Standalone (English version)

Pre-electoral economic fluctuations are showing up. Argentina’s exchange rate is now on the move. Index provider MSCI’s announcement on the downgrade of Argentine stocks to standalone status, the lowest category, a decision that was still expected to happen anytime due to the Fernandez administration’s intensified capital and currency controls, shadowed the Minister of Economy’s success on reaching its first deal with Club of Paris. MSCI’s move blew away any attempt to temporal sense of financial stability that this agreement could have brought about. Minister Guzman’s lack of sense of opportunity to publicly release his decision with the Club of Paris simultaneously with MSCI’s announcement wasn’t a good shot. Likewise the unofficial exchange rate started to rise, hitting the highest one-month period movement so far this year, and broadening the gap with the official currency market. Government authorities will have to struggle with the rising inflation that this ongoing currency fluctuations will cause, a trend that will settle down while electoral campaigns start to develop.

Standalone markets feature a complex and unstable regulatory framework, mainly related to domestic complex political contexts that lead to constant game changing outcomes. The government’s recent shift on the oil’s legal framework perfectly fits on a standalone market benchmark: this week the Chamber of Deputies passed a new bill that decreases biofuels blends in vehicular fuels – which still needs to be approved by the Senate; and, in turn, the government, tracked by VP Cristina Kirchner, is also drafting a bill to foster the oil refinement sector to bring over investment on Vaca Muerta. As mentioned, VP Cristina Kirchner is the most interested in passing this legislation, as she actually leads Argentine flagship YPF, by controlling its board through close collaborators of her, and also stands for the oil and energy sector that operate mostly in south-argentine provinces, the region where the Kirchner come from. This is Argentina’s standalone, while the world navigates a shift in the opposite direction, to a green and clear energy paradigm.

But President Alberto Fernandez not only stands alone in economics: so does in politics, as his two main partners at the Frente de Todos coalition are moving forward towards a bilateral political association, leaving the Head of Government aside. Sergio Massa and Cristina Kirchner agree on the fact that Fernandez administration’s is far from having a successful performance and understand they have to build an alternative leadership through the midterm election to keep up the coalition as they transit the second part of the Fernandez presidential mandate, who has proven to fail in building a strong leadership. Therefore, the President of the Chamber of Deputies, Sergio Massa, works to drive the union of the ruling coalition around himself. But he knows he first has to deal with the Kirchner family, both Vicepresident and his son, Maximo Kirchner, the leader of the Frente de Todos’ caucus in the lower house, who represent the most powerful branch of the coalition, with whom Massa has a record of distrust. So Massa has cleverly managed to induce and allow the Kirchners’ influence on the Transportation Minister, an area that he politically leads as part of the political distribution of the cabinets among the coalition. This is how this week’s two most crucial announcements have been strictly related to transportation and Kirchner’s desires: the nationalization of both the freight trains and the Paraná-Paraguay Waterway, this last one in a kind of hybrid and interim way – at least for now. This is one more internal warning to Fernandez and his cabinet. 

Cristina Kirchner is not only testing Massa – she is also worried about a potential –actually confirmed– candidature of his former Minister of Interior and Transportation, peronist Florencio Randazzo. Rumor has it that she might have tempted Randazzo to run within Frente de Todos' PASO primaries, although his Former Minister might have refused to do so. Anyway, Randazzo already confirmed via Twitter that he will run for a seat in this election and that he is building a third party, apart from the Frente de Todos ruling coalition and the opposition coalition, Juntos por el Cambio, which puts the ruling party into serious trouble if this means a loss of votes to other peronist option, as it would let them far from reaching a majority in the lower house. The up-coming weeks will be all about electoral definitions. 

THE PERSON OF THE WEEK

Governor Gerardo Morales won last Sunday the elections in Jujuy, for the fourth time since he is in office. The political effects that brought his success make of him the person of the week: on the one side, he soundly defeated the National Government's ballot, although the Peronist party has showed up with four different ballots this time, one of those taking in the lead the kirchnerista Milagro Sala, Morales' historical adversary in the province, who didn't performed well this time, only taking 5% of votes. Yet, this division of the Peronism might not have been an accidental disagreement, but might have been a clever strategy to ensure a desired outcome. And last, these results leave Morales' Radical Party in a more comfortable and stronger position at the national debate around opposition coalition's candidates. He is a supporter of doctor Facundo Manes and Senator Martin Lousteau's candidatures, who, in turn, travelled to Jujuy on Sunday to celebrate Morales' triumph.

THE QUOTE