Walter Molano | Newton’s third law
Published:Friday | August 30, 2019 | 12:00 AM
Sir Isaac Newton’s Third Law of Motion formally states that for every action, there is an equal and opposite reaction. Over the past weekend, we witnessed Newton’s third law in action, when tens of thousands of members of the Argentine middle class thronged the centre of Buenos Aires and converged on the Casa Rosada in support of President Mauricio Macri.
Coordinated by social media, and led by one of the leading film directors and movie stars, the crowd chanted, “Yes, we can”, “They won’t return”, and “Argentina without Cristina!”
Just as the market was coming to terms with a Fernández-Fernández presidency, the march reignited hopes that Macri could still have a fighting chance on October 27. President Macri, and his wife Juliana Awada, went out on the central balcony of the Casa Rosada, reminiscent of Juan Domingo Peron and his wife Evita, to receive the multitudes. Emotionally moved by the adoring support, the president shouted, “We will do better!” This was a much-needed sign of change and admission of mistakes.
Similar pro-government marches occurred in the provinces of Tucuman, Neuquén, Santa Fe, Mendoza and Cordoba. Confirmed in his position, Chief of Staff Marcos Pena did what he does best: he was in full campaign mode. The young strategist has been a close ally and he was the brains behind his previous electoral victories. Pena jumped back into the fray, firing away on social media, and vowed to fight to the bitter end.
Although the Fernández-Fernández ticket did much better than anyone expected, they were still short of an outright majority. The peculiar characteristics of the Argentine electoral system are the only reason why a candidate can win with a plurality. Nevertheless, there is a fighting chance that we could be in for a surprise this October.
In the meantime, former President Cristina Fernandez de Kirchner remained low profile. She left the country at the end of last week for Havana, to visit her daughter who is undergoing treatment. She was not scheduled to return until later in the week.
There are signs that divisions are already starting to form within the Fernández-Fernández camp. Cristina’s son, Máximo, is the head of Campora, the militant youth group, and he is taking full credit for Macri’s rout. The new electoral rules allowed, for the first time, 16-year-olds to vote in the presidential elections. Not understanding the extent of their actions, teenagers voted for the Fernández-Fernández ticket as an act of rebellion and defiance against their parents. Now, the Campora is demanding their pound of flesh, insisting on decision-making control of the administration.
The names of old demons, such as Guillermo Moreno, who was responsible for the debacle at the INDEC and who negotiated with business leaders with a loaded pistol on his desk, are starting to make the rounds. Alberto Fernández is patently against Moreno’s return and the rehabilitation of such individuals, and he has said that the country needs to break with its past in order to form a new future.
It was always known that he would come to loggerheads with Campora, but it was thought that the confrontation would occur after he had donned the presidential sash in December, and not beforehand.
Nevertheless, Maximo and Campora are salivating at the prospects of power and they are unable to restrain themselves. A falling out within the Fernandez-Fernandez camp could only improve the chances that a reinvigorated Macri could make it past the finish line.
The other good news over the weekend was the arrival of the IMF mission. After a short delay, the delegation finally arrived in Buenos Aires and they immediately met with government representatives. The IMF team was led by Roberto Cardarelli and he was accompanied by Alejandro Werner, the Director for Western Hemisphere.
The fact that Werner joined the mission underscored its gravity and importance. Normally, the last few missions were led only by Cardarelli, and he reported his findings to the director and the board. However, Werner’s presence may speed up the approval process for the upcoming US$5.4 billion disbursement, which is less than two weeks away.
The Argentine team was led by Economy Minister Hernan Lacunza and Central Bank President Guido Sandleris.
The mission arrived just in time to witness the overwhelming support for President Macri. Economy Minister Lacunza noted that the IMF team was very surprised by the massive turnout.
Fortunately, the government’s fiscal numbers have been better than the targets, hence there is a great deal of confidence that the IMF review will be favourable.
The mission is also expected to see a range of private-sector analysts and consultants. Alberto Fernandez indicated that he was open to meeting with the mission, which should provide a further boost to market confidence.
Alas, we cannot forget Newton’s Third Law of Motion. For every action, there is an equal and opposite reaction. In other words, after the bloodbath of the last two weeks, the game still remains afoot in Argentina.
Dr Walter T. Molano is a managing partner and the head of research at BCP Securities LLC.