BUENOS AIRES, Aug 13 (Reuters) - Argentina’s peso and dollar-denominated bonds dropped again on Tuesday as market turmoil spilled into a second day following opposition candidate Alberto Fernandez’s landslide victory in a primary election that dealt a severe blow to President Mauricio Macri’s re-election chances.

Fernandez, who has former President Cristina Fernandez as his running mate, pulled off a stunning upset in the primary with a wider-than-expected 15-point lead over Macri, a free market proponent.

Fernandez, regarded as a moderate within the Peronist movement, has said he would seek to “rework” Argentina’s $57-billion standby agreement with the International Monetary Fund if he won the general election. He has proposed an economic and social pact to combat inflation, which is running at 55%. </s> BUENOS AIRES (Reuters) - Argentina’s election primary on Sunday will determine President Mauricio Macri’s chances of winning a second term in October, with the country’s embattled peso currency expected to take a fresh beating next week if the business-friendly leader fares worse than expected.

As the main political parties have already chosen their nominees, Sunday’s vote will serve as a grand opinion poll on Macri’s chances of beating the main challenger, Alberto Fernandez of the left-leaning Peronist party.

The big question is whether Fernandez or Macri can win in the first round of the general election on Oct. 27. To avoid a second-round runoff in November, one candidate would have to clinch at least 45% of the October vote.

“The most important thing on Sunday is to see who passes 40% by the most votes. That’s the candidate most likely to get 45% in October and become president,” said Julio Burdman, a Buenos Aires-based pollster.

Opinion polls show Fernandez in the lead, which is not surprising given the weakness of Argentina’s economy under Macri.

As unhappy as they are about Argentina’s recession and high inflation, business leaders - and many well-to-do voters - say they are more concerned about a possible return to populism and intervention in the markets under the Peronists.

So rich Argentines may get nervous and ditch the peso if Macri performs poorly in Sunday’s primary.

“The potential panickers are middle- and upper-class Argentines, who will sell their pesos if it looks like Fernandez is going to win the presidency. This would pressure the exchange rate,” Burdman said.

The peso has already weakened 17.3% so far this year to 45.6 per U.S. dollar after a 55% swoon against the greenback in 2018.

Fernandez has chosen Argentina’s previous president, Cristina Fernandez de Kirchner, as his running mate. Both say they want the government to exert more control over the economy.

Kirchner is facing multiple corruption charges, all of which she denies. Critics say she nearly bankrupted the country after years of high deficits and heavy-handed currency controls that scared off investment and spurred capital flight during her two terms as president.

But she remains loved by millions of low-income Argentines who remember generous welfare spending by her administration.

Macri became president in late 2015, promising a new era of sustainable growth. Three and a half years later, the economy is shrinking while 55% inflation makes it harder for poor families to feed themselves.

Polls show Fernandez likely to get up to five percentage points more support than Macri on Sunday.

“If results are in line with expectations, the outlook for the government would be positive, because a small distance between Fernandez and Macri could be reversed between now and October,” said Mariel Fornoni, an analyst at polling firm Management & Fit.

“A more severe defeat for Macri on Sunday would complicate matters going into October, especially because the government would have to contain the market’s loss of confidence,” she said. </s> Peso plunges further, bonds down again on fears Argentina could return to populism 



BUENOS AIRES, Aug 13 (Reuters) - Argentina's peso and dollar-denominated bonds dropped again on Tuesday as market turmoil spilled into a second day following opposition candidate Alberto Fernandez's landslide victory in a primary election that dealt a severe blow to President Mauricio Macri's re-election chances.

The peso lost 9.32% of its value to reach 59 per U.S. dollar. The currency had hit an all-time low on Monday of 65 to the dollar, a drop of 30%, on fears that a Fernandez government could take Argentina back to interventionist economic policies.

Fernandez, who has former President Cristina Fernandez as his running mate, pulled off a stunning upset in the primary with a wider-than-expected 15-point lead over Macri, a free market proponent.

Monday's crash in the peso unnerved global equities investors, with markets already jittery over the Sino-US trade war and protests in Hong Kong.

"Yes, Argentina is a small economy. However, the last thing global markets want to see is another market-friendly government fall to populism and/or geopolitics," said Rabobank strategist Michael Every.

In an interview Monday, Fernandez said he was willing to collaborate with the current government after his primary triumph on Sunday sent the peso, stocks and bonds reeling.

Argentine assets had not recorded the kind of simultaneous fall seen on Monday since the South American country's 2001 economic crisis and debt default, Refinitiv data showed.

After an initial tentative move high on Tuesday morning, traders said the market turned and left dollar-denominated bonds down roughly 10 points down across the board, though volume was low.

The primary results showed Fernandez, a former cabinet chief, was well placed to win October's general election in the first round. He blamed Macri for the market turmoil.

"The dialogue is open, but I don't want to lie to Argentines. What can I do? I'm just a candidate, my pen doesn't sign decrees," Fernandez said in an interview with Argentine TV channel Net TV broadcast on Monday.

Fernandez, regarded as a moderate within the Peronist movement, has said he would seek to "rework" Argentina's$57-billion standby agreement with the International Monetary Fund if he won the general election. He has proposed an economic and social pact to combat inflation, which is running at 55%.

Macri, a scion of one of Argentina's wealthiest families, came to power in 2015 on promises to kick-start Latin America's third-largest economy via a liberalization wave.

But the promised recovery has not materialized and Argentina is in recession.

Investors were still assessing the damage caused by Monday's crash. Argentina's country risk rose 164 basis points to 1,631, the highest since 2009.

The cost of insuring against an Argentine sovereign default jumped again on Tuesday, according to data from IHS Markit. Markit's calculations price the probability of a sovereign default within the next five years at more than 72%.

Analysts also predicted the peso's fall would continue. BAML said it expects the exchange rate at 70.5 by end-2019 and 106.6 by end 2020. </s> In a letter, cited by Reuters, Dujovne said that the country's government needed “significant renewal” in its economic team amid a currency crisis.

“I believe my resignation is in keeping with my place in a government... that listens to the people and acts accordingly,” Dujovne said in the letter to Argentine President Mauricio Macri.

The country's president has appointed Hernan Lacunza, the economy minister for Buenos Aires province and former general manage of the Central Bank, as Dujovne’s replacement, according to AP.

Earlier in the day, Fitch Ratings announced in a press release that Argentina’s credit rating had been downgraded due to increased political risks driven by the recent electoral defeat of the country’s incumbent president.

Incumbent President Mauricio Macri won only 32.1 percent of the vote against his challenger Alberto Fernandez’s 47.7 percent in last Sunday’s election.

The primary elections results prompted a sharp drop in peso rate and an increase in economic instability. </s> (Bloomberg Opinion) -- Monday’s panic over Argentina’s weekend election results — the peso fell 15% and the S&P Merval stock index suffered its second worst rout in 70 years — may have been a bit overwrought. It was a primary election, after all, and the winning opposition candidate, Alberto Fernandez, has denied any intention to default on Argentina’s debt. But it sends an important message to Fernandez, and his running mate, former President Cristina Fernandez de Kirchner: Before the October election, they must convince stakeholders in Argentina’s economy that they understand the need to carry on with incumbent President Mauricio Macri’s economic reforms, if by another name.

Fernandez’s win was such a landslide, it sparked fears of a return to debt default, uncontrolled inflation and frenzied selloffs, precisely the sort of trouble that Argentines thought they had left behind. But the new market mess is a panic foretold.

Argentina’s leaders have been fatally misreading economic cues for decades. Misguided austerity and a flawed tether to the U.S. dollar in the late 1990s set off a currency collapse, riots, a run on banks, four presidents unseated in one 10-day stretch and, by 2002, the world’s largest sovereign debt default.

That debacle laid ground for the next. The Peronist tag team of Nestor Kirchner (2003-2007) and his wife and successor Cristina Fernandez (2007-2015) vowed to reclaim the country from predatory creditors, and briefly revived growth — before going on to squander the global commodities boom and turn South America’s second biggest economy into one of its most dysfunctional markets.

That wreckage helped propel Macri into office in 2015, on his market-friendly promise to restore Argentina to economic normalcy and the international community’s good graces. And he kept his word. Macri mended relations with global lenders, secured a rescue package from the International Monetary Fund, allowed the peso to float and belatedly engaged in the kind of fiscal probity that his populist predecessors had scorned. Yet his structural reforms were hesitant. And he faced a record drought that punished Argentina’s competitive farm sector, as well as a global selloff of emerging market assets. So he failed to deliver growth, jobs or stable prices — much less persuade voters to give him a second chance.

Credit the Peronists for spinning Macri’s grief into electoral gold. Barring an unlikely comeback — Eurasia Group rates Macri’s reelection prospects at just 10% — Fernandez is likely to be elected president in October, or in a runoff in December.

Yet here’s the irony: Macri may have moved too slowly and diffidently to put Argentina’s public accounts fully in order, but his policies are beginning to coax the country in the right direction. Whoever moves into the Casa Rosada in December will find little alternative but to carry them through.

Fernandez must now be clear that he understands that any return to government economic controls and protectionism would be folly. Yesterday, he said Argentina needs to rework its economic model, but didn’t explain how. He’ll have to do better than that. As Alberto Ramos of Goldman Sachs put it, “Fernandez not only needs to say the right things, but to convince people he means them, or else the markets will start to second guess him.”

To boost his credibility, Fernandez could name someone with a track record in finance to reach out to creditors and the IMF, clearly signaling his commitment to follow through with the fiscal consolidation Macri has put in motion. Leave it to the ecumenical Peronists to work those free-market principles into the populist gospel of reform.

Such efforts may still fall flat unless Fernandez, who has never run for national office, also shows what sort of leader he means to be. Can voters expect the pragmatist and conciliator he was when he broke ranks with the confrontational Cristina in 2008? Or will they be left with a mouthpiece for the mercurial Peronist power broker, bent on ruling by proxy and spending money Argentina doesn’t have?

The mayhem in the markets is a cautionary tale. Unless Fernandez can shed his slate’s populist legacy and deepen his rival’s policy agenda, he will stumble. After a decade of economic chaos brought on by willful politicians, the last thing Argentines need is another tone-deaf leader.

To contact the author of this story: Mac Margolis at mmargolis14@bloomberg.net

To contact the editor responsible for this story: Mary Duenwald at mduenwald@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mac Margolis is a Bloomberg Opinion columnist covering Latin and South America. He was a reporter for Newsweek and is the author of “The Last New World: The Conquest of the Amazon Frontier.” </s> BUENOS AIRES _ Argentina's Treasury Minister Nicolas Dujovne resigned on Saturday, days after President Mauricio Macri suffered a heavy setback in primary elections sending the peso into a nose drive.

In a letter to Macri published by newspaper Clarin, Dujovne said "circumstances" required a "significant renewal in the economic area."

Dujovne, who took the post in 2017 and led bailout negotiations with the International Monetary Fund last year, said that much was accomplished in terms of taming the deficit and trimming public spending, but "without a doubt mistakes were made."

According to Clarin, Dujovne will be replaced by Buenos Aires province Economy Minister Hernan Lacunza.

The minister's resignation comes three days after Macri announced a package of tax cuts and other economic relief measures for workers and companies following a surprise defeat in primaries on Sunday.

Macri took only 32% of the vote, against nearly 48% for opposition candidate Alberto Fernandez. The primaries, which whittled down the number of presidential candidates, were considered an important indicator of public opinion before the presidential elections on Oct. 27.

The defeat, attributed largely to Macri's austerity policies and Argentina's economic difficulties, sent the peso into a nose drive amid fears among investors that a Fernandez presidency could see protectionist policies implemented.

The South American country is in a recession, urban poverty remains high, inflation is running in the double digits and unemployment stood at 10% in the first quarter.

PHOTO (for help with images, contact 312-222-4194):ARGENTINA-TREASURY-RESIGN </s> Macri's coalition suffers heavy defeat in Argentina's second most populous district

The ruling coalition of Argentine president Mauricio Macri suffered a heavy defeat Sunday in elections held in Cordoba province, the country's second most populous district. Peronist governor Juan Schiaretti led comfortably after 94.2% of the vote had been counted, claiming 54% of ballots cast in his bid for re-election.

Macri's Cambiemos coalition was divided between rival candidates in the provincial elections, with Mario Negri garnering 17.8% and Ramon Mestre 11% of the vote. Peronists also took the mayoralty of the city of Cordoba for the first time since 1974.

The contest in an electoral district of 2.8 million voters -- some 8.7% of the national electorate -- had generated particular interest as Macri's success in the same province led to his victory in the 2015 presidential ballot.

Argentina will vote in the first round of presidential elections in late October. Macri is under pressure over a misfiring economy six months ahead of the polls.

He has implemented a series of unpopular austerity policies to try to restore stability in the face of soaring inflation, huge debt obligations and a currency crisis. The measures came in exchange for a US$ 56 billion loan from the International Monetary Fund.

Peronists greeted the strong showing in Cordoba with chants against Macri earlier Sunday. </s> The government of Argentina has decided to abandon the 21-percent value-added tax (VAT) on essential food products to compensate price hikes amid a collapse of national currency peso, President Mauricio Macri said

BUENOS AIRES (UrduPoint News / Sputnik - 16th August, 2019) The government of Argentina has decided to abandon the 21-percent value-added tax (VAT) on essential food products to compensate price hikes amid a collapse of national currency peso, President Mauricio Macri said.

"I made an unparalleled decision which has not ever been made in our country. We will abandon the VAT for essential goods bought by Argentinian families ... This measure will be in effect until the end of the year," Macri said in a national address, aired live on his Twitter late on Thursday.

As of Friday, the VAT will not be included in the price of bread, milk, butter, pasta, rice, flour, canned fruit, vegetables and mate.

Buenos Aires residents told Sputnik that prices had already surged by 20 percent, including the prices on goods produced inside Argentina.

"The prices for nearly anything have grown by at least 20 percent. I do not know what to do," Elena, a resident of the capital said.

Earlier this week, the peso dropped by around 30 percent � from 46-47 pesos to 60-64 pesos per US dollar � amid the political instability in the country.

The decrease in the national currency rate followed the announcement of the results of the primaries ahead of the election scheduled to be held later this year. According to them, opposition alliance Front of All led by Alberto Fernandez gained over 47 of the vote, while Macri's Together for Change coalition gained only 32 percent.

However, on Thursday, Argentina's largest state bank, Banco Nacion, sharply strengthened the peso, so the dollar cost 58 pesos instead of 63 pesos, which was the case on Wednesday. </s> Buenos Aires — Argentina's beleaguered peso currency collapsed 30.3% to record 65/$ on Monday, traders said, after market-friendly President Mauricio Macri's worse-than-expected performance in the country's Sunday primary election.

Bonds and shares were also expected to fall after opposition candidate Alberto Fernandez — whose running mate is former president Cristina Fernandez de Kirchner — dominated the primary by a wider-than-expected 15.5 percentage points margin.

The result cast serious doubt on Macri's chances of re-election for a second term in elections in October, analysts said.

Bank of America Merrill Lynch analysts said the scale of the Fernandez win was much more extreme than their "bear case" scenario. "We expect a significant sell-off in EXD [hard currency] assets and heavy pressure in ARS [Argentinian peso] with a potential devaluation in coming weeks," they said in a note.

Fernandez's lead far exceeded the margin of 2-8 percentage points forecast in recent opinion polls.

"Markets react badly when they realise they were scammed. We are living a fictitious economy and the government is not giving answers," Fernandez said in a radio interview Monday morning.

Argentina is in recession with inflation at more than 55% after more than three years of Macri's policies. Investors nonetheless see the Fernandez/Kirchner duo as a riskier prospect than free-markets advocate Macri.

Kirchner imposed strict currency controls that harmed investment during her 2007-2015 administration. She feuded with the country's key farm sector over export taxes and presided over a multiyear standoff with bondholders that kept Argentina locked out of the international capital markets.

"Macri has already implemented a number of short-term measures to try to shore up support ahead of the October vote. Additional promises can be made, but the gap he needs to make up is a very wide one," Standard Chartered senior emerging-markets strategist Ilya Gofshteyn said.

The comprehensive victory by Peronists Fernandez and Kirchner "paves the way for the return to left-wing populism that many investors fear", consultancy Capital Economics said in a note to clients.

"With a renewed focus on sovereign default risks, bonds, equities and the peso will come under severe pressure in the coming days. That said, falls in the currency might be tempered by intervention in the foreign-exchange market," it said.

The primary result indicated that Fernandez had enough support to clinch the presidency in October's first round, without having to go to a November run-off election.

A candidate needs at least 45% of the vote, or 40% and a difference of 10 percentage points over the second-place runner, in order to win the presidency outright.
After Argentine President Mauricio Macri comes second in Argentina's primary elections, the country's peso loses 15% of its value against the US dollar.