Man Who Ushered in Argentina's Last Boom Eyes Bid for Presidency
(Bloomberg) -- Roberto Lavagna, who oversaw the rebuilding of Argentina’s economy after the 2001 default, is emerging as a compromise candidate in what looks to be one of the most divisive presidential elections in the nation’s history.
The former economy minister would offer voters a middle path between current, right-wing President Mauricio Macri, on whose watch the country has fallen into two recessions, and former leader Cristina Fernandez de Kirchner, whose populist policies many blame for Argentina’s current economic woes. Lavagna says he wouldn’t run in a crowded primary race, but would be a candidate in a general vote.
Still, the 78-year-old is no shoo-in for the October vote. First, he must convince the fragmented opposition to ditch Fernandez and other rivals to support his candidacy -- no easy task given the loyalty many feel to Fernandez and his own outsider status. Then he must convince voters that he can create jobs and boost salaries, without fueling inflation and collapsing the peso.
Lavagna failed in a previous bid for the presidency in 2007 and backed a losing candidate in the 2015 race. As such, his track record against Fernandez isn’t encouraging. Many in the Peronist party, a populist political movement founded by former President Juan Domingo Peron, feel Fernandez’s tax and spending policies fit better with their agendas than Lavagna’s policies.
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"He needs the explicit support and political commitment of key Peronist wings," said Juan Cruz Diaz, director of political consulting firm Cefeidas Group in Buenos Aires. "It’s going to be very difficult or impossible for his campaign to prosper without that support. And if Kirchner is a candidate, it’ll be very difficult to get it."
Boom Times
Candidates have until June 22 to officially announce their candidacy, ahead of elections to be held Oct. 27. A runoff is triggered if the front-runner receives less than 45 percent of the vote or less than 40 percent with a 10 percentage point difference to the second place finisher.
The economist would win 58 percent of the vote in a runoff against Macri, according to a poll by consulting firm Synopsis cited in a March 29 Goldman Sachs report.
Lavagna was economy minister from April 2002 to 2005, overseeing annual growth of more than 8 percent after his first year in office as global commodity prices soared and exports to China boomed.
He restructured Argentina’s defaulted debt with foreign investors, getting most to accept 25 cents on the dollar. The remaining holdouts didn’t reach an accord until 2016. Lavagna also raised export tariffs to bring in more revenue, a policy that Macri tried to unwind before the currency crisis.
IMF Program
This time around, Lavagna has yet to detail his economic policies or any changes he would make to Argentina’s $56 billion credit line with the International Monetary Fund. Investors say they expect him to honor the IMF program, while seeking to ease spending cuts and the central bank’s current, harsh monetary policy.
In a radio interview, Lavagna described IMF bailouts as "spending cuts, more cuts and more cuts." He says he wants to focus on pro-growth measures. Through a spokesperson, he declined an interview for this article.
"Lavagna understands the need of having balanced accounts, but he doesn’t seem willing to do it via spending cuts," said Alejo Costa, chief strategist at investing firm BTG Pactual in Argentina.
Lavagna will hold his first foreign press event of the year on Tuesday. He has yet to publicize any policy or opinion on other key issues, such as abortion, the Venezuela crisis, corruption or crime, according to a spokesman. For now, he is most known to younger Argentines for wearing socks with sandals, a fashion faux pas that triggered a social media storm in January about his age.
The Peso
Lavagna could pursue one policy that markets will find particularly unpalatable: currency controls.
Although Lavagna has yet to formally announce his candidacy and running team, those who speak with him informally say he wouldn’t be opposed to some currency or capital controls to stabilize the peso, which would evoke memories of Fernandez’s presidency from 2007 to 2015.
The peso lost 50 percent of its value against the dollar last year and is down by double digits again this year. It has been the worst performer of 21 major emerging-market currencies tracked by Bloomberg in each year of Macri’s presidency.
"There are times when you need to have certain controls," said Guillermo Nielsen, who served as Argentina’s finance secretary when Lavagna was economy minister. Nielsen says he’s informally advising Lavagna. "What Macri is doing is destroying the peso. You need to have a currency as a prerequisite to any successful economic policy."
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