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February 2016

The recent win of Mauricio Macri in the Argentinian presidential elections has ushered in a new wave of interest from investors on the back of a more market-friendly government.



Argentina’s economy is on the road to recovery. The country, which once held the biggest sovereign debt default in history and branded an international financial pariah in recent years, is now starting to see financial change following the successful presidential victory of Mauricio Macri in November last year. Macri, a pro-business leader and former Mayor of Buenos Aires who campaigned for change, signifies the end of a battered economy and the isolation of investors.

Even before Macri’s government could take action, investors responded positively to the idea of his presidency. The Merval, Argentina’s stock index, increased 40% from the beginning of October before the elections could take place. The bond markets improved even more, and yields on the country’s 10-year bonds fell to just 2.25%.

Macri has inherited an economy with an expanding fiscal deficit and inflation of around 20%, along with foreign reserves sitting at a nine-year low from the former President Cristina Fernandez de Kirchner. Kirchner, who was constitutionally barred from running for a third consecutive term, chose Daniel Scioli the current Governor of Buenos Aires as her successor to run against Macri.

For more than 12 years “Kirchnersism” has been the dominant political force in the country, first under Nestor Kirchner and then later his wife Cristina. For more than a decade economists and the international community have criticised the Kirchners for their secretive foreign exchange system, isolation of investors, the seizure of privately owned assets and the under reporting of inflation.

In a televised interview in the run up to the elections last year, Scioli summarised the difference between him and Macri: “I defend the role of the State and he defends the role of the market.”


Macri, a well-known businessman and former president of one of the most famous football clubs in the country, Boca Juniors, took his place in office in December and has pledged to reverse much of the Kirchners’ policies and open up the economy. Now, both his fans and critics will keep a steady eye on him as he begins the transition process; transforming the market into an investor friendly one.

CBRE’s Head of Research in Argentina, Lucia Do Campo agrees. “Many expectations are now placed on the elected government, awaiting changes on the economy and foreign relations fronts. For instance, a market friendly approach will be implemented thoroughly seeking to recover predictability and the trust of foreign investors. Mr. Macri is aware that Argentina is in desperate need for investments in order to fight back inflation.”

Do Campo believes that in order to prevent consumption levels from falling, the investment funds should come from abroad and as a pro-business leader Macri is aware of this and will foster friendlier relations between Argentina and the U.S. “His conciliatory leadership approach was shown after winning when he vowed to ‘build bridges’ with his rivals,” she adds.

According to Do Campo in order to get the desired FDI levels, the new government plans to unify its official exchange rate and its parallel one, which would mean a devaluation of the local currency, favouring the entrance of foreign capitals with hedge funds already interested on disembarking in the country.

“Furthermore, if the devaluation is higher than the inflation rate, as it is desired, it should make Argentina more attractive to tradable producers. Moreover, the huge fiscal deficit will be reduced,” she adds.

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