Factbox: Argentina's Fernandez could review IMF deal, impose capital controls

BUENOS AIRES (Reuters) - A resounding victory by Argentina’s center-left opposition leader Alberto Fernández in Sunday’s primary election alarmed investors with the prospect he could roll back President Mauricio Macri’s business friendly agenda if he wins October’s presidential vote.

FILE PHOTO: Presidential candidate Alberto Fernandez speaks during the primary elections, at a cultural centre in Buenos Aires, Argentina, August 11, 2019. REUTERS/Agustin Marcarian

Below are Fernandez’s positions on the key economic issues facing South America’s second-largest economy, which is battling recession, runaway inflation and rising poverty levels.


Fernandez, regarded as a moderate within the Peronist movement, has proposed an economic and social pact to combat inflation, which is running at 55%.

Macri sought to slow inflation with government spending cuts and strict monetary policy. The central bank sought to dry up liquidity using high interest rates, which reached 74%.

Fernández by contrast said he will seek to lower interest rates to revive the economy and stimulate consumption.

He has said that public service rates - such as electricity and gas - will no longer reflect increases in the dollar exchange rate and inflation. Sharp rises in the cost of public services have fueled price hikes in recent years and hit poor Argentines hard.


Fernandez must delicately manage the relationship with the International Monetary Fund, from which Macri received a loan for $57 billion in exchange for tough fiscal commitments, including a primary fiscal surplus of 1% in 2020.

Fernandez, who met with Fund officials during the campaign, has said he will seek to renegotiate the agreement but has not provided specific details.

“The current economic program is not our program. It commits our country well beyond its own possibilities,” Fernandez said after meeting Fund official in June. He has emphasized that a return to economic growth was crucial for Argentina to pay off its debts.


Fernandez said he wants a competitive exchange rate in order to allow Argentina “to produce and export”. On Monday, following the primary results, the peso tumbled 30% to a record low of 65 per dollar, before recovering slightly.

One of the first steps taken by Macri when he took office in late 2015 was to eliminate the exchange controls imposed by outgoing President Cristina Fernández de Kirchner. He also removed reserve requirement on capital flows in an attempt to attract foreign investment.

Since then, a dramatic slide in the peso has translated directly into higher inflation.

Fernandez accused Macri of using a $57 billion IMF loan to stem the fall in the peso.

Fernanda Vallejos, an economist and congresswoman from Fernandez’s “Frente de Todos” alliance, told Reuters the candidate was studying measures to limit short-term capital flows “to reduce the levels of vulnerability of the economy.”

The measures could include reintroducing reserve requirements for capital flows, she said.


Fernandez proposes eliminating taxes on industrial exports, and foreign sales of technology and knowledge-based services.

Macri, who had promised to gradually reduce these taxes, instead extended them to all assets last year in a bid to reduce the budget deficit under the IMF deal.


Fernández has based much of his campaign on criticizing a sharp increase in public service rates, the counterpart of a reduction in subsidies under Macri.

One of Marci’s most unpopular policies was the reduction of energy and transportation subsidies, a measure that hit the pockets of ordinary Argentines hard.

When Macri took office, subsidies represented about 5% of gross domestic product (GDP) after Kirchner’s government kept public service rates low to sustain the purchasing power of Argentines.

According to C&T consultancy, subsidies would fall to 1.6% of GDP at the end of 2019.


Fernandez has said he will seek to stimulate Argentine exports while promoting import substitution to defend local industry and employment.

He wants the Mercosur regional bloc to be strengthened and has called for changes to a trade deal with the European Union reached in June because he considered that it could harm local industry.

Macri welcomed the EU deal as a historic milestone after decades of negotiation.

Reporting by Eliana Raszewski; Editing by Lisa Shumaker