Or at least, the peculiarly polemical and dogmatic kind espoused by Cristina Kirchner. While European economies are pulling to the left, Argentina has taken a surprise lurch to the right with the election of Mauricio Macri as president. Fund managers suggest that this may be the catalyst for Argentina to see a sustained economic turnaround.
Markets have certainly greeting the news warmly. The main Argentine stock market index – the Merval Argentina index – is up 89.55% for the year to date (source: Bloomberg to 23 November), with much of that gain coming since the end of September when it first seemed possible that Macri might secure victory.
Denise Prime and Tim Love, emerging markets investment managers at GAM, said that although Macri’s economic plans are still emerging, they believe he will undertake a number of much needed reforms, such as greater independence for institutions, from the central bank to the judiciary, a quicker, sharper depreciation of the Argentine peso and a rapid resolution of the long-running conflict with ‘holdout’ bond investors.
This latter point is particularly important for any economic recovery in Argentina. The country has long been locked out of capital markets as an ‘unreliable’ borrower; this has seen international capital flee the country and not return. Any resolution of the protracted legal battle over bonds may be the first step in drawing international capital back to the country.
Prime and Love are optimistic that the election outcome will be beneficial: “If ever there was a country in emerging or frontier markets that had the simplest route to a significant increase in economic output per capita, it is Argentina. But all opportunities need a catalyst – and the outcome of the presidential elections could provide just that.
Of course, Argentina still has a hill to climb: Roberto Lampl, head of Latin American Investments at Alquity Investment Management, says: “The transition from failed country to global power is likely to be both bumpy and slow. Macri will have to undo twelve years of damage but looks set to prioritise the economy and growth during his Presidency.
