Argentina's Fernández attempts to allay investor fears

Alberto Fernández, the leading candidate in Argentina’s October presidential election, is attempting to moderate his economic message after a 15-point primaries victory over President Mauricio Macri.

During an event organized by newspaper Clarín, Fernández gave long-form answers to questions relating to the economy, Argentina’s polarized political climate and his track record as former president Néstor Kirchner’s chief of staff.

When asked about the possibility of Argentina defaulting and about restructuring its debt with the IMF – which extended a US$57bn bailout package to Macri’s administration when the country faced a currency crisis last year – Fernández replied: “Argentina has zero chance of defaulting if I become president.”

Fernández was quick to point out that he negotiated the conditions of the last default in 2003, after the devastating economic and political crisis of 2001. On that occasion, Fernández was tasked with negotiating with bondholders who held debt first issued during the 1976-82 military dictatorship and which kept growing through the 1980s and 1990s.

Fernández is relatively unknown to investors, who are wary of his running mate, former president Cristina Fernández de Kirchner.

However, Fernández is singing a different tune to the fiery left-wing populism of the Kirchner era, especially during Cristina’s two terms from 2007-15. In recent declarations, he has attempted to strike a more centrist and conciliatory tone that is nevertheless deferential to the policies of the late Néstor Kirchner, who governed from 2003 to 2007.

Fernández’s comments

“I lived through the default. It’s very damaging to society. Nobody could wish for a default as a way out, nobody. It would be a situation that sets us back,” he said during the Clarín event. “Nobody could seriously consider a debt cancellation and restructuring, nobody. This is a debt that was contracted two years ago, under a democratic government elected by Argentines. The debt we discussed in 2003 was a debt that began in a dictatorship. One thing has nothing to do with the other.”

Fernández did, however, recognize that the weak economy – which is in recession – and gloomy forecasts make it difficult for Argentina to service the debt under current conditions. He added that whatever administration assumes power at the end of the year, it would have to negotiate with the IMF to adjust the conditions of the payments to Argentina’s ability to pay.

The main tool for repaying the debt, he argued, would be spurring economic growth, especially through exports as the country needs dollars to service its external commitments.

When asked about the currency controls of introduced by Cristina Fernández to stem the fall of the peso, he said he had always been critical of the measure. “It wasn’t a good solution,” he said. “Even worse was [Macri’s solution of] acquiring debt … I don’t think the solution is controlling capital outflows or establishing differentiated exchange rates. None of these solutions have worked in the past, they have always failed. We need to be creative and look for new solutions, and that’s what we’re doing.”

He also rejected price controls, which have a long history in Argentina and were widely used by both Kirchner administrations as a measure to control inflation. Instead, he suggested a development plan involving an agreement between businesses, unions and the government to try to kickstart the economy.

“I’m not an economic dogmatist,” Fernández said. “I’m not a Keynesian or a liberal. I’m an economic pragmatist. There are moments in which the economy can be fixed by Keynesian measures and moments in which more freedom is the solution.”

Argentina's political situation was discussed at length by BNamericas in our most recent Political Risk report: Who will govern Argentina?