Argentina Politics Update - 6 September 2023
Milei's pick for VP attends controversial event, Bullrich changes tactics, new "soy dollar" introduced
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Politics
Milei’s running mate riles Argentina activists with event justifying 1970s dictatorship (Financial Times, Buenos Aires Times, El País)
Libertarian candidate Javier Milei’s running-mate, Victoria Villarruel, participated in an event in honor of the “other victims” of the political violence Argentina endured at the hands of a military dictatorship in the 1970s and early 80s
Villarruel is the daughter of military officers, and has long sustained the position that the violent actions of the guerrilla groups against the dictatorship should be judged as harshly as the systematic violence and disappearing of people of the dictatorship itself
Human rights organizations quickly condemned Villarruel and the event
Condemnation of the actions of the military dictatorship, including trials of military leaders, is one of the only points most Argentines have been able to agree upon since the country’s return to democracy 40 years ago
Operation Beat Milei – Massa’s emergency election campaign (Buenos Aires Times)
The campaign team for ruling coalition Unión for la Patria (UxP) candidate Sergio Massa’s believes that 14% of those who voted for Milei in the PASO - who in 2019 voted for the ruling coalition - could return to the coalition and vote for Massa in the October general elections
There are three possible strategies for Massa to take in order to beat Milei:
“Avoid attacking him head-on and to attack him on side issues, such as the consequences of his plan for the economy”
“Increase the presidential hopeful’s organic presence in social networks”
Having President Alberto Fernández convince governors to support Massa, and having vice president Cristina Fernández de Kirchner remain silent, given her polarizing image
Provincial pushback: City Hall and 13 provinces refuse to pay bonus (Buenos Aires Times)
Massa, who proposed a plan for provinces to pay 60,000 pesos to employees to counter against the effects of inflation and devaluation, faced pushback from 13 provinces - as well as Buenos Aires City - who announced they would not comply with the measure
Many provincial governors rejected Massa’s policy, citing that they were already involved in provincial salary re-negotiations
At least six of the governors who rejected the policy are either critical pieces in Massa’s campaign strategy or are allied to the government, therefore dealing a significant blow to the Economy Minister in their refusal
Bullrich’s two-front battle (Buenos Aires Herald)
Juntos por el Cambio (JxC) opposition coalition candidate Patricia Bullrich’s decision to name Carlos Melconian as her pick for Economy Minister was a direct response to the Milei campaign, as Bullrich aims to solidify her economic stances
Bullrich has also opted for a more moderate tone in an attempt to appeal to voters of her primary competitor Horacio Rodriguez Larreta and ruling coalition candidate Sergio Massa, as well and helping distance herself from Milei’s combative rhetoric
Bullrich says JxC should not depend on Macri’s actions (Buenos Aires Herald)
The opposition coalition, headed in part by Mauricio Macri, is seeking to distance itself from the former president, who has in recent weeks been seen getting closer to Milei
Though he never explicitly chose Bullrich as his candidate during the PASO, Macri often touted his support for her “deep, swift change” and was understood to be angling for a Bullrich win over Larreta
Milei recently announced that if elected president, he would create a special position within the Foreign Ministry for Macri
Patricia Bullrich suggests Juan Schiaretti should drop his presidential candidacy (Buenos Aires Times)
Córdoba Province governor Juan Schiaretti is a dissident Peronist running for president, who earned 3.71% of the vote in the country’s PASO primaries
Bullrich strategically suggested that Schiaretti should drop out of the race and urge his voters to choose her instead, as a way to stop Milei and Massa
Official PASO tally: difference between 3 main coalitions smaller than initial count (Buenos Aires Herald)
Final vote counts in the country’s PASO primaries resulted with only a 2.6% difference between the three main coalitions:
Javier Milei (La Libertad Avanza): 29.9%
Juntos por el Cambio: 28%
Unión por la Patria: 27.3%
Milei remained the most voted candidate
In the days following the PASO Milei had claimed fraud, accusing people of trying to “rob or destroy” his party’s ballots; the National Electoral Chamber said it had not received any legal claims regarding the vote count
Organised crime in Argentina: clans, crooked cops and money-laundering (Buenos Aires Times)
Organized crime in Argentina differs from criminal activities in other countries across the region due mainly to a lack of three things: 1) extreme violence from criminal groups, 2) control exercised by criminal groups over entire cities (instead relegated to specific areas, such as poorer neighborhoods), and 3) direct involvement of criminal organizations in state institutions
Most of the criminal gangs in Argentina tend not to compete with each other
Criminal activity in the country revolves around money laundering and human trafficking, as well as drug transit
Economics
5 key points on dollarization and the bi-monetary economy among the proposals of Argentina’s opposition (CNN en Español)
Milei and Bullrich advocate for similar-yet-different economic policies of dollarization and a bi-monetary economy, respectively
While Milei proposes the outright elimination of the peso, Bullrich would opt for the legalization of the dollar alongside the peso, with both as legal tenders
Almost all of the economic changes proposed by both opposition candidates would require Congressional support, given the necessary change in current laws to enact the proposals
Argentina, in dollar love affair, agonizes over divorcing the peso (Reuters)
“Milei's dollarization plan has sharply divided opinion: his backers argue it is the solution to inflation near 115% while detractors say it an impractical idea that would sacrifice the country's ability to set interest rates, control how much money is in circulation and serve as the lender of last resort,” write Marc Jones, Eliana Raszewski, and Rodrigo Campos
It is estimated that Argentines have most of their assets outside of the local financial system, reaching almost $371 billion, which in turn weakens the domestic economy
Though Milei’s dollarization plan has captured voters, many economic analysts agree that Argentina simply does not have the necessary reserves to enact the plan, and that many Argentines’ savings would be harshly diluted as a result of the economic maneuver
Argentina’s Dollarization Is a Dangerous Delusion (Bloomberg)
Argentina already tried de-facto dollarization in 1991 under Carlos Menem, with a “convertibility plan” that lasted ten years. The policy resulted in an “economic catastrophe the likes of which Argentina had probably never seen”
The convertibility plan “collapsed, in essence, because the Argentine economy - its households and businesses, governments and banks - could not generate enough dollars to cover the debts incurred to maintain consumption in the convertible era,” explains Eduardo Porter
The high costs of convertibility and dollarization should push Argentina to look for solutions elsewhere, including longer-term economic thinking and sensible political institutions
Foreign banks wait for another devaluation in Argentina: what the dollar will close at in 2023 (Bloomberg Línea)
Bank of America declared itself “bearish” towards Argentina, noting that the recent devaluation of the peso did not help increase the government’s net reserves and that the gap between the parallel exchange rates grew even larger
Bank of America projected that the official dollar would reach $615 at the end of 2023, meaning a total 61% devaluation; BBVA’s projection reached $650, with an additional 46% devaluation before the end of the year
Wells Fargo, and Standard Charter were more conservative in their estimates, projecting $485 and $490, respectively
Argentina's 'soy dollar' is back, with 25% of foreign currency available to exporters (Buenos Aires Times)
The latest policy - the fifth of its kind - decreed that soy exporters who manage to liquidate sales before September 30 will be benefitted, though this policy iteration did not include a unique exchange rate
The previous Export Increase Programme (PIE) exceeded its goal of raising $2 billion in only a couple of days, raising hopes that this latest move will have similar results
Lithium + Energy
Argentina has a medium term lithium export annual target of 400,000 tons (MercoPress)
Mining Secretary Fernanda Ávila announced that Argentina aims to increase lithium exports from 34,000 tons to 400,000 tons
China's Tsingshan set to expand lithium value chain in Argentina (BN Americas)
A $120 million alkali chlorine processing unit will be located in Argentina’s Jujuy province
The plant will play a key role in supplying regional companies with the chemicals sodium hydroxide and hydrogen chloride, key for lithium carbonate production
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