Argentina Angles for Fernández Presidency

The results of the presidential primaries held in Argentina last weekend show that the country’s pro-business president, Mauricio Macri, is unlikely to be reelected in October.

Senior director at Americas Market Intelligence Remi Piet told the Investing News Network (INN) that the 15 percent gap between Macri and the leading candidate Alberto Fernández is unlikely to be overcome before the election, which is to be held on October 27. Alberto Fernández received 47 percent in presidential primary, while Macri had 32 percent.

“Right now it’s looking like Fernández and the VP (candidate) Cristina Fernández de Kirchner — the former president of Argentina — will be elected at the end of this year,” he said.

Argentina is a major mining jurisdiction, with large gold, copper and lithium projects on the go, amongst everything else.

The mining industry has been wooed by the Macri administration since his election in 2015, with Macri widely described as “pro-business” compared to the interventionist Kirchner, who oversaw a plunge in mining investment during her 2007 through 2015 tenure. Under Macri, mining was declared a key industry.

The weekend primary — which all Argentinian voters are required to vote in — is designed to whittle down the number of candidates eligible to run in the presidential election, and tends to be a reliable signpost for what the final result will be, so markets reacted according to sentiment.

“Obviously the reactions from the market were extremely strong,” said Piet.

“With the peso going down to 59 pesos per dollar — this will have strong consequences on the capacity of Argentina to finance some of its projects, and the biggest worry for the market obviously is the possibility that Argentina will default on its debt and will go back to the policies that were put in place by the (previous Cristina Fernández de Kirchner) administration.”

Piet said many of the policies that could return are “probably not in the best interest of channeling investment in the country.”

However, for the mining industry, the picture isn’t so grim, said Piet.

“If you look at mining interests specifically, probably the picture is not as bleak as some might think. Both Macri and Kirchner-Fernández are in favor of mining investment in the country,” he said, adding that the industry had been developed under the previous Cristina Fernández de Kirchner administration.

According to Piet, the industry under an administration led by Alberto Fernández and Cristina Fernández de Kirchner would likely see more investment from China, though he said that there would be questions around transparency.

For miners and mining investors, Piet said that overall, the election didn’t change all that much.

“The issue is you must not overstate the importance of this election. Obviously it will decide a lot of macro policies for Argentina, but when you are a miner and an investor, the most important element is to do your due diligence, to understand the level of risks at the local level, understand the community management issues. 

“It will still be possible to move forward a series of investments in Argentina. There have been a series of lithium investments in lithium mines, especially from Eramet (EPA:ERA) (and) from Chinese companies also.”

Piet said that for traditional investors, while the doors may remain open to their money, they’d need to be “much more cautious about who (they) work with” due to transparency, contracts, subcontractors, government relationships and local unions.

“This level of risk is likely to be increased under a Fernandez-Fernández de Kirchner administration.”

When asked if there was any response to the result from the resources industry so far, Piet said it was too early to tell, but a lot of investments that people were hoping to see at the end of the Macri administration will not happen because of the risk of him not being reelected.

“I believe that if you had seen a positive result in those primaries for Macri, it’s possible you would have seen an increase in the presence in mining companies over the next few months, but they are likely to stay on the sideline at least until the election.”

Listen to the full interview in the recording above, where Piet also talks about the elections in Guatemala, and developments in Peru.

The Argentinian election will be held on October 27.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.