POLITICS Macri’s Re-election Will Require "All the Energy in the World," and Then Some

This Week: Macri’s Re-election Will Require "All the Energy in the World," and Then Some Graphic of the Week: Presidential Approval Youth Unemployment in Argentina Pension Reform Revisited Download a PDF version of this report.

The Weekly Pulse USD/ARS: Up from 37.82 (12/13) to 38.05 (12/20*) MERVAL 25: Down from 31019.79 (12/13) to 28969.47 (12/20*) Monthly Inflation (CPI), November: 3.2% *At time of writing

POLITICS Macri’s Re-election Will Require "All the Energy in the World," and Then Some By Scott Squires Macri's 2019 election hopes rest on the fate of the Argentine economy In an impassioned speech to lawmakers last week, Argentina’s President Mauricio Macri all but announced his run for president in 2019. Encouraging members of his Cambiemos coalition to “gather all the energy in the world” for the upcoming election year, the President called for the country to continue on the path of fiscal austerity. With time, Macri has promised, such a strategy will deliver the country from its economic woes. Macri’s speech culminates a tumultuous year in Argentina and echoes the position he has maintained throughout the economic crisis: fiscal tightening is the only way forward. The trouble is, not all Argentines agree. In 2019, Macri’s tenuous political future will depend on an economic recovery — one that is far from assured. Macri will also face stiff competition. A raft of challengers, all appealing to Argentina’s hatred for the International Monetary Fund, stand ready to pounce on Macri’s broken economic promises. New polls While Macri hasn’t explicitly announced a 2019 presidential run, he told Bloomberg in an October interview that he was “ready to run” for re-election next year. Last week, a new poll by Buenos Aires political consulting firm Poliarquía showed Macri’s approval rating in December had inched up to 39 percent from 32 percent the month prior. The increase, partially attributable to a near spotless G20 performance, has allowed Macri’s popularity to skirt the 40 percent margin he will need to advance in the country’s primary elections, set for August 11 next year. The new poll numbers suggest Macri’s popularity is not nearly strong enough to assure an outright 2019 win, however. Macri’s first two years saw the economy chugging along, and the president enjoyed fair weather support. This year, Macri saw his popularity dragged down with a plummeted peso. A poll by Management and Fit in October, conducted shortly after Argentina expanded its financing agreement with the IMF to $56.3 billion, put Macri’s popularity at just under 27 percent. Compare this to the near 50 percent he enjoyed a year earlier when his Cambiemos coalition swept the 2017 midterm elections. Stiff competition Atop Macri’s wobbly popularity, the incumbent will face competition from Peronist candidates of all stripes. The latter seek to discredit his market-friendly policies as disastrous for the working class, and will capitalize on the country’s near-universal hatred of the IMF. Former President Cristina Fernandez Kirchner, a giant of Argentine politics for the better part of a decade, is considered Macri’s major challenger. However, she stands on equally shaky footing. Kirchner, who has not announced a political run, is under investigation in the country’s wide-sweeping “notebooks” corruption scandal. Her administration stands accused of taking bribes from companies and business owners in exchange for public works contracts, charges that have severely weakened her clout in a head-to-head standoff against Macri. The scandal hasn’t completely dashed her chances at the 2019 presidency, however; Kirchner still enjoys relatively strong support. According to Reuters, Kirchner and Macri each hold a core base of support of approximately 25 percent of the country’s voters. Questions over a Kirchner candidacy leave room for a third-way candidate — a moderate Peronist who can toe the line between Macri’s pro-business politics and Fernandez’s appeal to the country’s strong leftist Peronist movement. While a recent Synopsis poll showed Macri winning a head-to-head with Kirchner, Macri’s chances stood remarkably slim against moderate Peronist candidates. The phone poll, which surveyed 1,400 Argentines, showed Macri beating Sergio Massa, former mayor of the Buenos Aires suburb Tigre, with a one-point margin. Against agricultural engineer Felipe Solá and Salta Province Governor Juan Manuel Urtubey, Macri is projected to lose by 2.6 and 8.8 point margins, respectively. Former Economic Minister Roberto Lavagna, who served throughout the 2001-2002 debt crisis, has also seen his name thrown into the ring. Though the economist and 2007 presidential candidate has not announced a run, he continues to publicly opineon contemporary politics. Lavagna is polling well. It’s the economy The likelihood Macri will clinch the presidency may simply come down to how well the economy performs in the first half of 2019. If, as optimistic economists predict, the economy sees an export-based recovery at the onset of Q2, Macri may survive to see another term. Non-IMF voices aren’t so sure. The OECD predicts Argentina’s recession will continue through 2019, forecasting a 2 percent contraction in GDP next year. Persistent emerging market turbulence, continued hikes in the U.S. Federal Reserve rate or crop-spoiling 2019 weather could all see this prediction borne out. Without a prompt recovery, Macri will need to “gather all the energy in the world” — and then some — to keep his spot in the Casa Rosada.

Graphic of the Week: Presidential Approval

ECONOMY Youth Unemployment in Argentina By Amy Booth Argentine youth at a job fair run by the Labor Ministry's Empelo Joven Program On December 5, youth and business leaders from across Argentina, Brazil, Paraguay, and Uruguay gathered in Montevideo at the first ever “Youth of Mercosur” meeting. Thirty private companies signed a joint decree committing to providing more than 40,000 work opportunities to the region’s youth by 2020. Supposedly, around half of these opportunities will go to Argentine youth. Initiatives such as these have become increasingly necessary as Latin America struggles to prepare its youth for turbulent labor markets and the gig economy. According to the International Labor Organization (ILO), one in five Latin American youth (19.6 percent) are now unsuccessfully seeking work — up from 14 percent between 2012 and 2014. With their country headed for its fifth recession in a decade, Argentine youth need all the help they can get. 2017 saw 23.5 percent youth unemployment according to the ILO. While low historically, 2018 and 2019 recessions will almost certainly provoke new increases.