The surprise announcement that ex-President Cristina Fernández de Kirchner (CFK) will run for vice president raises as many questions as it does answers. Is it a masterstroke, a genius piece of political manoeuvring or just a smoke-screen?
For investors, while the news was not as negative as CFK standing for president herself, there will be wariness of her involvement in any capacity, at least until there is more clarity on how the arrangement will work, where the real power lies, the extent to which this Justicialist Party (the main opposition and largest component of the Peronist movement) ticket will embrace market-based economics and whether CFK truly has changed her spots. Bonds are now paring most of their losses after falling drastically on the news.
The move may be designed to allay investor fears of a leftwards lurch under a CFK presidency but, for as long as she is involved, it does not eliminate them. CFK, even as VP, is likely to maintain a key and influential role. Indeed, could this be little more than a ploy to get herself into the presidency by the back door? If they were they to win, could Alberto Fernández, who will be running for president, step aside sometime after the election and allow CFK to take charge?
The motivation for the move is unclear. CFK looked set to present a realistic threat to the incumbent President Mauricio Macri on her own. CFK and Macri are neck and neck in the polls, with some suggesting she could defeat Macri in a second round. So, taking a back seat seems odd, and out of character.
Her political strategists may have decided she has a ceiling on her vote and fear she could be weakened further by the 11 indictments against her (one such case involving corruption in public works contracts started on Tuesday). Also, perhaps Peronist leaders persuaded her that this was for the best, given a likely adverse market reaction if she stood for president and won, making the economic turnaround even harder. Hence, a coming together of Alberto Fernández and CFK may be seen as the ticket that widens the Peronist support and maximises the movement’s chances of returning to power. But, ideologically, can Fernández and CFK work together, or is this merely an election fix?
It is also not clear at this stage if the joint ticket will unite the Peronist factions. Although it may be an appeal for unity among the Peronists, will leading moderates – and presidential hopefuls – such as Roberto Lavagna and Juan Manuel Urtebey do so? Surprisingly, perhaps, Sergio Massa – the Peronist presidential candidate in 2015 – was reported to be willing to consider supporting the joint ticket.
Still, questions will inevitably be asked by investors about where the real power lies, with Fernández the face of the president, and CFK pulling the strings. If the joint ticket is successful, investors will look to the choice of finance minister too. Will it be a moderate (in the Lavagna mould) or a return for CFK’s “economic guru” Axel Kicillof?
What little we do know about the Alberto Fernández-CFK joint ticket is that they are likely to seek a renegotiation of the IMF programme (as indeed it seems would other Peronist hopefuls, like Lavagna). Although the IMF will always seek to help a country in whatever way it can, there are limits and it is not clear how much scope there is to change the programme, especially if the Peronist platform tilts leftwards, toward the ‘Kirchnerism’ of CFK and her late husband Néstor Kirchner.
Kirchnerism, while having to recover from the 2001 default of its predecessor regime, had 12 years to rebuild the economy, but left it with severe imbalances. It will be a concern to investors if the diagnosis of what is needed in the current crisis is more Kirchnerism.