In Argentina, Cristina's 'Heir Apparent' Is No Longer Apparent

Results for Argentina ’s recent presidential election were reported this week, and almost no one expected the outcome. The chosen successor to current president Cristina Fernández de Kirchner – who is constitutionally barred from running for office again until 2019 – failed to win the expected majority and now faces the humiliation of a run-off on 22 November. It is quite possible that center-right opposition leader Mauricio Macri, the current mayor of Buenos Aires, will ultimately win. The result may bring the end of Argentina’s decades-long rule under Peronist socialism.

Macri has won accolades by pledging to end Argentina’s long-running dispute with a group of combative US hedge fund managers after its most recent in a long string of sovereign bond defaults. The Argentine government has become something of a punch line for its comically inaccurate economic statistics, and its almost pathological disregard for bondholders. But the most recent default was on bonds that were denominated in US dollars, thereby subjecting them to the judgment of thoroughly unsympathetic US courts. Fernández has refused to make any payments, but the dispute has shut Argentina out of global capital markets – a severe handicap amidst the ongoing slump in commodity prices.

Now many fund managers who specialize in emerging markets are taking a second look at Argentine stocks. A recent Financial Times survey reported that the number of managers who intend to buy Argentine stocks before year-end has increased by 50 percent since the beginning of 2015. The uptick is based on confidence that the new president will seek a quick resolution to Argentina’s dispute with the litigious hedge funds, thereby regaining some legitimacy in the global capital markets.

Photo Credit: Jubilee Debt Campaign

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