Argentina Politics Update - 17 May 2023
CFK officially drops out of presidential race, political standoff between Supreme Court and executive branch, major lithium producer merger
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Politics
Argentina Election Update - May 2023 (Latin America Risk Report)
“With just 3 months to go until Argentina’s PASO primary elections, and 5 months ahead of the presidential elections, Argentina is likely to continue seeing spats between the Supreme Court and the ruling administration.”
The spats between the judicial and executive branches, especially regarding electoral issues, are setting up a major institutional clash
Cristina Fernández de Kirchner officially drops out of presidential race (CFK Argentina, Independent)
In a speech published on her website, the former president and current vice president confirmed she would not be a candidate for the Frente de Todos (FdT) Peronist coalition, claiming she would “not be the puppet of those in power for any candidacy”
The speech also heavily criticized the Juntos por el Cambio (JxC) opposition coalition and the Supreme Court
Her announcement casts further uncertainty over who the FdT presidential candidate will be, as many were still holding out hope that CFK would change her mind and begin campaigning
Lacking results, Massa tries to sustain a possible presidential bid (Buenos Aires Times)
Without economic data offering him the electoral strength he wished for, Economy Minister Sergio Massa has reverted back to his original rhetoric of blaming electoral strategies for the country’s current economic state
Massa notably different from current president Alberto Fernández’s preferred strategy - participating in the PASO primaries to choose a FdT candidate - claiming that the process and lack of a candidate could generate additional internal instability
To vote or not to vote (Buenos Aires Times)
The Supreme Court ruling is not unprecedented: it has ruled various times on similar issues of candidates attempting to remain in power past their constitutionally-mandated term limits
It is possible the Supreme Court delayed its decision until the last minute due to provincial instances, considering rumors that the government had been intending to clash with the Court
Javier Milei presented his proposals: cuts to pensions, privatizations, and public health tariffs (Infobae)
Milei supports privatization of retirement and pensions funds, seeking to curb state spending
He also seeks to make optional sexual education in schools and establish a National Security doctrine
The Supreme Court’s political muscle (Buenos Aires Times)
The author argues that for the Supreme Court, “Unfortunately being so explicit about their political muscle undermines their credibility and lowers the Court to the same base level of political interaction as the rest of the ecosystem.”
Three governors reelected in Argentina (MercoPress)
The Peronist coalition saw gubernatorial wins in Salta, Tierra del Fuego, and La Pampa last Sunday
San Juan’s elections, originally delayed due to a Supreme Court ruling, also resulted in a Peronist gubernatorial win
There were no elections in Tucumán, also delayed by the Supreme Court Ruling; they are set to be held in the first half of June
Economics
Argentina plans emergency economic measures to avoid big devaluation (Financial Times)
The Central Bank is set to increase interest rates to 97%
Changes are also expected in the foreign exchange market, as Argentina is quickly running out of its foreign reserves
The IMF “is unlikely to want to bring forward disbursements in the months before a potentially pivotal election, which the government is likely to lose.”
Food is also expected to be imported with zero tariffs, for the first time in Argentina
Argentina Is Going Broke to Stall a Full-On Currency Collapse (Bloomberg)
The majority of Argentina’s estimated $34 billion foreign reserves are not liquid
Foreign reserve liabilities exceed total reserves by about $1 billion
The peso is down 33% so far this year
Between late March and the end of April, Argentines have pulled more than $1 billion of US dollar deposits from banking systems
The BCRA hurries another amplification of a swap with China and seeks another sum at the end of the month (Infobae, La Nación)
The Central Bank is seeking to amplify its current swap with China for an additional $19 billion
In May, $1.07 billion of Argentine imports will be paid in Chinese yuans, instead of USD
Argentina’s activation of the swap with China is yet another method to try and maintain its dwindling levels of foreign reserves
Argentina’s Problem Is Economic Malpractice, Not the Peso (Bloomberg)
The author argues that dollarization is not a feasible solution to Argentina’s economic problems
Argentina doesn’t have the necessary foreign reserves to enact the change; this would then require a severe devaluation of the peso to make up for it
Political constraints, including lack of congressional support regardless of who the president is
Dollarization is likely to fail as long as politicians continue to enact ineffective fiscal and monetary policies
A series of government measures have not curbed inflation as intended; they made it worse
“Whoever is the country’s next leader will need not only to set the right policy, but also accumulate enough political capital to sustain it.”
Argentina inflation smashes past every forecast to hit 109% (Reuters)
Inflation in April reached 8.4%, bringing the annual rate to 108.8%
Inflation hasn’t hit triple digits since 1991
Lithium
Argentina gets “nod” from US to increase lithium trade fivefold (Buenos Aires Herald)
The Mineral Security Partnership, an alliance created by 13 global powers, invited Argentina to participate in its first meeting
The alliance is formed by: Australia, Canada, France, Germany, Japan, Finland, South Korea, Sweden, the UK, the US and the European Commission
The MSP’s goal is to achieve ““supply chains for critical minerals”
Mining secretary Fernanda Ávila was present in the meeting and answered a variety of questions regarding Argentina’s lithium sector
Argentina does not currently have a free trade agreement with the US, meaning that with the implementation of the Biden administration’s Inflation Reduction Act, Argentina may be left out of the critical minerals subsidies network
It is expected that the US will seek an agreement with Argentina so that Argentina is able to participate regardless
Lithium exporters announce huge merger in Argentina (MercoPress)
The country’s only two lithium producers, Allkem (Australia) and Livent (LTHM), announced a $10.6 billion merger and will form a new company that will operate in Catamarca and Jujuy
The merger is set to occur by the end of 2023
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