Monday, September 2, 2019
The surprisingly ample victory of opposition candidate Alberto Fernandez over President Mauricio Macri in the August 11 presidential primaries triggered a currency run and a sharp fall in international reserves and led the government to announce a “voluntary reprofiling” of short-term debt. The announcement was interpreted as a default, worsening investor expectations. The debt crisis puts the political transition at stake, with nearly two months before the general election and over three months until a new administration takes office in December.
- Following a new debt crisis, capital markets will be closed, forcing a sharper fiscal adjustment.
- The financial crisis will delay any economic rebound and worsen social indicators.
- The fragile fiscal situation will inhibit implementation of any ‘populist’ measures by the new government.
- The structural reform agenda will make some progress, though more slowly than expected.