3. Argentina's Macrisis
Argentina looks like it's headed, once again, for the misery of economic chaos and sovereign default, writes Axios' Dion Rabouin. It has now reached the point at which, the formerly unthinkable now looks entirely probable: That Cristina Fernández de Kirchner could, once again, become president.
It wasn't meant to be this way. Argentine President Mauricio Macri came to office at the end of 2015 as a pragmatic businessman who was going to save Argentina's economy from the ravages of 12 years of Kirchnerist Peronism. (Cristina's two terms in office, between 2007 and 2015, came after her husband Nestor's tenure from 2003 to 2007.) Instead, as this year's presidential election approaches:
- Inflation is running at 55%, according to official statistics;
- Poverty in the country rose to 32% at the end of 2018, up from 25% the prior year;
- Unemployment has risen to 9.1%;
- GDP is shrinking fast, down 6.2% from a year ago;
- The Argentine peso is plunging, recently trading at 44 pesos to the dollar, almost triple the rate when Macri took over as president;
- The cost of buying one-year default protection on Argentina has soared to 984bp (or 9.84 percentage points), up from 430bp in March.
The central bank has raised interest as high as 65% in an attempt to fight inflation, but that has only served to push Argentina into recession. The central bank is now fixing the exchange-rate band, or instituting currency controls, while the government freezes prices on 60 food products until October.
What's next? "I truly believe that if Cristina wins, we're looking at defaults," said an investor who was not authorized to speak publicly about the issue. "Given the state of the economy, her election would just crash the market."
The bottom line: The more likely Cristina's re-election becomes, the more money leaves the country, and the further the currency and bond markets fall, making Macri look even worse. That, in turn, only serves to make another Kirchner presidency even more likely. It's hard to see what can break the downward spiral between now and the presidential election in October.