CONTACT INFORMATION POLITICAL & REGULATORY RISKS Juan Cruz Díaz [email protected] [email protected] www.cefeidas.com Megan Cook +54 (11) 5238 0991 (ARG) [email protected] REPORT +1 (646) 233 3204 (USA) Marina Martínez de Hoz [email protected] Katrina Cohen Cosentino [email protected] Political Climate Report - ARGENTINA January 18, 2021 POLITICAL CLIMATE CLIMATE POLITICAL IN THIS ISSUE The Fernández administration recently completed its first year in Page 2 Electoral coalition fails to consolidate as office with a mixed balance. The administration achieved some of its governing coalition goals, notably renegotiating Argentina’s foreign debt and passing a Page 3 law to legalize abortion, and has managed to navigate the COVID-19 Argentina legalizes abortion crisis and position Argentina to begin a large-scale vaccination Page 4 Outlook: 2021 campaign. However, the government struggled to consolidate its electoral coalition into a governing coalition, and its first year was Argentina begins COVID-19 vaccination campaign plagued by coordination challenges, missteps and backtracks. Now, Page 6 the government begins its second year as a recent uptick in COVID- Argentina continues talks with 19 cases comparable to September and October (the months with IMF highest number of infections) threatens to disrupt the gradual Page 8 reopening of recent months and undermine projections for a long- Upcoming midterm elections exacerbate tensions in coalitions awaited economic recovery. Talks with the IMF over a new deal, Page 9 expected to be signed in the coming months, are ongoing. Congress concludes active year Meanwhile, the government will face its first electoral challenge this of remote sessions, begins extraordinary sessions year, and the upcoming midterms are already complicating political dynamics within both the government and opposition coalitions. For Page 11 Eyes on 2021: Key issues to its part, Congress had a busy 2020 in which it passed many watch pandemic-related laws and is preparing for extraordinary sessions with a busy agenda. Fernández administration completes difficult first year The Alberto Fernández administration marked its first year in office on December 10, a year in which it faced numerous challenges including renegotiating Argentina’s foreign debt, managing currency crises, and, most difficult, designing Argentina’s response to the COVID-19 pandemic. Overall, the government’s first year leaves a mixed balance; it has achieved some of its goals and largely managed the COVID-19 crisis, thus far avoiding the level of saturation of the health system seen in some other countries, but has struggled to consolidate its electoral coalition into a governing coalition. Shortly after taking office in December 2019, the government passed its first major initiative, the “Law of Social Solidarity and Productive Reactivation”, which aimed to increase government income to support increased spending in priority areas (measures to help SMEs and vulnerable populations) (see December 2019 PCR for background). Progress on other priorities set during its campaign and first weeks in office—reaching a deal to restructure Argentina's debt; restoring purchasing power and fighting inflation; passing laws to attract investment in priority sectors; reforms of the judiciary and intelligence services; efforts to Find more about our services Follow @CefeidasGroup strengthen and federalize the public contain the impact of COVID-19 and administration; and advancing a women’s the strict lockdown implemented in and reproductive rights agenda—has been March, combined with the ARGENTINA – mixed. government’s limited ability to seek financing in the market, exacerbated PCR PCR On the one hand, the government the fiscal deficit and put pressure on successfully renegotiated Argentina’s the exchange rate. As a result, despite foreign debt with private bondholders having successfully renegotiated its debt (see here for background), giving the with private bondholders earlier this year, government fiscal space in the short- Argentina experienced periods of very high term as it seeks to push the country currency pressures, leading the out of a multi-year recession. Now, the government to establish strict capital government has started talks with the controls and adjust import controls to International Monetary Fund to restructure defend dwindling Central Bank reserves debt with the multilateral organism (see and prevent a major devaluation of the below). Additionally, 2020 ended with the peso. Recent weeks have been Senate approving a law to legalize characterized by adjustments to these abortion (see sidebar on next page for measures as the government seeks to more details), which the president had balance the need to protect reserves said was among the government’s top and limit access to the exchange priorities in the annual speech that market with the need to attract FDI inaugurates the start of the normal and allow companies access to goods legislative year in March (see March PCR used in productive processes. for background). Electoral coalition fails to consolidate as Nevertheless, the COVID-19 pandemic governing coalition put much of the government’s initial agenda on hold, and priorities such as As the government concludes its first efforts to reform the judicial system year in office, it is clear that the and advance with a social and diverse Frente de Todos electoral economic agreement saw scant coalition has struggled to work as a progress as the government instead governing coalition, and that focused on containing the public President Alberto Fernández has not health crisis. Meanwhile, the COVID-19 yet managed to consolidate his crisis and the strict lockdown implemented leadership or assume the undisputed in March pummeled the already struggling position as leader of the coalition. economy, which is estimated to have contracted by between 10.9 and 11.7 In mid-December, the main political percent in 2020. Additionally, figures of the governing coalition unemployment reached 11.7 percent in participated in a political act within the the third quarter. During the same framework of an announcement by the quarter, poverty reached 44.2 percent governor of Buenos Aires Province as a according to the latest measurement of sign of partisan unity on the eve of an the Argentine Catholic University’s electoral year, one of the few joint public Observatory of Social Debt. appearances of President Alberto Fernández and Vice President Cristina As a result, the government focused on Fernández de Kirchner (CFK) throughout promoting economic bridge measures, the year. While both made references to through price freezes and emergency the significance of maintaining a united assistance programs targeted at front, CFK subtly criticized some of the vulnerable populations and struggling national ministers, reawakening rumors companies (see here for background). about cabinet shuffles. However, the increased spending to 2 The appearance of the main Frente de a ban on corn exports through March 1, Todos coalition members together had changed the ban to a daily limit of 30,000 political salience on the eve of an tons, and then lifted the measure ARGENTINA – election year (see below for details), completely. The changes reflected a sending a signal that they recognize desire to not raise tensions with the PCR PCR their differences—which no one is powerful agricultural sector, as well denying—but know that their chances as differences in preferred approach of performing well in the elections within the government. In this sense, it require remaining united. Nevertheless, echoed the failed attempt made last year CFK took the opportunity to assert her authority. Although CFK continues to Argentina legalizes abortion in milestone for country, region largely remain in a background public role and highlight that Alberto Following a marathon session, Argentina legalized Fernández is the president and abortion early on the morning of December 30, a decision maker, she has control of key victory for the feminist grassroots movement institutional leverages, including the popularly referred to as the greentide (due to the use of a green handkerchief as it’s symbol). The majority of the ruling bloc in both bill, which was presented by the president, passed chambers of Congress, and the most with 38 votes in favor and 29 against in the Senate, electoral support in the key Buenos and ensures free access to abortion up until the Aires metropolitan area. This gives her 14th week of pregnancy supporters influence in the government. The bill was presented in December, passed in the Her comments at the event echoed Chamber of Deputies by mid-December and previous questions about “funcionarios que approved in the Senate before the end of the no funcionan” (“public officials that don’t month. The vote was expected to be tight, but the bill ultimately passed with a safe margin as work''). undecided lawmakers broke in favor of the bill, which was also discussed alongside a bill that aims While President Fernández and Cabinet to promote maternal and infant health. Chief Santiago Cafiero ruled out changes, A bill to legalize abortion was first voted on in 2018 internal divisions and missteps within the under then-President Mauricio Macri, but after government coalition have led to rumors passing in the Chamber of Deputies failed to gain about shuffles in key areas, including the the necessary votes in the Senate. The result Economy and Foreign Affairs ministries, reflected