Flash Report /

Argentina: New alliances to temper market rally

  • Sergio Massa has confirmed his alliance with Alberto Fernández-Cristina Fernández

  • These developments might temper the rally that greeted Macri’s announcement of his Peronist VP...

  • ​...As markets digest what these alliances mean for voting behaviour and different election scenarios

Argentina: New alliances to temper market rally
Stuart Culverhouse
Stuart Culverhouse

Head of Sovereign & Fixed Income Research

Tellimer Research
13 June 2019
Published by

As we anticipated yesterday, Sergio Massa finally confirmed his alliance with the Alberto Fernández-Cristina Fernández (F-F) Peronist alliance (PJ, UCR and some other smaller parties). Both President Mauricio Macri and F-F have been courting Massa, valuing his support base (c10%, according to polls) and seeing an opportunity to broaden/moderate their own platforms, although recent days have suggested that Massa was more likely to join F-F. 

This was one of a few developments in Argentina with the expiry of the 12 June deadline for forming alliances ahead of the presidential election in October. It followed Tuesday’s surprise news that President Macri had picked a moderate Peronist (PJ), Senator Miguel Pichetto, as his vice-president running mate. 

The worst kept secret in Buenos Aires

Massa’s announcement may only be confirmation of the worst kept secret in Buenos Aires. Yet, he kept everybody guessing and left it to the very last minute given the balancing act he faced between keeping close to Peronism, while many of his supporters don’t support CFK. Massa broke from Kirchnerism in 2009 when he was Cabinet Chief and is now the leader of the moderate Renewal Front faction of the Peronist party. He ran in the 2015 presidential election and came third in the first round. As we noted yesterday, it is not clear how well he gets on with CFK these days, but he has a relationship with Alberto (who was Massa’s campaign manager in 2015).  

The question now is whether he will be able carry those votes to F-F, or will he lose them if his supporters see it as a return to the past (and a rejection of CFK). But even if he brings around half his reported support base, that would nudge F-F closer to the 40% threshold needed in the first round (victory in the first round requires either 40% plus a 10ppt lead over the second place, or 45%).  

What this means is that a broader Fernández-Fernández-Massa (FFM?) Peronist alliance could pose a more formidable challenge to Macri, and while this might send a negative signal to investors (to the extent that it is seen as increasing the chances of CFK obtaining power), optimists might hope the moderate face of the FFM ticket embodied by Alberto Fernandez and Massa will constrain any populist tendencies. 

A third alliance

Meanwhile, a third alliance has been formed under the banner Federal Consensus 2030 to challenge the incumbent and Peronist opposition. Ex-economy minister Roberto Lavagna has agreed an alliance with Salta governor Juan Manuel Urtubey – although it is not clear which of them will stand as presidential candidate.  

With the departure of Pichetto to Macri and Massa to F-F, the deal marks the effective collapse of the Alternativa Federal movement, the moderate Peronist faction that Massa, Pichetto, Urtubey, Córdoba Governor Juan Schiaretti, and Lavagna broadly represented, but which has been marred by disagreements over election strategy. 

Lavagna had all but split from the movement a few weeks ago when he announced his intention to stand, but he was reluctant to form alliances and has struggled in the polls, while Urtubey had been mentioned as a possible running mate for Macri. They have now decided to come together. The Urtubey-Lavagna alliance is perhaps a surprising twist, but not wholly unexpected. We had suggested in our previous report that following Pichetto’s move to Macri’s camp, that might leave Urtubey to lead the moderate Peronists, or that the Alternativa Federal camp may even decide not to stand.  

In our view, a third option will appeal to voters that will not support CFK and are disaffected with Macri, and democratically, will provide a more competitive election than merely a binary choice. But it risks splitting the moderate vote and working against Macri (the “anyone but CFK” vote will have two choices), which could be negative for investors. However, conversely, it could work in Macri’s favour by splitting the Peronist vote. 

"Let's Change" have changed

Lastly, the Cambiemos (“Let’s Change”) ruling coalition changed its name to Juntos por el cambio, or Together for the Change. This follows Macri’s announcement of the PJ’s Miguel Pichetto as his running mate. Cambiemos is an alliance of Macri’s PRO party, Alfredo Cornejo’s Radical Civic Union (UCR), and Elisa Carrió’s Civic Coalition (CC) parties, but the rebranding may reflect that it now contains some of the Alternativa Federal Peronists.  

In all, seven election alliances have been registered and the next key deadline is 22 June for the registration of candidates. 

Tempering the rally

On balance, we think these developments might temper the rally that greeted Macri’s announcement of his Peronist VP, as markets digest what these alliances mean for voting behaviour and different election scenarios.