On 6 May 2019, embattled President Mauricio Macri sent a letter to all opposition parties to propose a national consensus plan to help to stabilize the economy regardless of who is elected president in the October 2019 general election. Macri's 10-point plan includes a balanced budget, an independent central bank, the honoring of sovereign debt, as well as changes to labor laws and the pension system.

Over recent months, business confidence in Argentina has been undermined by economic recession, high inflation, and currency instability. Opinion polls showing left-wing former president Cristina Fernandez de Kirchner (CFK) ahead of Macri for the first time have added to the negative sentiment. CFK is deeply feared by the private sector given her prior backing of capital controls and countenance of foreign sovereign debt default. However, opposition leaders have not heeded Macri's call to negotiate a "basic consensus".

Potential president candidate and former economy minister Roberto Lavagna said that "consensus over more of the same is pointless". Meanwhile, Sergio Massa of Frente Renovador, rather than accepting the dialogue, responded with a 10-point plan of his own. CFK rejected the invitation out of hand.

Significance

Macri's plan, which he unveiled in a context of plummeting popularity, appears to be an electoral tactic to divide the moderate opposition, which has yet to agree on a common candidate. It also seeks to polarize the race, making it a binary choice between him and CFK. The inclusion of labor and pension reforms in his plan, two issues that constitute red lines for Kirchnerists, suggests that consensus was not the proposal's goal.

Macri's declining chances of re-election is undermining business confidence and therefore currency and credit volatility will remain until October. Indicators of change in political dynamics include whether the ruling coalition drop Macri and nominate instead Maria Eugenia Vidal, the popular governor of Buenos Aires province, as presidential candidate. There is still the slight possibility that CFK decides not to run for office; she has until 22 June to do so. Both developments would be risk positive as it would reduce the risk of Argentina abandoning the USD56 billion agreement signed with the IMF last year.

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Posted 15 May 2019 by Carlos Caicedo, Senior Principal Analyst, Latin America Country Risk, S&P Global Market Intelligence