Winning over investors

“Argentina needs to regain private investors’ confidence,” says Hector Torres, a former IMF executive director and senior fellow at the Centre for International Governance Innovation.

“The IMF provides financial support, but confidence can only come if the next program is ‘owned’ by Argentina’s political class. Our problem is, above all, political.”

He says “Argentina’s political class remains polarized between two political relics” in ex-presidents Macri and Cristina Fernández de Kirchner – Alberto Fernández’s current vice president – on the left. 

The midterms shift the balance of power in Buenos Aires but economists are still unsure which way. 

The defeat could push Fernández towards more orthodox economics that would reverse damaging policies, such as capital and price controls, and curry favour with the IMF. Analysts believe austerity measures would likely be needed to help to shore up the country’s battered public finances.

While Argentina’s chequered history with the IMF means a deal could be unpopular, Fernández insists his government is “absolutely” committed to reaching an agreement on the $44bn of loans despite glacial progress in talks before the midterms.

However, a weakened president may also feel under pressure to pursue populism in a desperate bid to shore up support among voters and within his coalition government. 

“It’s notable that the president after the election seemed to make some conciliatory remarks suggesting the need to deepen their efforts to reach an agreement with the IMF,” says Sanghani.

“But the risk is that there’s still some radical parts of the peronist coalition and they may look at this heavy electoral defeat as an indication that they’ve not gone far enough in in some of these more radical economic policies, and they may want to ramp up spending to shore up support ahead of the presidential election in two years time.”

Goldman’s Ramos warns the instability could mean “more populist near-term policies” before a bigger policy shift at national elections in 2023.

The midterms defeat could offer a path towards an IMF deal and a pro-investor policy shift in a bid to pull the economy out of its freefall. But Argentina and its inflation-weary voters have been here many times before.