CONTACT INFORMATION POLITICAL & REGULATORY RISKS [email protected] Juan Cruz Díaz [email protected] www.cefeidas.com Megan Cook +54 (11) 5238 0991 (ARG) [email protected] +1 (646) 233 3204 (USA) Marina Martínez de Hoz Torre Bellini [email protected] Esmeralda 950 Emilia Cerra Ciudad Autónoma de Buenos Aires [email protected] (C1007ABL) República Argentina Rayan Akill [email protected] Political Climate Report - ARGENTINA POLITICAL CLIMATE REPORT June 26, 2019 IN THIS ISSUE Page 2 The passage of the deadlines for formalizing alliances and What does the Pichetto announcement candidacies has brought clarity to the electoral scenario ahead of the mean? August 11 primary elections. In an unexpected turn of events, Massive blackout leaves Argentina without power President Mauricio Macri announced that his running mate will be long-time Peronist Miguel Pichetto, a move aimed at showing Page 3 Bolsonaro visits Macri plurality and assuring governability in a second term. The Macri- Page 4 Pichetto ticket’s primary opposition will come from Alberto What is happening with the opposition? Fernández and former President Cristina Fernández de Kirchner, who Electoral analysis and outlook managed to attract Frente Renovador leader Sergio Massa to their Page 6 space. In fact, the primary development of recent weeks has been Local elections continue to the conformation of two large electoral alliances around these tickets reaffirm strength of incumbents and the weakening of third-way candidacies. As the candidates turn Economic team presents to to campaigning, there are signs that the government’s position is investors; indicators still weak not as solid as it may hope, a position that is not helped by a still Page 7 weak economy. At the same time, a busy provincial electoral Congressional activity grounds to a halt amid election season calendar in June largely confirmed the strength of incumbents. Meanwhile, congressional activity and labor mobilizations have U.S. Supreme Court rules against Argentina in YPF case slowed down, overshadowed by electoral maneuvering. Page 8 General strike fails to make major impact Electoral alliances take shape around two main poles The passage of the deadlines for formalizing alliances and candidacies (on June 12 and June 22, respectively) has brought more clarity to the electoral scenario. In a surprise turn of events on June 11, President Mauricio Macri announced that national Senator Miguel Ángel Pichetto will be his vice presidential running mate in this year’s elections. The announcement that Pichetto—the head of the Peronist (PJ) bloc in the Senate—would replace Gabriela Michetti, a loyalist of Macri’s PRO party, was highly unexpected. Indeed, speculation in the preceding weeks had been that any shake-up would involve either replacing Macri on the ballot, or running a vice president from within the current governing coalition—certainly not from the opposition (see May PCR for background). The same day, Frente Renovador (FR) leader Sergio Massa held a joint press conference with national head of the PJ party José Luis Gioja to announce that the FR would be joining “the opposition front” backing the ticket of Alberto Fernández and former President Cristina Fernández de Kirchner (CFK). It has since been confirmed that Massa will drop his presidential bid and head the list of candidates for the national Chamber of Deputies from Find more about our services Follow @CefeidasGroup Buenos Aires province for the political Massive blackout leaves all of space now known as Frente de Todos Argentina and Uruguay in the dark (Front for All). ARGENTINA On June 16, Argentines across the country woke – These dual announcements all but up in darkness. At 7:07 a.m. a massive failure occurred in the electrical interconnection system PCR signaled the dissolution of the that left all of mainland Argentina and Uruguay Alternativa Federal—the non- (the countries have an interconnected power Kirchernist Peronist alliance that had grid) as well as parts of Chile, Brazil and sought to position itself as a third-way Paraguay without power. Power was gradually option between Macri and the ticket restored throughout the day to the approximately 50 million users who were including CFK. Massa and Pichetto, along affected. with Córdoba Governor Juan Schiaretti and Salta Governor Juan Manuel Urtubey, had The evening, Energy Secretary Gustavo been the four main leaders of the space. Lopetegui gave a press conference in which he attributed the outage to a failure in a high- In a likely recognition of the Alternativa voltage transmission line from the Yacyretá Dam Federal bloc’s weakened position, Urtubey that forced an automatic shutdown. Lopetegui announced on June 12 that he will run as said the government is investigating the series of the vice presidential candidate of Roberto events that led to the widespread outage, and that more information would be available in 10- Lavagna, who had previously refused to 15 days. compete in an Alternativa Federal primary. The Lavagna-Urtubey space, which has Opposition leaders quickly seized on the blackout now been named Consenso Federal 2030 to criticize the government’s energy policy, arguing that major increases in electricity prices (Federal Consensus 2030), is supported by have not resulted in better service, but instead in a coalition that includes the Socialist Party, a massive blackout. They also called for the GEN and others. For his part, Schiaretti, government to give explanations to national who recently secured re-election in Congress. However, the quick restoration of service, the extraordinary circumstances the Córdoba (see May PCR for background), occurrence and its distance from the first has shown little inclination to become national elections on August 11 mean it is involved in national politics, preferring to unlikely to have an electoral impact. focus on his province. The markets also initially rebounded on This means that as the August 11 the news and the belief that the move will primaries approach, there are two help improve governability in a possible main presidential tickets (Macri- second Macri term. Pichetto and CFK-Fernández) that are frontrunners, with the Lavagna-Urtubey While the new Macri-Pichetto formula ticket (as well as several other candidates) could attract some Peronist votes, it is trailing behind. not expected to meaningfully increase voter intention for Macri, and it is not What does the Pichetto announcement intended as an electoral maneuver. mean? Instead, the move was intended as a signal to the ―inner circle‖ of political elite and shows willingness on the The reaction to the announcement of part of Cambiemos—which has now been Pichetto as VP has largely been rebranded Juntos por el Cambio (Together positive from the Cambiemos base for the Change)—to open up to other and coalition allies as well as from the political spaces. This has long been a markets. The allies of Macri’s PRO party demand of coalition allies (see March PCR in Cambiemos, the Coalición Cívica (Civic for background), such as the UCR. Coalition, CC) and Unión Cívica Radical Although the party ratified its continuity in (Radical Civic Union, UCR), reacted with Cambiemos at a late May convention, it praise for the decision, stating that any simultaneously called for the coalition to expansion of the coalition is positive and be expanded and improved. The heads of that the move will promote governability. 2 all the main parties in Cambiemos have Peronists into the Juntos por el Cambio said they were previously consulted with space. However, we believe there is and are pleased with the decision, with reason to be skeptical that his ability ARGENTINA some even suggesting that Pichetto’s to usher support for the government’s – selection was their request. initiatives will be as successful as PCR hoped. Although Pichetto has a long Pichetto has been the head of Peronist (PJ) trajectory in the PJ and personal bloc in the Senate since 2002, but relationships cultivated during his time, he announced his resignation as the bloc’s leader following Macri’s announcement. Bolsonaro visits Macri in first official to Pichetto was previously allied with CFK Argentina since assuming power during her presidencies from 2007-2015, On June 6, Brazilian President Jair Bolsonaro met but he later broke from her, and his time with President Mauricio Macri during his first as head of the opposition during Macri’s official visit to Argentina since assuming power in presidency has been characterized by January. Bolsonaro and Macri had met earlier in moderation and willingness to negotiate the year, during Macri’s official visit to Brazil in mid-January (see Jan-Feb PCR). The presidents with the current administration. He is had a meeting where they discussed Mercosur, widely recognized as an artful and Venezuela’s crisis, and advanced with the negotiator in Congress and was key to signing of several bilateral agreements. ensuring opposition support for some Following the meeting, Bolsonaro stated that the measures advanced during Macri’s long-awaited Mercosur agreement with the first term, such as a pension reform. European Union (EU) should be concluded soon, and he thanked Macri for his work on the In that sense, Pichetto’s nomination is agreement. There is speculation that the deal could be closed during the 2019 G20 Summit set underlined partly by the same logic as to take place on June 28-29 that behind naming Alberto Fernández the presidential candidate of Frente de Moreover, Bolsonaro unexpectedly announced Todos (see May PCR for background) in that the countries had begun discussions for the creation of a monetary union. Brazil’s Central that it aims to show an attempt to Bank immediately denied this, stating that there reach out to politicians that were are no current projects or studies in place for the previously unaligned between the two creation of a monetary union with Argentina.