3 4 6 7 8

Page Page Page Page Page

. remainstalled IN THIS IN ISSUE reopensschools st st to be to be t the t the merge merge incentivescolor political efeidasGroup C Extraordinarysessions yield debt,approves new president YPFsuccessfully restructures with busywith international agenda severallaws, controversial bills government w@ PresidentFernández starts 2021 scenario,set up divisive elections Argentinaextends social distancing, andal and and andal Electoralyear Follo The episode episode The In the days In days the

n agains filed

coalition coalition requested that a

On February 19, ’s Argentina’s 19, February On

a vaccination scandal that that scandal vaccination a which which for its its for —

, vaccination vaccination and and

Argentina

19 19 -

person classes classes person shape political political shape

- s.com inal complaints have bee have complaints inal Find more Find about our services in

COVID ng up support support up ng eida

Monetary Fund. Monetary Juntos but will year Argentina This

shori President Alberto Alberto President .

nomic activation nomic . on Cook

On the international front, the the front, international the On

ARGENTINA 19 crisis and vaccination campaign. and vaccination crisis 19

egan - 19 vaccination priority groups. In the preceding days, days, preceding the In groups. priority vaccination 19 kcohencosentino@cef - POLITICALREGULATORY& RISKS JuanCruz Díaz [email protected] M [email protected] KatrinaCohen Cosentino - hour opening speech as the ordinary ordinary the as speech opening hour nternational nternational saw the government face its largest largest face its government the saw - González García resigned following a request from President from President a request following resigned García González

cial reform cial o focusing focusing zation. the I the , promoting eco promoting , polari a vaccination scandal that prompted the the prompted that scandal vaccination a active active — lmost tw lmost edia began to report several cases of national, provincial and municipal and municipal provincial national, of cases several report to edia began 1

202

increasing increasing , , FORMATION

fighting inflation fighting das.com i efe rnment has been been has rnment

www.cefeidas.com 5238 +54(11) 0991 (ARG) +1(646) 233 3204 (USA) CONTACTIN info@c

vaccination. vaccination. In response, the opposition crim Congress, to given be explanation detailed special room in the Ministry of Health after speaking with González García. García. González with speaking after of Health Ministry in the room special sc Vaccination” “VIP the into media the national in escalated quickly criticisms numerous faced had who minister, the of legitimacy last the undermined COVID the of handling for his e to continued reports resignation, minister’s and the admission following Verbitsky's the had received who ties political with otherwise or office public in individuals about new leaders that were not part of the prioritized groups for vaccination (focused on healthcare healthcare on (focused vaccination for groups prioritized the of part not were leaders that li The vaccines. receiving districts) some in teachers and individuals elderly and workers, to the close leaders and union officials public legislators, national also included known journalist a partisan Verbitsky, Horacio when 19 on February crisis peaked This a in vaccinated was he that interview radio a in announced coalition, governing the close to government face its largest political challenge to date to challenge political its largest face government minister. health national the of resignation the prompted Ginés Minister Health national not figures of political vaccination about the outrage to growing due Alberto Fernández COVID the in included currently local m and national gove with negotiations ongoing to struggles scandal, vaccination by VIP roiled Government respond the saw February to 2021, start quiet a After relatively sessions in Congress began, outlining priorities for the year for the priorities outlining began, Congress in sessions include judi controversial a advancing is tone electoral the and elections, legislative midterm hold national and discourse political color to already beginning positioning After a relatively quiet start to 2021, with the the with 2021, to start quiet relatively After a February underway, campaign date to crisis political Meanwhile, minister. health national the of resignation conditions distancing social under remains country the throughout reinstated were a an gave Fernández PoliticalClimate Report March11

POLITICAL CLIMATE CLIMATE POLITICAL REPORT

former Health Minister for alleged breach population. For example, Fernández of duties, and demonstrations occurred commented during a press conference that

outside of the Casa Rosada in Buenos Argentine law does not recognize cutting a

ARGENTINA

– Aires and in other cities across the country line as a crime, a criticism of what he on February 27. argued were politicized efforts from the

PCR PCR opposition, which filed a criminal complaint

Analysis against the former health minister.

Although he added that the issue should

Almost immediately, Secretary of Health be treated seriously and that those Access Carla Vizzotti was named as involved should resign as they do not have González García’s replacement at the head his support, the comment was seen as of the Health Ministry, and was sworn in somewhat missing the point of what by President Alberto Fernández on had generated public outrage, which February 20. Vizzotti in recent months was not that a crime had been had served as a virtual vice minister committed but rather that certain of health, and often served as the privileged individuals had put their public face of the national own interests above those of the rest government’s pandemic response of the country. efforts. Since the scandal exploded, the government has made several In this sense, the scandal has efforts aimed at diminishing its undermined the credibility of the impact. First, it released a list of 70 government, which came into office individuals who had been vaccinated by with the promise of being “different”, personnel from a national hospital, which both from the previous Macri included political figures and officials, administration, which it has tied to businessmen, and journalists. Second, the “elite rule” by calling for an end to new minister spearheaded the creation of privileges and solidarity, as well as a monitoring and tracking system for those the corruption associated with the vaccinated against COVID-19, and, finally, Cristina Fernández de Kirchner (CFK) the ministry published guidelines for administration. The incident symbolizes defining “strategic personnel” in the the wear down of the government’s government and allowing them to access political capital in recent months. After vaccines. seeing its popularity peak last year following the initial implementation of its The “VIP Vaccination Scandal” has COVID-19 response, the president’s seriously hit the government, which approval rating fell to about 40 percent, has struggled to respond and mitigate where it has been hovering since August the political and reputational damage (see here for background). While polls it has generated. On the one hand, the suggest that the incident has not national government has tried to deflect affected voting intention among the criticism by framing the matter as a government’s most committed voters, relatively isolated incident that involved a they suggest that the incident and limited number of individuals. It has also difficult economic situation are having implemented the measures noted above. a stronger impact among potential However, the government has failed swing voters. It is still early in the to provide a strong and convincing electoral year, but the government response. While President Fernández and will need to show better organization Cabinet Chief Santiago Cafiero have and advance quickly with the emphasized that the health minister was vaccination campaign, which is part of quickly fired, despite his personal its electoral and economic reactivation relationship with the president, the strategy (see here for background). president’s response has failed to mirror the outrage felt among much of the

2

While the “VIP vaccination” is the first vaccines allocated to Argentina through major political crisis for the the WHO’s Covax program.

government, it evidenced the ongoing

ARGENTINA

– challenges in terms of coordination Argentina extends social distancing, and management (see here for reopens schools

PCR PCR background). While the scandal involves

New COVID-19 cases in Argentina have fallen since

the vaccination of a wide range of reaching a peak in early January. In the last 24

individuals, many for purely political or hours, Argentina recorded 7,693 new confirmed

relational criteria, part of the criticism has COVID-19 cases and 107 registered deaths, focused on lack of transparency and clarity bringing the country’s total to more than 2.1 million cases and 53,359 deaths. After having previously in the criteria for giving vaccines to extended social distancing measures through all of “strategic” individuals in the government February, on February 28, Argentina’s national (e.g. why officials in various ministries and government extended the COVID-19 social at different hierarchical levels were distancing restrictions through March 12 across the country. This means that economic, commercial and vaccinated). In this sense, the issue industrial activities are allowed to occur with has exposed the mismanagement and approved protocols, although restrictions remain in failure to coordinate exhibited place on the size of social gatherings in indoor consistently by the government, as spaces and on outdoor cultural events, among others. Further, public transport in the part of the issue could have been metropolitan area remains restricted to essential avoided by clearly defining and workers and other authorized groups (such as stronger management of vaccination teachers and students). Provincial governments are efforts (although it should be noted that empowered to implement circulation restrictions as they deem necessary, based on local many local governments as well as epidemiological conditions. national government have been implicated in scandals related to improper awarding Schools and other educational institutions have of vaccines). been allowed to resume activities in line with national guidelines and local government approval. By mid-March, almost all provinces will have While the VIP vaccination scandal has resumed schooling in different formats. The issue of dominated headlines, Argentina’s returning to in-person classes had become a vaccination campaign continues to flashpoint in recent weeks, as the opposition began pushing on the government to resume classes and advance—albeit slowly, in part due to criticizing it for pushing back the beginning of the delays in the arrival of vaccines from regular school period due to the epidemiological Russia. On February 27, Argentina situation while simultaneously authorizing many reached the milestone of having other activities. These declarations sparked a controversy between the governing coalition and vaccinated 1 million individuals (counting the opposition parties, with the former accusing the those who have received both one and two latter of using the pandemic for their electoral doses of the vaccine), and as of March 10, advantage. 3.45 percent of the population had The government additionally extended international received at least one dose. In recent travel restrictions and recommended that residents weeks, additional doses of Russia's limit international travel through March 12. Sputnik V vaccine have started to arrive in Argentina’s borders remain closed to non-residents the country. Additionally, Argentina has and tourists, including from neighboring countries. The government has already anticipated that received 1 million doses of the Sinopharm stricter entry controls will be implemented from vaccine as well just over a half million then on in an effort to prevent the entry of more doses of the Covishield vaccine. The contagious strains of COVID-19 circulating in some government is anticipating the arrival of countries. another batch of Covishield doses in March as well as the start of the arrival of

3

Recent weeks have also brought welcome Election Watch news for the government whose decision

to use the Sputnik V vaccine was subject National legislative elections are scheduled to take ARGENTINA place in Argentina in October, and primary elections – to media scrutiny and widely criticized by the opposition (see here for background), in August. The elections will renew one-third of the Senate (24 of 72 seats) and half of the Chamber of

PCR PCR such as the publication of a peer-reviewed Deputies (127 of 257 seats), making them pivotal assessment of the Sputnik V vaccine in to secure the government alliance’s position.

leading medical journal The Lancet. This

helped the government justify the previous In the Senate, Córdoba, Santa Fe, Mendoza, Tucumán, Catamarca, Corrientes, La Pampa, decision of regulatory agency ANMAT that Chubut provinces will renew all three of their seats the vaccine be approved for use given that in a system that awards two seats to the party with the government had access to data on the the most votes and one seat to the runner up. The vaccine’s trials. Additionally, it was government will renew 15 of its 41 seats, while the opposition will seek to renew 9 of its 29 seats. In announced on February 26 that an the Chamber of Deputies, the government will agreement had been reached to allow a renew 51 of its 119 seats (43 percent), while about lab in Argentina to begin production of the half of the opposition’s seats (60 of 116) are up for Sputnik V vaccine. renewal.

Some parts of the government coalition have been Electoral year incentives color political pushing discussion regarding postponing or scenario, set up divisive elections cancelling the primary elections on the basis that they are set to take place in mid-winter, and could present a problem if COVID-19 cases spike and also This year Argentina will hold national that doing so could save money. However, this midterm legislative elections (see change would need to go through Congress by May sidebar for details), and the electoral 8 and requires opposition support, which it is not tone is already beginning to color clear it has. political discourse and shape political social rights, and—controversially— positioning. As the governing Frente advance efforts to reform the judiciary. de Todos and main opposition coalition Juntos por el Cambio seek to In contrast to Fernández’s speech last shore up support among their bases, year, which was relatively moderate discourse is becoming more and somewhat academic, this year’s combative, setting the stage for what speech was more combative in are likely to be divisive elections, as content. Occasional appeals to unity were seen in recent events including the overshadowed by harsh criticism of the president’s speech to open the legacy of Fernández’s predecessor, legislative year and the response to , particularly in regards to human rights violations in Formosa the issuance of foreign debt and the deal province. with the International Monetary Fund and included the announcement that an On March 1, President Alberto Fernández investigation would be opened into the gave the traditional presidential address issue to determine if there was damage to that inaugurates a new period of ordinary the state. The tone of the speech was sessions in the national Congress. In a not a surprise, coming on the heels of nearly two-hours speech, Fernández a difficult few days for the provided a summary of the way in which government in which it has faced his administration handled the pandemic, ongoing criticism for its handling of highlighting efforts to strengthen the the “VIP Vaccination Scandal” and health system and provide economic clashed fiercely with the opposition support to vulnerable populations. He also over protests of the issue. The tone laid out the government’s agenda for this was also not unusual in an electoral year, which will include fighting inflation, year, in which the government will seeking to revive the economy and redouble efforts to appeal to its most promote regional development, expand committed base while clearly

4

differentiating itself from the and control prices. For example, in mid- opposition. February, the government accused several

major consumer goods companies of

ARGENTINA

– The speech also reemphasized the reducing their production volumes or government’s overall economic failing to deliver certain consumer

PCR PCR agenda. With the aim of promoting products for commercialization in violation

economic growth, the president listed six of national regulations. Separately, after

bills the government will seek to advance President Alberto Fernández threatened to

this year to stimulate priority sectors and increase export taxes or establish quotas local SMEs (see below). Additionally, on agricultural and food exports in an fighting inflation and ensuring growth of effort to control the inflation of food prices. salaries in real terms remain high on the Major agricultural sector groups pushed government agenda, as despite the back against the president’s statements, economic slowdown last year, monthly saying these policies have failed in the inflation figures have shown an upward past, as have opposition parties. In recent trend in recent months (see graph), months, global prices for food commodities especially in key areas such as food and have surged, while Argentina's inflation housing. While the government projected rates began to pick up by the end of 2020, inflation of 29 percent this year in the motivating the government to intervene in annual budget, private estimates put the the food market. These conflicts with the figure closer to 50 percent. For this agricultural sector raise memories of the reason, one of the government’s primary 2008 conflict with the then administration objectives is to reach agreements that of Cristina Fernández de Kirchner, which limit on price increases and control polarized the country. They are likely to inflation, and the government has been continue in the coming weeks as the meeting with union and business leaders government looks to fight inflation. looking to make wage and price agreements. The president’s inaugural speech also highlighted his intention to advance The government’s approach to with reforms of the judicial system. fighting inflation has brought clashes While judicial reform has been on the with some private sector actors as it president’s agenda since taking office (see pushes them to increase production here for background), bills presented to

5

reform the Public Prosecutor's Office and President Fernández starts 2021 with reform of the federal criminal jurisdiction busy international agenda have stalled in Congress due to their

ARGENTINA

– controversial nature. In his speech, the A relatively quiet domestic agenda in most of president called for “crossed controls” of January and early February gave way to an active international agenda that included state visits to PCR PCR Congress over the legislature, which was

both Chile and Mexico, virtual participation in the

interpreted by some as promoting an World Economic Forum in Davos and a conversation

inappropriate role for the legislature. The with French President Emmanuel Macron.

president’s statements set off a series of events that culminated in the In late January, the president made a two-day state visit to Chile where he met with President Sebastián resignation of Justice Minister Marcela Piñera for an agenda focused on supporting bilateral Losardo, who came out to clarify that trade. The two signed several commercial the president’s comments were not agreements and Fernández spoke with the Chilean aimed at promoting a body to review private sector with the aim of attracting investment, seeking to reassure them that the government will or sanction judge’s performance, but move to lift capital controls in the medium term if rather at creating a body to study the the economy begins to recover. Then, in February, functioning of the judiciary and make President Fernández made a three-day trip to recommendations to Congress. Mexico, where he was received by counterpart Andrés Manuel López Obrador with whom he discussed efforts to strengthen bilateral trade Losardo’s resignation came in the relations and promote access for Latin America to wake of a series of crosses with COVID-19 vaccines. During the trip, the leaders political figures in the governing announced the opening of the Mexican market to Argentine meats. Additionally, Fernández met with coalition close to Vice President Mexican business leaders including billionaire Cristina Fernández de Kircher. The Vice director of Grupo Carso, Carlos Slim. President has made repeated attacks against the judiciary for undertaking what Much of the international agenda has focused on expressing Argentina’s positions towards debt she refers to as “lawfare” and advancing negotiations with the International Monetary Fund political cases, including in recent public and shoring up support. For example, in his January testimony made in a case related to dollar speech to the World Economic Forum, Fernández future contracts that was begun by high- said there is no space for “irresponsible adjustments. Separately, on February 5, Fernández level officials of the previous Macri held an online meeting with the president of France, administration. Following days of rumors, Emmanuel Macron, during which Macron pledged President Fernández confirmed on March 8 his support for Argentina’s attempts to renegotiate that Losardo would be leaving in a public its USD 44 billion in debt with the IMF, while President Fernández said that the support provided interview in which he stated that she was by France during the Argentine government’s talks “overwhelmed” and implied that she was with private creditors had been very important for struggling to deal with the politicking of the country. Likewise, Argentina's Ambassador to the role. She will relocate to Paris to serve the United States, Jorge Argüello, has said that among the top issues on the bilateral agenda are a as Argentina’s Ambassador to UNESCO, future bilateral meeting between the presidents of and the government is currently evaluating both nations, the negotiation with the IMF, and the possible successors. Fernández´s recovery of the biodiesel market. The ambassador comments suggest that Losardo was stressed the importance of the US Treasury in the discussion, and said that he thinks that an tired of the political pressures of the agreement will be achieved within the next few role, and may be replaced by a figure months. Economy Minister Martín Guzmán will more aligned with the vice president. travel to Washington, DC in late March to continue This is only the second cabinet exit debt renegotiation talks with the IMF in which Argentina is pushing to extend payment periods since Fernández took office, but like and reduce interest rates. On March 11, the IMF the first replacement (see here for stated that it “continue[s] to actively and background), shows a government constructively engage with the Argentine authorities struggling to manage its internal and look forward to meeting Minister Guzmán later this month”, but acknowledge that it would take tensions. some time to reach a new deal.

6

Meanwhile, the government has also YPF successfully restructures debt, been dealing with complicated politics approves new president around another issue: fresh concerns

ARGENTINA In January, state owned energy company YPF put – about human rights violations in the province of Formosa. In early March, forward a proposal to restructure USD 6.2 billion in corporate debt after the Central Bank denied the

PCR PCR protests broke out in the province as the company access to dollars it needed to make a local government announced a return to a payment in March (in accordance with current

strict mandatory social isolation lockdown foreign exchange restrictions through which the

in response to an uptick in COVID-19 government is requiring companies to refinance debt in an effort to stave off a devaluation). After cases. The province cracked down on several weeks of tough negotiations with creditors, protests, and images of protestors injured they reached an agreement in mid-February, and by rubber bullets garnered headlines. YPF achieved almost 60 percent support from creditors to restructure the 2021 bond that was set to mature in March, although support for swaps of The incident has put the national other bonds was lower. government in an uncomfortable position as Formosa has been The company’s approach to negotiations received governed by Peronist Gildo Insfrán, a some criticism for generating uncertainty, but its stance overall showed a desire to restructure and government ally, uninterruptedly for avoid a default in line with the approach taken to 25 years. While the national the sovereign debt restructuring. The deal allows government has expressed concern the company access the exchange market to pay its about the violence, it has not taken as remaining obligations, and YPF has said its debt restructuring—which came following a year in which strong a position as might be the company’s cash flow declined due to the expected, likely due to this political pandemic context and amid restrictions on access alignment. Meanwhile, the opposition has to the foreign exchange market that limited its criticized the government for failing to capacity to repay its debt—will free up cash in the near term to support its 2021 investment plan. defend human rights, one of its banner issues, and also used the issue to draw Separately, on February 24, Pablo González fresh attention to the impact of lockdowns assumed the presidency of YPF after receiving on the economy. The incident has taken approval from the company’s board of directors. González replaces Guillermo Nielsen, an economist undertones of electoral positioning as close to President Fernández who had limited national opposition leaders traveled to experience in the oil sector and was seen as Formosa to support protestors. increasingly isolated from the company’s decision- making process. González is a lawyer who also holds a certificate in Hydrocarbons Law from the Analysis Universidad Austral and served as vice , one of Argentina’s main oil provinces, Overall, recent weeks make clear that from 2015 to 2019 alongside Alicia Kirchner. Prior both the government and opposition to taking this position, he held office as a national deputy for the province of Santa Cruz, a post to are setting the stage for a contentious which he was elected in 2019. election in which they will seek to paint the vote as a choice between maintain its majority in the Senate in any two highly divergent options in which case. Additionally, even a close much is at stake in an effort to shore election bodes well for the up their legislative positions. The government as the opposition would government understands the necessity of need to repeat its very strong 2017 maintaining the unity of its electoral performance just to preserve its coalition in order to perform well; seats; meanwhile, the government President Fernández recently said he will needs only to defend its current seats not break the unity with either CFK or and pick up 10 seats in the lower because that is what led to house in order to reach quorum. For the arrival of Macri. However, the stakes the opposition, the elections may be in some ways are lower for the more important in setting the stage government than for the opposition. for the 2023 presidential elections and The will almost certainly

7

defining its leadership than in ARA San Juan submarine accident. strengthening its congressional Additionally, the Senate gave approval to

position. While Buenos Aires Mayor the bill proposed by the governing

ARGENTINA

– Horacio Rodríguez Larreta is clearly coalition to modify the Competition positioning himself for a presidential bid, Defense Law, which grants greater powers

PCR PCR the recent reappearance of former to the executive in the appointment of the

President Mauricio Macri on the stage with members of the Competition Defense

the launch of a foundation and the Tribunal, as well as the 2021 Fiscal

publication of several open letters raises Consensus signed with provincial questions about his role moving forward. governors which will allow local governments to suspend some tax Extraordinary sessions yield several reductions and exemptions during the laws, controversial bills remain stalled year. Among the bills that failed to advance during extraordinary sessions are In addition to authorizing the the judicial reform and the Public Ministry designation of judges and reform, both contested by the opposition ambassadors, Congress passed 11 party. Both initiatives have been approved laws during the period of by the Senate and are awaiting approval extraordinary sessions—held from by the Chamber of Deputies, where the January 4 through February 28— government faces a more challenging including several priority bills for the scenario for approval bills as it does not government. However, these 11 bills have a majority represented just a third of the bills included in the list of themes authorized Regular sessions began on March 1, by the president for discussion (during and the government will now seek to extraordinary sessions, only issues put on advance priority legislation in the the agenda by the executive can be coming months before electoral discussed), and no sessions were held in paralysis sets it. Among the first either chamber in January. priorities is advancing a bill authored by Chamber of Deputies President Sergio Extraordinary sessions in the Chamber of Massa to raise the income tax floor; the Deputies were delayed due to lack of president previously expanded the agenda agreement on key issues to be discussed for extraordinary sessions to allow and debate over extending the protocol for committees to begin discussing the bill. mixed remote and in-person sessions and Also high on the agenda are moving the as such did not begin until February 11. fiscal consensus and a nutritional labelling On the other hand, the Senate met three bill through the lower house (both have times, including holding two sessions in Senate approval). Additionally, in his February as a well as a meeting to renew inaugural speech, President Fernández authorities in the chamber. said he will soon send a series of bills to Congress, including ones related to public Among the measures that received final service tariffs, judicial reform and approval during extraordinary sessions indigenous and gender issues. He will also were a law mandating congressional send six bills to stimulate sectors of the approval for international debt economy: 1) incentives for EVs and agreements, including with the sustainable mobility; 2) incentives for the International Monetary Fund, a law to automotive industry; 3) regulation of ensure financing for the public science, cannabis for medicinal and industrial uses; technology and innovation system, a law 4) national purchases of medications; 5) to provide tax benefits to promote private agroindustrial development; and 6) oil investment in construction, and economic sector promotion. compensation for family members of the

Disclaimer: 8 This message is confidential and intended solely for the individual or entity to which it is addressed. The information provide d is exclusively for general background research and does not furnish advice on any particular commercial investment, trade matter or issue. The content of this material may not be replicated, reproduced, kept in a retrieval system or transmitted in any form or by any means, electronic or otherwise, without the express consent and approval of Cefeidas Group. © 2021 Cefeidas Group