Macro Analysis /

Argentina: Election too close to call, but still a long way to go

    Stuart Culverhouse
    Stuart Culverhouse

    Head of Sovereign & Fixed Income Research

    Tellimer Research
    2 July 2019
    Published by

    The race for the presidency is shaping up, and while Macri has overseen impressive macro adjustment, it could be politically costly. Sovereign yields reflect market concern that the Fernandez-Fernandez ticket could triumph.

    Election: Broadly speaking, at this stage, the election envisages seven alliances and nine election candidates ahead of the primaries (known as PASO) on 11 August. The first round is scheduled for 27 October. Yet, it’s still a close call between the Macri-Pichetto and main opposition Fernandez-Fernandez ticket. Both tickets have been chosen to try to widen their respective support bases. The Macri-Pichetto ticket was well received by markets. But polls still show a close race, even statistically tied, and there is still a long way to go.  

    Economy: The scale of macro adjustment (policy-based and through exchange rate) under Macri has been impressive and necessary, but politically costly. Although the economy may have stabilised in Q2, Argentina remains vulnerable to domestic and external shocks, given its large financing needs, and now high public debt burden (86% of GDP in 2018, according to the IMF). Whoever wins will have to deal with this still-huge financing needs, which will require an ongoing role for the IMF.

    Investment recommendation: Yields of 14% on the ARGENT US$ 21s still reflect a lot of uncertainty, which could be termed a “CFK premium”. We have a Hold on the ‘21s and ‘26s bonds.

    Real GDP has fallen for five consecutive quarters (%)

    Source: Haver

    This report on Argentina is derived from our recent EM macro conference call, held on 26 and 28 June. If you would like a recording of the full call and the associated presentation, please contact or your Tellimer contact directly.