The MERVAL index rose from around 993 points in November 2008 to 42,057 points in July 2019, a 4.135 percent jump in just 11 years. From the stock market’s viewpoint and despite its recurring structural difficulties, Argentina finally seemed to become popular among other market players than just hedge or investment funds often denounced as “vultures” on the national political scene.
At the surprise announcement that the Peronist movement could return to power and question President Mauricio Macri’s policy denounced by the opposition as “ultra-capitalist” and “IMF submissive”, the Buenos Aires Stock Exchange slipped from 42.057 points to around 25,000 points from July to September 2019, a 40 percent drop in just 2 months.
According to Cyceon, this sudden disenchantment of investors is based on three main factors :
- First, the return to power of Cristina Fernandez de Kirchner as vice president of future potential president Alberto Fernández could spoil the rapprochement with the United States after the arrangement accusations of the former Kirchner administration with the Iranian government for the AMIA terrorist attack that killed 85 people in 1994.
- Secondly, analysts interpret the possible defeat of Mauricio Macri as the umpteenth evidence of chronic political instability in Argentina where corruption sometimes complicates the good conduct of business.
- Finally, the quality of the country’s public and private debt has deteriorated and has been downgraded by rating agencies as a result, and the specter of default is reappearing in the light of the IMF’s alleged reluctance to continue restructuring aid through a record $57 billion loan granted last year.
Moreover, the leading presidential candidate Fernandez has himself confirmed his skepticism about the IMF’s action, saying that “the loan received by the country and the raft of conditions associated with it has not generated any of the hoped-for results,” thus strengthening the sentiment that Argentina is experiencing “a never-ending crisis.”
In addition, recession fears in the United States and the diminished prospects for global growth do not favor emerging markets such as Argentina, again perceived as a risky if not speculative destination for foreign capital.