August when Macri was trounced in the primaries, triggering a collapse in the peso and a plunge in local bonds amid fears the new government would default on existing debt despite the IMF’s largest ever bailout package.
Alberto Fernández, 60, who was the former cabinet chief from 2003 to 2008, won with 47.8% of the vote together with his vice presidential mate, former Argentina ruler, Christina Fernandez Kirchner, while Macri’s centre-right coalition received 40.7%, with nearly 88 per cent of the ballots counted.
As the FT notes, the remarkable Peronist victory justified former president Cristina Fernández de Kirchner’s surprising decision to invite the lesser known and more moderate Fernández, who is no relation, to run for the presidency, while she ran for vice-president. The strategy enabled the reunification of Peronism after it was deeply divided just two years ago — when the two Fernándezes were not even on speaking terms.
The triumphant Peronist return is not just in the presidency: early results suggest that the Peronists and the center-right opposition will have similar representation in the lower house of congress and a third of the senate, with each group controlling almost half of both chamber.
As for Macri, whose brief stint at the top in Argentina led to an unprecedented crisis and a revulsion to so-called market-friendly, if utterly incompetent, centrists, said that “this is just the beginning” as he conceded defeat in an emotional address to his supporters, although it wasn’t clear what exactly “this” was the beginning of. “More united than ever, we are going to be there to defend the values that we believe in . . . we are going to continue working for Argentines through a healthy, constructive and responsible opposition.”
Yeah, good luck with that.
The new Peronist government will inherit an economy in crisis, on the brink of its ninth debt default, in recession and with inflation at around 55 per cent. Although Mr Macri also faced a disastrous economic situation when he took power four years ago, most headline macroeconomic statistics are now considerably worse after a bruising currency crisis that forced Argentina to seek a record $57bn bailout from the IMF.
Ironically, it was another peronist government that blew up the IMF back in 2001, when Argentina, during what would later be known as its Great Depression, defaulted on about $130 billion in debt, which at the time was a seventh of all the money borrowed by the developing world. This time it will be even worse, and the IMF has already alllocated over $50 billion to the local economy to boot.
And since Argentina’s capital markets were already Hasenstabbed in August, when its bonds and currency imploded, and the monetary policymakers knew what to expect, moments ago the Argentinian central bank announced it would hold a press conference at 830am on Monday, ahead of which it imposed draconian capital controls, limiting dollar purchases to just $200 per person per month, down from $10,000.