What if the opposition wins Argentina’s election?

Second-place stunner: Mauricio Macri, the pro-business mayor of Buenos Aires, stumped Argentina’s ruling party with an unexpected strong showing in the presidential elections held on Oct. 25. Macri took second place in the elections with 34.3 percent of the voters’ support, just slightly behind Daniel Scioli, the candidate from the official government party, who obtained 36.8 percent. Due to this result, runoff elections will be held on Nov. 22 for the first time in Argentine history.

Macri positioned to end an era of dysfunctional economic policy: If our forecast for the second round materializes, 50 percent of third-place finisher Sergio Massa’s supporters will vote for Mauricio Macri and 42 percent will vote for Daniel Scioli. Assuming our forecast is accurate, these numbers are likely to position Macri as Argentina’s next president with approximately 45.5 percent of the votes versus Scioli with 44.1 percent.

Reform agenda: The five policies that Mauricio Macri is likely to implement in 2016 if he becomes Argentina’s next president are:

1. Currency devaluation
2. Government budget cuts
3. Elimination of trade controls/restrictions
4. Negotiation with holdout creditors
5. Elimination of capital controls

What it will take for foreign investors to move: The elimination of import and price controls should allow for faster and more cost-effective access to intermediate and final goods, which could boost foreign direct investment into Argentina. As a matter of fact, in a recent poll that we conducted with FSG’s multinational clients, 72 percent of respondents mentioned capital and currency controls as the main roadblock to expanding their presence in Argentina, followed by trade restriction with 64 percent of the votes.

For more analysis on Argentina, see my colleague Mario Gutierrez's post on our FSG blog: https://blog.frontierstrategygroup.com/2015/10/what-if-macri-wins-argentinas-runoff-election-implications-for-multinationals/