Argentine executives are preparing for the next government with a mix of pessimism, resignation and even some humour.
At an annual conference in the pristine Patagonian city of Bariloche last week, held at the legendary Llao Llao hotel, about 200 politicians, CEOs, traders and business owners gathered to discuss the outlook for the country. While the meeting would usually be full of suspense and speculation on the eve of an election over the latest opinion polls or market moves ahead of the October 27 vote, there was a sense that an opposition victory is already pretty much a done deal.
It’s all part of the new reality since opposition candidate Alberto Fernández trounced President Mauricio Macri in the August 11 PASO primary, setting into motion a historic market sell-off which prompted the government to reimpose capital controls and unilaterally push out maturities on local government debt. The change of terms on the local debt and a proposal to extend the timeframe for other bonds referred to as a “reprofiling,” was a persistent theme at the gathering near snowcapped mountains and the Moreno lake.
“I’m feeling reprofiled,” one executive laughed when greeted by another.
Another executive at a communications firm joked that after the currency plunge, they had to “reprofile” their capital investment plans. And one moderator took a delay in stride, saying “we’ve reprofiled the next panel. If it goes much longer they’ll say we did a haircut.”
In the primary, the margin between Macri and Fernández –16 percentage points – was twice as large as what major pollsters had been predicting as the most extreme outcome. Since the event, while some poll firm directors have spoken publicly and admitted they failed to lean more heavily on face-to-face surveys, there’s a dearth of data.
When asked what foreign investors were asking about, a political analyst said they had basically stopped calling altogether.
Plans A, B, C
There were by far more questions than answers. Economists and former policy makers gave presentations outlining “Plan A,” “Plan B,” and “Plan C” for 2020. That’s because doubts remains on whether Fernández will take a pragmatic approach or opt for the unconventional, intervention-heavy policies of his running-mate and former president Cristina Fernández de Kirchner. The many potential scenarios only seemed to reinforce that it’s still anybody’s guess.
There was also no shortage of speculation over how a record US$56-billion credit line with the International Monetary Fund will change after the election.
In a survey of the attendees presented by Ernst & Young, and held after the primaries, the gloom was apparent. Companies are paring back investments, with only 38 percent of respondents saying they would take on debt in 2020, compared to 53 percent in 2018 and 80 percent in 2017. And respondents that thought overall investments would fall also grew to 23 percent from 7 percent.
“We need to be able to foresee the rules of the game – it’s the same in mass consumption as in football,” said Guillermo Rimoldi, CEO of candy-manufacturer and agribusiness firm Georgalos. “It’s unfeasible to play the game and know where to kick the ball when the goalpost is constantly moved.”
by Carolina Millan, Bloomberg
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