LATIN-AMERICA

Macri No More: How Argentina’s Turmoil Impacts Chile’s Business and Politics

The results of the primary elections in Argentina and the resulting instability could affect Chile’s economic and political landscape. Recent history of both countries suggests that what happens on one side of the Andes spills over to the other. So even if Macri won the elections in October, Chile’s right-wing has reason to worry.

Just like President Mauricio Macri, Chilean firms in Argentina are not having a good time. The Peronist candidate, Alberto Fernández, enjoyed a crushing and surprising victory over the incumbent in the last primary elections. A disastrous result for the markets and Chilean business. 

Fernández, whose running mate is former president Cristina Fernández de Kirchner, took almost 48% of the vote, compared to 32% for Macri. If those results were repeated in the October 27 presidential elections, Fernández would win the presidency without the need for a second round.  

Immediate effects of the shock result included increasing uncertainty in Argentina and countries such as Brazil and Chile, negatively affecting these countries’ investments in Argentina. On a consumer level, the loss of Argentine’s purchasing power will mean a fall in Chilean exports to the country and a drop in tourist trips to Chile.

Restless Chilean Investments

Chilean capital is especially present in Argentina’s retail and airlines segments. Both of these were heavily impacted by the collapse of the stock market, the devaluation of the Argentine peso and the increase in economic insecurity after the primaries.

Importantly, the Fernández de Kirchner administration nationalized the pension funds and imposed currency controls, measures which are incompatible with the liberal economy playbook. Her administration was also accused of manipulating economic statistics.

Therefore, several analysts fear a Fernández presidency would turn back the clock to these measures, provoking a repetition of the liquidity problems and exchange controls, and other issues.

The anxiety of the pundits a possible return of left-populist policies, together with a president who governs until December 10 in a vacuum, sharpens the volatility the US-China trade war has already brought to the country, while global indicators point to a general slowdown.

 

Nervousness in La Moneda

Faced with this complex situation, La Moneda has reacted cautiously. After the primaries, President Sebastián Piñera said “each country makes its own decisions.” He emphasized growth in the national economy while recognizing that volatility in Argentina will affect Chile. 

The head of Chile’s Socialist Party, Álvaro Elizalde, then sprinkled salt in the wound, saying, “like President Piñera during his campaign, Macri promised sustained growth of the economy, and the results are bad. That shows that when presidents do not keep their promises, they have bad election results.”

But as Piñera’s administration has tried to distance itself from Macri’s, it’s important to recall that they are close and share important similarities. Both are ultra-wealthy businessmen who entered politics, and both own their respective countries’ most popular football teams, Boca Juniors and Colo Colo, which they use as a link to their citizenries. They also share views on international affairs, which has been reflected especially in the approach to the Venezuelan problem.

The demise of the Pink Tide and the resulting return of the right in many Latin American countries began to a large extent with the victory of Mauricio Macri in 2015. His presidency was seen to clean out an incompetent and corrupt administration that brought Argentina down. But Macri’s victory also created momentum for Piñera’s return to power and provides, together with Bolsonaro’s, the backdrop for the Chilean leader’s turn away from the center. It would be ironic if Macri fell to the forces he once defeated – and thus also could pave the way for the demise of a center-right he once strengthened.

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