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a role — perhaps more worrying is that this Nevertheless, despite the relatively is already having negative consequences difficult economic moment — and the

for the Macri administration. Additionally, fact that December is typically a month ARGENTINA

there are concerns that recent events could with increased social mobilization — – push country risk even further up. For 2018 is drawing to close with relative

PCR PCR example, a recent Supreme Court ruling calm. However, the upcoming paritarias decided that around 150,000 retirees (salary negotiations) are likely to be merited recalculated retired pay (see contentious given the drop in workers’

below), and there are concerns these costs purchasing power, and the CGT leadership could make it harder for Argentina to meet has been making increased noise in recent future debt payments. days.

Approval of Macri’s management of the Additionally, on December 27 the country has been steadily decreasing government announced new “tarifazos” - as throughout 2018: it started the year around unpopular hikes in public service rates are at around 50 percent, and has now steadied known — and prices for public transit, gas around 30 percent (see graph), estimated and electricity are set to increase between to be Macri’s core base of voters (though 40 and 60 percent in the first half of 2019 there has been a slight rebound in recent (set to end several months ahead of months after the successful G20 summit elections). The government likely hoped and due to a more stabilized economy). that making this announcement during Even though it still seems that Cambiemos the holidays would give time for its is well-positioned for next year’s elections, impact to be dulled, but there has with a divided opposition and strong already been pushback from the disapproval of likely contender Cristina opposition, potentially setting up a Fernández de Kirchner (CFK), Kirchnerist or new showdown over rate hikes in the other Peronist candidates stand to benefit new year. Just one day later, on December politically from increasing uncertainty. 28, it was announced that Energy Secretary Ironically, current electoral Javier Iguacel would be replaced by uncertainty — due to the political risk Gustavo Lopetegui, who was coordination it poses and the consequences it secretary in the Office of the Cabinet Chief creates for the Macri administration, until September. Iguacel is partly paying such as decreased access to financing the political cost of the increases, but his — could become a deciding factor in the resignation was also likely due several 2019 elections. policy disagreements with Economy Minister Nicolás Dujovne. Lopetegui is close

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to Cabinet Chief Marcos Peña and has been working closely with Dujovne for some PPP program topples under increased country risk pressure

time. ARGENTINA

The 2019 budget, approved in November, cut – Extraordinary sessions come to a government funds for public works and cemented the government’s decision to rely on a public-

PCR PCR close, ending legislative year private-partnership program for infrastructure projects. However, a new country risk maximum Political financing and barra brava bills reached in mid-December essentially caused the government to give up their hopes of being able postponed to attract private investment for the program. The program had been facing difficulties in attracting investment since earlier this year, with possible The legislative year formally ended on links to the notebooks corruption scandal December 28, and Macri’s decision to deterring international banks and high country call for extraordinary sessions to risk resulting in unfeasible interest rates. After a discuss pending bills yielded mixed mid-December meeting between Macri, Economy results. Two of the most talked about bills, Minister Nicolás Dujovne, Transport Minister , BICE President Francisco the political party financing law — which Cabrera, and Banco Nación President Javier would limit cash donations and allow González Fraga, it was confirmed that the PPP private sector contributions to the 2019 program would be postponed until costs decrease. Projects which have already been started, such presidential campaigns — and the anti- the first six road network projects awarded under barra brava bill — which outlines harsher the framework, will continue as planned. sentences for soccer fanatic wrongdoers (see November PCR for more details) — were postponed at least until February, for more details), further debate will also when further extraordinary sessions could wait at least until February 2019. Initial be called by presidential decree (ordinary discussions of the bill showed conflicting sessions start in March). opinions, with various sides asking for modifications. The bill will now return to The decision to postpone discussion of committee and will be treated in future the political financing law came from sessions. the government. Discord within the Cambiemos coalition, with Coalición Cívica -Mercosur trade deal approved by (CC) party leader Elisa Carrió, amongst the lower house others, expressing her discomfort with the bill was the main cause for delay. Senate Though the initial discussion of updated majority leader Miguel Ángel Pichetto (PJ) terms for a Mercosur-Chile trade deal were also pushed for postponing discussions, as frustrated by opposition lawmakers in late opinions within the opposition were also November and early December,2 the divided about the specifics of the bill’s document was approved and finalized by content. the Chamber of Deputies on December 19. The new deal aims to include professional Though proponent and Minister of Security services in the existing trade deal, and also (PRO, Cambiemos) has facilitate and reduce transaction costs for been advocating for the barra brava bill, to exporters in Argentina across the value be discussed for almost two years and chain. Chile is the fourth largest destination despite its renewed relevance after the for Argentine exports, and January- Copa Libertadores final debacle (see here

2 Discussion of the deal, which has already been Red por Argentina, and some provincial blocs all approved by the governments of Chile and , and voted to postpone discussion, naming the lack of has also been approved by the national Senate, was prior consultation with industrial sectors, lack of halted by the vote in the lower house in favor of comparative data on the impact of the deal, and lack sending the proposal back to committee. In a rare of time to analyze the proposal (most deputies only a display of unity, opposition lawmakers from Frente day of prior analysis before the vote) as the primary para la Victoria, Frente Renovador, Argentina Federal, reasons for their vote.

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November exports in 2018 have increased Monzó re-elected president of Chamber by 15 percent compared to the same period of Deputies for 2019

in 2017. In addition, Chile is the third In early December, National Deputy Emilio Monzó ARGENTINA

largest export destination for Argentine (PRO, Cambiemos) was re-elected president of – small-to-medium size enterprises. the Chamber of Deputies with broad support from all political blocs. This will be Monzó’s fourth and

PCR PCR last period as Chamber president, as he will not Argentina’s own brand of “Me Too” seek re-election next year. The deputy has played movement refocuses attention on a key role in helping to advance the government’s

legislative agenda during Macri’s first term. gender violence and sets political However, he has been a proponent of building a agenda more broad-based governing coalition that includes moderate Peronists. In once again accepting the presidency, Monzó praised the In mid-December, the Actrices “rosca política” — a term which refers to back- (Argentine Actresses) collective — which room politics, and connotes the importance of formed earlier this year to advocate for the seeking deals across the aisle. The comments also passage of the bill to legalize abortion — play tribute to the importance of a personal style of politics, and implicitly criticized a social-media shone a spotlight on allegations of sexual based strategy. Disagreements over strategy with abuse and harassment in the entertainment other key players in the Macri administration likely industry and sparked a movement with contributed to his decision not to seek elected wide-reaching impact. The allegations office next year. Nevertheless, Monzó will play a key role in shaping legislative debate during the made by actress Thelma Fardin against upcoming year. Juan Darthés in a press conference sparked a wave of other women to come forward with stories of abuse in the industry, abortion bill — have somewhat diverted the echoing the “Me Too” movement in United focus from social issues in recent months, States in more ways than one, with the the re-emergence of gender violence on the hashtag “Mira como nos ponemos” political agenda has provided the conveying a sense of resistance and government an opportunity to take togetherness. initiative. On the heels of the most recent controversy, President Macri presented the The movement set off a series of allegations National Plan for Opportunities and Rights against high-profile figures for sexual (2018-2020), which includes strategies harassment and abuse, including two such as protocols for public response to sitting senators. The charges set off political incidents of gender-based violence. shockwaves in both the governing coalition and the opposition and refocused attention There are undoubtedly political on gender and gender-based violence, benefits to the government for which in recent years have prompted responding quickly, as it can widespread social mobilization, pushing the demonstrate initiative and generate a issues prominently onto the public agenda. narrative unrelated to the struggling economy as well as capitalize on the The government moved quickly to broad support these issues tend to introduce a bill that mandates training on generate. This is a strategy the gender perspectives and gender-based government has used before, such as when violence for officials in all three government it allowed congressional debate on the branches in this year’s extraordinary abortion bill as it became increasingly clear sessions. The bill, known as “Ley Micaela” - that economic reforms were unlikely to after a young woman murdered in April advance (see March PCR for more 2017 - was quickly approved with almost background). unanimous support. Given the large social support they Although economic difficulties — combined amass and the difficulties involved with the ultimately narrow failure of the with debating other controversial

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matters in an election year, social Macri and Bolsonaro to meet for the issues are likely to remain prominent first time in a bilateral meeting

on the 2019 agenda. In fact, the With Brazilian president-elect Jair Bolsonaro set to ARGENTINA

Campaña Nacional por el Aborto Legal, take office on January 1, considerable uncertainty – Seguro y Gratuito de Argentina has said it remains about the outlook for relations between the neighboring countries. President Macri and

PCR PCR will present a bill to legalize abortion for the Bolsonaro will meet in Brasília on January 16 for a eighth time next year, making changes that bilateral meeting. After speculation that Macri take this year’s debate into account. It is would attend Bolsonaro’s inauguration on January

likely that the government will once 1, Macri confirmed via Twitter that they would again allow debate on the measure, meet to discuss the future of the bilateral relationship after he returns from vacation. and a revised bill has a real possibility Foreign Affairs Minister will represent of passing. the Argentine government. This is a break from the tradition of the vice president attending when the president cannot, but in recent weeks Faurie Supreme Court rules on has been one of the loudest voices highlighting the controversial cases, shows importance of bilateral ties. unexpected divisions Mercosur is likely to be high on the agenda at the bilateral meeting, along with the Venezuela crisis. In recent weeks, the Supreme Court Argentina, now head of Mercosur, aims to make it has ruled on a series of controversial more flexible as well as to finalize a trade agreement with the European Union. The issues, including changes to the “2 for Bolsonaro administration has claimed that the 1” and pension fund laws, with political bloc is not a priority and it has also stated that it repercussions. At the same time, these needed to be updated. On the other hand, Brazil have exposed divisions in the court that is looking to expand international trade with bilateral agreements. Macri will likely seek to have emerged since the unexpected ensure Bolsonaro’s support for reforms allowing election of new court president (see member countries to negotiate trade agreements. September PCR). Bilateral relations got off to a rocky start when the soon-to-be Finance Minister of Brazil claimed that On December 4, the court ruled against the Argentina was not a foreign policy priority. At that applicability of the “2 x 1” in human rights point, the president-elect’s team announced that cases, effectively reversing a highly their first official trip would be to Chile, breaking unpopular decision from May 2017. This with the tradition of first travelling to Argentina. Later, however, Macri invited Bolsonaro to the ruling in favor of applying the clause, which G20 summit although he had not assumed the decreases the time served in prison by presidency (the trip was cancelled as Bolsonsaro double the amount spent in pre-trial had to undergo surgery). Macri’s absence at detention, in a case against a former Bolsonaro’s inauguration might be a scheduling coincidence, but it could also be a sign of tensions member of the military convicted of crimes to come. Nevertheless, despite the rocky start, against humanity during Argentina's most- Macri has remained vocal about Argentina’s need recent dictatorship generated widespread to work with Brazil as both economies depend protest and condemnation from across the heavily on each other. In any case, a bilateral meeting with a set agenda could prove to be more political spectrum (see May 2017 PCR for substantial than a traditional meeting on the background). In response, Congress sidelines of the inauguration ceremony. quickly approved a law to limit the scope of the applicability of the “2x1” and exempt cases of war crimes, human rights that the current formula used by social violations or genocide. The most recent security agency ANSES to calculate court decision upheld the law passed payments for retirees is unconstitutional. In 2016, Congress passed a law known as last year, and effectively nullifies the applicability of the “2x1” in the “Historic Reparation” that changed the aforementioned situations formula used to calculate payments for retirees who voluntarily adhered. ANSES

In mid-December the court made another later issued decrees applying the ruling with strong political impact, deciding calculation to other cases, which the court found unconstitutional.

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Although there are some concerns about the financial impact of the Corruption probe expands, reaches 3 members of the presidential family

measure — exacerbated in the context ARGENTINA

of the government’s austerity drive — There have been new developments in the – the highly-technical debate applies to notebooks scandal, which investigates illicit cash payments made by companies in exchange for

PCR PCR a limited number of individuals who public works contracts during the Kirchner retired between 1995 and 2008, and administrations (2003-2015). New business much of the impact of the ruling has leaders, including members of the Macri family,

been political. Opposition leaders, are being investigated as part of recent developments. Meanwhile, former President including Peronist Sergio Massa and Unión Cristina Fernández de Kirchner’s (CFK) preventive Ciudadana leader Agustín Rossi, celebrated detention has been reaffirmed by the judiciary, the decision and used the ruling to criticize but she is protected by parliamentary immunity. the government. The court’s finding that Franco and Gianfranco Macri, father and brother only Congress can make changes to the of President Macri, were called to testify as part of retirement formula have also sparked calls the ongoing investigation. The Macri family for more in-depth legislative debate on the business was awarded concessions for several issue. The issue is a sensitive one for highways during the 90s and the early years of Kirchner governments, and there are allegations the Macri administration, given that that illegal payments were made to the national one of the government’s most difficult government during this period. Gianfranco Macri moments was the passage of a social has denied paying bribes. The Macris claim they security reform package in December were minority stakeholders and had sold most of their company’s shares by 2003. The government 2017, that prompted protest and cut has not made any statements regarding the into the president’s approval ratings. proceedings.

Also in mid-December, the court failed to Separately, Judge Claudio Bonadío ordered the 4 preventive detention of CFK. This decision was find Santa Cruz Province’s Ley de Lemas backed by the Chamber of Appeals, after her team electoral system unconstitutional. The claim appealed CFK is accused of heading of an that it was unconstitutional had been put organization that received illegal payments in forward by current provincial Senator exchange for public work contracts and state concessions. However, she cannot be imprisoned Eduardo Costa (UCR, Cambiemos), who in as long as she holds parliamentary immunity. The 2015 lost the election for governor despite Peronist bloc and other allies have said that they receiving the most votes of any candidate will not support efforts to strip her legal due to the way the system sums votes. The protection, maintaining their stance that sitting legislators’ immunity should only be revoked in court found that, constitutionally, provinces the case of a firm sentence. On December 28, the have the autonomy to set their own Appeals Court freed five former collaborators of electoral rules. This was an unfavorable the Kirchners, finding a lack of evidence that they decision for the Macri administration, were involved in an illegal association.

which has sought to overturn the law, Other implications in the investigation have to do given that Costa would be well- with the legal liability attributed to implicated positioned for a gubernatorial run in its business leaders. The Chamber of Appeals decided absence. The ruling also set a precedent to reduce the charges to less severe crimes, which is likely to put some relief in the business for electoral disputes occurring in other community. Paolo Rocca, one of Argentina’s most provinces, such as Río Negro, where local prominent business leaders, will not be courts will now be tasked with deciding preventively detained after Federal Prosecutor procedural issues that could negatively Germán Moldes rejected the measure, though the charges of bribery made against Rocca still stand.

3 It is estimated that the ruling applies to 150,000 but whose votes are added together to define which individuals, or roughly 2 percent of retirees, and party garnered the most votes). The victorious party would amount to an increase of government spending is the one that receives the most votes once the of approximately ARS 70,000 per individual annually. votes won by each of its sublemas have been added 4 Ley de Lemas is an electoral system in which each together. Within this party, the winning sublema is political party or coalition (“lema”) is entitled to have the one that individually received the most votes. several “sublemas” (candidates or lists of candidates that are essentially competing against one another

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impact the electoral chances of the national At the moment, polls show that voting government’s preferred candidates. intention for a Cambiemos candidate is

solid at roughly 30 percent, while roughly ARGENTINA 50 percent plan to vote for an opposition – What does this all mean? candidate (although this aggregates

PCR PCR The spate of rulings — largely support for moderate Peronist and unfavorable to the government — have Kirchnerist candidates, and they are likely exposed divisions in the court, and to split the vote if they do not reach an raised questions about the highly electoral alliance). Another 20 percent of politicized nature of the judiciary. The voters remain undecided. In this case, election of Carlos Rosenkrantz — a Macri strong divisions in the opposition appointee — as Supreme Court president in between those who support CFK and September was seen as a tilt in favor of the those who do not work in favor of Macri administration. However, both the Cambiemos, though it is clear that the “2x1” and pension payment cases show current administration does not have a Rosenkrantz isolated in 4-1 rulings, and wide enough margin, if any, to offer without consolidated support, making comfort. anticipating future rulings more difficult. Despite the divided opposition, it is highly 2019 general elections: How things unlikely that Cambiemos can achieve the 40 are shaping up percent vote (and 10 percentage point difference with the runner-up) required to

win in a first round. In a ballotage Though it is still early, it seems that scenario, although most polls have a there will be three main contenders for Cambiemos candidate (presumably the presidency in 2019, representing Macri) winning by a small margin, Macri’s Cambiemos coalition, the coalition there is there is also increased of non-Kirchnerist Peronists grouped in uncertainty. CFK has very strong Alternativa Federal (see below), and disapproval ratings, which is why most Kirchnerists. Candidates have yet to be predict her loss in a hypothetical Macri- defined for the three movements, though Fernández showdown, though a full month Macri himself and former President Cristina between the general elections and a second Fernández de Kirchner (CFK) are likely to round vote could be enough time to throw their names in the ring. convince swing voters in the non-

Kirchnerist, Peronist space.

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Complicating matters further is the Kirchnerist, Peronist presidential candidate fact that 2019 is not lining up to be an to compete against Cambiemos in 2019.

easy year for Argentina’s economy. Zamora joined the other nine governors of ARGENTINA

Throughout 2018, Macri made decisions to Argentina Federal, as well as Senate PJ – stabilize Argentina’s economy that cost him leader Miguel Ángel Pichetto, Frente

PCR PCR some popularity, such as the IMF deal. If Renovador leader Sergio Massa, various Argentina starts showing early signs of national and provincial legislators, and recovery, these measures could be mayors of

marketed as a relative success of the municipalities, in an end-of-year meeting. Macri administration; however, further Discussions continued about leaving CFK missteps or unexpected crises could tip out of the Peronist primaries and holding the balance in the elections. provincial elections earlier in the year, in an Furthermore, lackluster economic figures effort to build momentum leading up to the may force the government to resort to a 2019 general elections. political strategy of polarization with the Kirchnerists as the elections approach to The face of Kirchnerism? keep attention away from the economic issues. On December 15, Unión Ciudadana leader and former CFK Defense Minister Agustín The rise of Alternativa Federal Rossi announced that he would be compete for the presidential nomination in the PJ The number of provincial governors who primaries as a candidate representing the have pledged their support for the Kirchernist factions.5 Rossi, whose Alternativa Federal coalition rose to 10 in campaign will run on two slogans, “There’s December with Santiago del Estero another way” and “The road to 2019, with Governor Gerardo Zamora joining the Cristina forever,”6 has already stated that opposition movement, whose objective it is he will withdraw if CFK decides to run. Other to provide a unified front for a non- possible candidates within this space are PJ

5 This is assuming that there are PJ primaries with a 6 "Hay otro camino" and "Camino a 2019, con Cristina Kirchnerist candidate, as the strong rift between siempre," respectively. Kirchnerist and non-Kirchnerists has driven other PJ leaders, such as Pichetto, to discuss the possibilities of holding separate primaries for both sides.

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Vice President Daniel Scioli, and National announced its adherence to the new Deputy Felipe Solá (Scioli and Solá are also protocol.

former Buenos Aires province governors). ARGENTINA

The latest signal of strain in the – As stated by Rossi himself, Kirchnerists face Cambiemos coalition with regards to

PCR PCR the task of building a strong candidacy in this resolution came from Elisa Carrió, case that CFK decides not to run. Not leader of the CC political party. Carrió, having Cristina Fernández de Kirchner who had previously asked (to no effect) that

as a candidate could mean not taking the protocol be discussed in Congress, advantage of her strong base of core stated on December 6 that this protocol supporters, but it could also be turned “violates human rights.” International non- into a positive if another Kirchnerist governmental organization Human Rights candidate with lower disapproval Watch seems to agree with Carrió, stating ratings can amass her voting base. in a December 6 communiqué that the resolution “runs counter to basic human Internal rift in Cambiemos over rights standards” and “contains loopholes security protocol and ambiguities that could allow security officers to employ firearms in an Following the logistical success of the unacceptably broad set of circumstances.” organization and security of the G20 leaders’ summit, on December 3 Security The law and order discourse Minister Patricia Bullrich approved a new surrounding the new protocol weapons protocol for police officers, which resonates with much of the Cambiemos would grant them greater discretion in their base, and debate surrounding it could use of firearms (for instance, the new be an early indicator of the Cambiemos protocol enables police officers to use their electoral strategy. While Carrió firearms without giving a verbal warning continued with her strategy of slowly when they face life-threatening situations). distancing herself from the current administration, there was strong Bullrich has pushed to make this system a support for Bullrich within Cambiemos. reality, stating on December 6 that she has It is highly probable that, should Macri run, been discussing this protocol with President the vice-presidential candidate on the ticket Macri for the better part of a year and that will be a woman (replacing current VP he supports it. President Macri has not , who after many recent made any public remarks regarding the missteps seems likely to be replaced, but protocol, which makes sense given the only with an insider from Macri’s PRO controversial nature of the measure: party). Bullrich’s name should be added to there has already been strong the list of potential vice-presidential pushback against it, including from candidates, along with Social Development high-profile members of the Minister . A Macri- Cambiemos coalition. Bullrich ticket could point towards a law and order, Bolsonaro-esque The protocol needs to be ratified by approach to the election, while a Macri- provincial jurisdictions before it is applied Stanley ticket could renew the elsewhere. Governor María Eugenia Vidal government’s pragmatic and (PRO, Cambiemos), for instance, rejected reasonable tone. the application of the protocol in the province of Buenos Aires, as have several other provincial governments. On the other hand, the government of Buenos Aires City

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Eyes on 2019: Cefeidas Group’s key issues to watch in the year ahead

 Argentina-Brazil relationship: Will Brazil’s Jair Bolsonaro and President Macri be

able to get on the same page? A positive relationship with its number one trading ARGENTINA

partner would provide positive headwinds for Argentina’s economy and could boost – its strategy of seeking trade agreements, but any missteps could signal rough sailing

ahead. PCR PCR  Economic indicators: Will stubborn inflation finally be tamed? And will the

anticipated economic rebound make itself felt in time for the elections, or will the

government have to convince the public to give it more time for reforms to take effect?

 Vice-presidential race: With it increasingly unlikely that Vice President Gabriela Michetti will appear on the presidential ticket next year, who gets the nod as VP will signal the government’s strategy. Will it pick Social Development Minister Carolina Stanley in a nod to progressives or double-down on a mano dura rule of law strategy with Security Minister Patricia Bullrich?

 Electoral alliances: Will the Peronists be able to unite under a unity candidate? And will CFK participate or go at it alone and risk dividing the opposition vote? Will deals be struck in some distrcits to decouple provincial from national elections in an effort to boost Peronists’ electoral chances?

 Corruption cases: With corruption cases advancing against former President CFK and high-profile business leaders, corruption is set to be a campaign focus. The government will seek to portray corruption as in the past, but risks being tainted by association.

 IMF financing: Argentina’s financing needs seem to be met for next year, but what comes next?

 Abortion debate: Will 2019 be the year that Argentina legalizes abortion? After a narrow miss last year, a new bill set to be introduced in March could once again be the focus of political debate and this time garner enough support to pass.

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