360 Madison Avenue, 17th floor
(on 45th St. between Madison and 5th Aves.)
New York City
This EMTA Special Seminar will provide analysis and commentary by a panel of market and political analysts on the upcoming Argentine elections.
11:45 a.m. Registration
12:00 noon – 2:00 p.m. Panel Discussion
Arturo Porzecanski (American University) – Moderator
Fernando Losada (AB)
Patrick Esteruelas (EMSO)
Siobhan Morden (Jefferies LLC)
Alejandro Catterberg (Poliarquía Consultores)
Lunch will be provided
Additional support provided by Jefferies.
Registration fee for EMTA Members US$95 / US$695 for non-members / Credentialed Media Complimentary
Seminar on the Upcoming Argentine Elections
This Special Seminar, “Argentina Elections – What the Future Will Hold”, was sponsored by Banco Mariva (with additional support from Jefferies LLC) and took place at EMTA’s offices in NYC on October 16, 2015. Arturo Porzecanski (American University) moderated the panel, with the following panelists: Fernando Losada (AllianceBernstein), Patrick Esteruelas (EMSO), Siobhan Morden (Jefferies LLC) and Alejandro Catterberg (Poliarquía Consultores). Relevant documents addressed during the panel discussion, including Mr. Catterberg’s PowerPoint presentation, can be accessed by Clicking Here.
Alejandro Catterberg presented his detailed PowerPoint slides on the economic and political indicators, as well as public opinion polling, on the presidency and legislative seats to be renewed.
Arturo Porzecanski asked all the panelists for their most-likely scenarios for the presidential and congressional elections, and what probability they assigned to them, as well as the panelists’ thoughts on whether they expected that electoral irregularities (as in the Tucumán provincial elections) would affect the legitimacy of the alleged winner. He also asked how much of a constraint they believed Mrs. Kirchner and her followers (who have infiltrated the entire Executive branch and are present in the national legislature, the judiciary, provincial governments, labor unions, etc.) would impose on a Scioli, Macri or Massa administration.
Catterberg predicted 40/30/20 for Daniel Scioli, Mauricio Macri and Sergio Massa, respectively, plus or minus 2%, without a clear first round victory. If the second round includes Scioli and Macri, Scioli is likely to win, while a Scioli and Macri second round is harder to predict. 2015 was a time of political transition, which won’t end after the elections. If Scioli becomes president, the relationship with Cristina Kirchner will be pivotal as all will look to how much power she is willing to concede to her front-runner. With Macri (who has an “open chance to win”), the political transition will take longer as he will have to consolidate his position with the current political party and require some agreement with the Peronists so that he can pass the laws that are necessary. Massa remains the underclass candidate. 2016 will be the year of economic transition (which is impossible to commence without political transition). 45% of those polled approve of the job Kirchner has done and 40% like her. Nevertheless, Catterberg doesn’t expect much structural reform in education, tolerance to corruption and checks and balances. The hope is for Argentina to return to its “mean”.
Siobhan Morden expressed the frustration of many investors, waiting for an outcome that may be unclear. She was also interested in how the new administration would address the balance of payments stresses. She admitted that polls often dictate outcomes, and said that the market perceived Scioli as the probable outcome. With Scioli winning the first round, changes may be effected sooner, while a second round will postpone any desired changes. Her biggest concern was public opinion in which the expectation was for the situation to remain the same or only moderately better or worse. The country has a huge “entitlement structure”. Scioli was campaigning on preserving the status quo and continuity, with the main constraint being a reversal of public opinion.
Patrick Esteruelas thought Macri was trying to appear as the true Peronist, with any candidate in place of the incumbent having a higher probability of success. Esteruelas saw economic and social constraints arising, and some political ones, after Kirchner (the first one to leave office with such a high level of popularity).
Fernando Losada also confirmed that only in minimal polls did Scioli actually win in the first round, while he thought that there’s a 50% chance of Scioli winning generally. He also thought that Kirchner would want to return (with the question being when), given that there will be “unavoidable frictions” between her and Scioli. If Kirchner does return, it will be perceived as the result of Scioli or Macri failing the Argentine people. Porzecanski noted that this was the first time a Peronist had to clean up another Peronist’s mess (including judicial challenges).
Porzecanski remarked that Argentine society seemed to be sharply divided between those who wanted continuity and those who wanted change. If the popular mandate turned out to be, or is interpreted as, one that favors “gradualism”, rather than “shock therapy,” he wondered what some of the policy changes that could be made in socially digestible installments would be - tax relief, subsidy reductions or exchange-rate corrections? Can one change only one piece of the puzzle? And would such a gradualist course be sufficient to improve the business climate, spur an economic recovery, reduce inflationary pressures and keep bond investors from selling out?
Losada posited that not all challenges are created equal, with the most important being fixing the fiscal imbalance. Other challenges include an over-valued exchange rate, inflation, depletion of Central Bank reserves and other mismanagement of microeconomic issues. Facing the fiscal issues has a strong political component. He thought that the majority of the population does want change, with the larger part wanting a slower pace to that change.
Esteruelas believed the majority wanted “continuity with change”. The candidates are subject to institutional and economic constraints. However, he reminded the audience of the 2002 superpowers introduced when the government needed leeway to spend at its full discretion, which was renewed each year (most recently Kirchner asked for renewal until 2017). He also thought devaluation or capital controls may have to be implemented.
Finally, Porzecanski asked if there were any “low-hanging fruit” areas on which a new administration could or should move expeditiously, without fear of triggering a social backlash, such as removing Camporista (Kirchnerite) appointees from the government, vigorously pursuing corruption investigations, cleaning up INDEC (the official statistical agency) or settling with holdout creditors.
Morden responded that measures were needed to restore investor confidence with the least political costs (although a recession was likely). A low trade surplus (vs. last year’s), a cash flow deficit, sluggish growth and no access to capital were problematic. As for the holdout issue, market demand may be so low that capital access may no longer be a viable solution. Cosmetic changes are insufficient. Scioli would need to be proactive (not reactive) from the beginning, addressing the fiscal imbalance, tariff structure and reduction of subsidies; only then could we see an improved market demand for Argentine paper. Muddling through on this basis through gradualism may be the only option.