Macri Faces Difficult Presidential Agenda in Argentina

With only hours left before the transition of power, outgoing President Cristina Fernandez de Kirchner and President-elect Mauricio Macri, cannot come to terms on how the presidential handover will take place.

To be sure, Argentina is facing much more serious problems that Macri will have to confront immediately upon taking office.

Though unemployment numbers are low, there are no reserves at the Central Bank and no money to pay pensions or wages. This is a frightening situation.

With Macri at the helm, what are the economic possibilities for his administration?

"Change always offers some prospect of improvement," said Vladimir Werning, Executive Director, Head of Latin America Research, J.P. Morgan Securities Inc., at a panel discussion held at the Council of the Americas/Americas Society titled Argentina's New Leadership: What's Next.

Werning continued to say that "in emerging markets, where there is no growth story, Argentina, if it does the right thing, offers an idiosyncratic growth story."

More fundamentally, Werning adds that soy prices are down, which constrains the national income. This is not growth supportive factor he says. Then there is the problem with the holdouts and as Werning terms it "an unresolved divorce from the Capital Markets," which means Werning says, that it is difficult to smooth out the transition.

"I think the challenge of this administration is to make it clear...there is [now] economic rationality, and Macri has experts in his administration with experience. And a full set of policy tools. Of which, much of the traditional policy tools were ignored or distorted, are now put back on the table. There is room for macro equilibrium." said Werning.

However, a key challenge for Macri will be what political room he has to move in a direct way to "coordinate market expectations and generate a virtuous circle," said Werning.

The runoff between Macri and Daniel Scioli was the first one in Argentina's history. The number of Argentinians that watch the results equaled that of the final of the World Cup in 2012, in which Argentina was a finalist.

Macri's win though was by a mere 340,000, who decided the election.

"It was a close election but not dramatic," said Victoria Maria Murillo, Political Science and International Affairs Professor, Columbia University, at the panel held by the Council of the Americas.

According to Murillo, those that decided the election want moderate change, nothing too dramatic. During the final days of the election, Macri moved decidedly to the center. His win came from the rich provinces and the most populated like Mendoza, Santa Fe and the money producing regions like La Pampa, La Rioja and San Luis said Murillo. Those that pay taxes she added.

Macri will govern without a majority in Congress. He has a few seats in the Upperhouse and several more in the Lower chamber. Alliances with the Peronist factions and the Radicals will be key for him.

In an e-mail exchange with Professor Murillo, she said that the first 100 days in office Macri will have to do everything. And time is not on his side.

"On the political side, the ticking clock is the legislative elections of 2017 and the impact they will have in the incentives of the Justicialist Party (PJ as it is known in Argentina) as an opposition party. Now Macri will have an easier time negotiating with Peronist factions, but as elections approach, the incentives to oppose will grow and those to unify will also increase. Moreover, the nature of economic performance at the time of those elections is crucial in thinking about governability for the second part of his administration," Murillo wrote.

And what is the future of Fernandez de Kirchner?

Of this Murillo was clear, she wrote that her main political capital is that she still has a good approval rating of 35-40 percent, which is high for regional standards at the moment. Yet, this public opinion capital is hard to apply in a context of no immediate future elections and since she is not running for office. This Murillo adds explains her emphasis on Fernandez de Kerchner's losing tools to control the Peronist who are not necessarily of her close circle and can shift loyalties in search of resources or replacing her leadership within the PJ party. In the province of Buenos Aires legislature, we have already seen a rupture in the Peronist caucus and many governors have openly called for the need to reorganize it. It will not be easy for her to keep her leadership in the party without the resources of the Executive office, she continued.

With all of this hanging in the balance for Argentina, it is hoped the two protagonists can agree on the transition to power.