Flash Report /

Argentina: CFK as vice president – masterstroke or smoke-screen?

    Stuart Culverhouse
    Stuart Culverhouse

    Head of Sovereign & Fixed Income Research

    Tellimer Research
    20 May 2019
    Published by

    The surprise announcement on Saturday that ex-President Cristina Fernández de Kirchner (CFK) will figure in the presidential elections in October not as president, but rather as vice president to Alberto Fernández – no relation – for the Peronist (PJ) party, raises as many questions as it does answers. It will change Argentina’s pre-election landscape, both in terms of Peronist alliances, President Macri’s and the ruling Cambiemos’s response to it, and possibly voter preferences. 

    For investors, while the news may not be viewed as negatively as CFK standing for president herself, there will be wariness of her involvement in any capacity, at least until there is more clarity on how the arrangement will work, where the real power lies, the extent to which this Peronist ticket will embrace market-based economics, and whether CFK truly has changed her spots.

    Is it a masterstroke, a genius piece of political manoeuvring, or just a smoke-screen?

    The move may be designed to present a more moderate and electable face to Kirchnerism, and may allay investor fears of a CFK Presidency, but for as long as she is involved, it does not eliminate them. CFK, even as VP, is likely to maintain a key and influential role. Indeed, a cynic may see it as little more than a ploy to get CFK into the presidency by the back door, despite what she may say about her leadership aspirations; if they were they to win, could Alberto Fernández step aside sometime after the election (for whatever reason) and allow CFK to take charge? 

    The motivation of the move is unclear. CFK looked set to present a realistic threat to the incumbent President Macri on her own. CFK and President Macri are neck and neck in the polls, with some suggesting she could defeat Macri in a second round. So, taking a back seat seems odd, and out of character. Her political strategists may have decided she has a ceiling on her vote, and fear she could be weakened further by the various (11) indictments against her (she is set to go on trial tomorrow in one such case involving corruption in public works contracts). Also, perhaps senior leaders in the PJ persuaded her that this was for the best given a likely adverse market reaction if she stood for president and won, making the economic turnaround even harder. Hence, a coming together of Mr Fernández and CFK may be seen as the ticket that widens PJ’s support and maximises the PJ’s chances of returning to power. 

    For his part, Alberto Fernández had an uneasy relationship with CFK. He is seen as more moderate than CFK, despite having served under Kirchnerism in 2003-08, first under CFK’s husband Nestor as Cabinet Chief, and then briefly under CFK when she came to the helm. He stepped down after a battle between the government and farmers over export taxes. After he left, he was critical of CFK’s presidency and aligned himself with the moderate wing, supporting dissident Peronist Sergio Massa’s 2015 presidential campaign. It seems that the two have now put that behind them. But ideologically, can they work together, or is this merely an election fix? 

    It is not clear at this stage if the Alberto Fernández-Cristina Fernández de Kirchner joint ticket will unite the Peronist factions. While the joint ticket may be an appeal to moderate Peronists to join them, it is not clear if leading moderates – and presidential hopefuls – such as Roberto Lavagna and Juan Manuel Urtebey, will do so. Surprisingly perhaps, Massa was reported to be willing to consider supporting the joint ticket.

    Still, questions will inevitably be asked by investors about where the real power lies, with Mr Fernández the face of the president, and CFK pulling the strings. If the joint ticket is successful, investors will look to the choice of finance minister too. Will it be a moderate (in the Lavagna mould), or a return for Kicillof? 

    What little we do know about the Alberto Fernández-Cristina Fernández de Kirchner joint ticket is that they are likely to seek a renegotiation of the IMF programme (as indeed it seems would other Peronist hopefuls, like Lavagna). While the IMF will always seek to help a country in whatever way it can, there are limits and it is not clear how much scope there is to change the programme, especially if Kirchnerist ideology pervades the Peronist platform. 

    Kirchnerism, while having to recover from the 2001 default of its predecessor, had 12 years to rebuild the economy, but left it with severe imbalances. It will be a concern to investors if the diagnosis of what is needed in the current crisis is more Kirchnerism. 

    Further reading: Argentina: Christina’s VP candidacy does not unite Peronists