Argentina’s stock market crashes after Macri loses pre-election poll

Rafael Azul

Argentina’s “PASO” primary election, which is designed to select candidates for federal posts and weed out political parties that obtain less than 1.5 percent of the vote, took place on August 11.

The unexpected collapse of support for President Mauricio Macri and his Juntos for El Cambio coalition spurred a run on the Argentinian stock market, which plummeted 60 percent to close down nearly 40 percent, the second largest one-day market collapse in the world since 1950. The peso lost 23 percent of its value, reaching a low of 61 pesos per US dollar.

Above all, the market crash shows international finance capital’s concern that the vote reflects massive social opposition to austerity regimes. Spain’s El Paíscalls the collapse “Black Monday” and warned that the economy is “on the verge of collapse.” What is “even worse” than the crash, El País wrote, is the “fear over the long coming months of a vacuum of power … without a credible government.” The first round of the general election is October 27. The New York Times, meanwhile, makes references to Argentina’s 2001 default when the country confronted mass demonstrations and went through a handful of presidents in a matter of weeks.

In Sunday’s elections, four political coalitions qualified to run on October 27. The big winner was the Peronist and trade union-led Frente Para Todos (Front for All), with 47.4 percent of the total vote. Its presidential and vice-presidential candidates are Alberto Fernández and former President Cristina Kirchner. The ruling coalition won just 32.1 percent of the vote. Its candidates are Macri and Migue Ángel Pichetto (Peronist).

Third, with 8 percent, was former economics minister Roberto Lavagna (Peronist) of the Consenso Federal, an anti-Kirchner Peronist group.

The pseudo-left Frente de Izquierda Unidad (an electoral alliance consisting of Partido Obrero, Partido de los Trabajadores Socialistas, Izquierda Socialista and Movimiento Socialista de los Trabajadores) came in fourth with 3 percent. Another pseudo-left candidate, running independently of the FIT-U, Manuela Castañeira, of Nuevo MAS (Movement for Socialism) obtained 0.8 percent of the vote.

Opinion polls leading into Sunday’s vote predicted a toss-up election between Macri and the Peronists. The difference was overwhelming, with Macri’s supporters acknowledging his chances in the general election are close to zero. If Sunday’s vote holds up in October, the Peronists will not only win the presidency in the first round, but will also very likely control the lower house of Congress. The possibility of such an outcome is provoking consternation in financial and industrial sectors.

There are some indications that Wall Street and the Argentine bourgeoisie are ready to dump Macri, whose illegitimacy will make enforcing International Monetary Fund (IMF) cuts more difficult. Among the domestic capitalist class, some are now demanding that Macri abandon the race and throw his support to Roberto Lavagna, of the anti-Kirchner Peronist Alternativa Federal.

Lavagna, 77, was economics minister for President Eduardo Duhalde during the 2001 debt crisis; shortly thereafter he became economics minister once again, under President Néstor Kirchner, where he was charged with negotiating the IMF’s “rescue” package of social service cuts.

As the voting was taking place, a group called the “256 executives” (members of the country’s industrial business association) actively discussed the voting results through Nuestra Voz, a Whatsapp chat group. Included in the discussion was the the proposal that Macri drop out of the race and lend support to support Lavagna.

The following day, Juan Manuel Urtubey, Lavagna’s candidate for vice president, denied having received such indications from the big business association. At the same time, Urtubey called on Macri to listen to the 47 percent “that did say something” on Sunday, demanding that he abandon the “electoral model” and begin thinking about his next steps, given the seriousness of the election results, calling for a transition organized by the political and productive establishment to accomplish a “common goal.”

Concerns over the legitimacy of Macri’s rule goes beyond Argentina’s borders. The British Financial Times weighed in on Tuesday, accusing Macri of having lost touch with reality.

“With voters giving Mr. Fernandez a 15-point lead, the peso tumbled while the Merval—the local stock index—lost 48 per cent of its value in US dollar terms. Government dollar bonds lost about 25 per cent on average, with yields rising to about 35 per cent on short-term notes, while credit default swaps showed an implied default probability of 75 per cent.

“At a press conference, [Macri] vowed to fight back and blamed the market crash on voters. This presidential loss of touch with reality may have scared markets even more than the prospect of Cristina Fernández de Kirchner’s return...