Argentina's Scioli Vows to Continue Fernandez Holdouts Policy
- Candidate says he'll seek $30 billion in annual investments
- Scioli pledges to continue to fight against vulture funds
Argentina’s ruling party presidential candidate Daniel Scioli echoed the current administration’s position on so-called vulture funds that have sued the nation in U.S. courts to demand payment on their defaulted bonds.
Scioli, outlining his economic policies in a speech Monday, said he’ll continue the fight for “a world without vultures” and would try to meet obligations with 100 percent of Argentina’s creditors under “fair, equal and legal” terms. Argentina, he said, has proven it can access multi-lateral lending without paying hedge funds what they’ve demanded.
The decade-long battle with holdout creditors, led by billionaire Paul Singer’s Elliott Management, has curtailed Argentina’s participation in international capital markets, draining the nation’s foreign reserves, causing the economy to stagnate in the past two years and driving an estimated fiscal deficit of 7.3 percent of gross domestic product. In a speech billed beforehand as being the clearest indication yet of his thinking, Scioli highlighted continuity with President Cristina Fernandez de Kirchner and gave few clues of the “gradual” changes he has said he’ll make.
The 58-year-old, two-term governor of Buenos Aires province, who is leading polls ahead of Oct. 25 elections, said he will make investment the pillar of his future government and expects to attract $30 billion a year in foreign capital, but gave no hint of dismantling currency controls that have driven foreign companies away from Argentina. An inflow of investment would allow for more production, foreign currency for reserves and could gradually slow inflation to a single-digit, he said. The peso would continue to be administered by the central bank and the exchange rate wouldn’t be set by the market, as his rival Mauricio Macri has promised.
“We’re going to get more foreign currency by producing and exporting more, not by issuing debt,” Scioli, flanked by Peronist governors and with key members of Fernandez’s economic team in the audience, told a crowd of supporters including businessmen and union leaders during his 40-minute speech at a theater in central Buenos Aires.
First Round
A U.S. judge blocked debt payments beginning last year after Argentina refused to comply with his order to pay the funds in full when servicing restructured bonds, prompting a second default in 13 years.
The announcement comes as some polls for the first time show Scioli winning in a first round as they project him gaining more than 40 percent of the vote with a 10 percentage-point lead he needs to avoid a November run-off with either Mauricio Macri or Sergio Massa. Scioli would get 42.1 percent of votes against 31.1 percent for Macri and 19.9 percent for Massa, according to a poll published Monday by Ricardo Rouvier & Asociados. A Raul Aragon & Asociados poll produced similar results: 39.8 percent for Scioli against 27.5 percent for Macri and 23.1 percent for Massa.
Scioli has until now been reluctant to reveal much of what he plans to do if he gains power, saying simply he will make “gradual changes” where needed to some of Fernandez’s policies or leaving his economic advisers to speak on his behalf.
‘Burnt Ships’
Argentina’s economy has stagnated over the past two years as a shortage of dollars has crimped imports, affecting the nation’s industrial sector. The economy grew in the second quarter for the first time since 2013 as the government steps up spending ahead of the elections, according to Capital Economics. While GDP may expand 0.5 percent this year, Capital Economics expects it to contract once again next year as the next government is forced to devalue the peso.
The next president of Argentina will assume office Dec. 10 with net reserves of as low as $6 billion, according to Itau, a fiscal deficit of 7.3 percent of GDP, according to Fitch, and private estimates of about 25 percent inflation. That will drive the next government to make changes, said Fausto Spotorno, chief economist at Buenos Aires-based consultancy Orlando Ferreres y Asociados.
“There are two Sciolis -- he talks like Cristina and then he has his photo taken with the U.S. ambassador,” Spotorno said by phone. “The government has burned its ships to get to the end of the year. The next president will inherit an economy with burnt ships and without room for maneuver.”
Scioli said he would prioritize national industry, increase investment in science and technology to 1 percent of GDP from 0.6 percent, build 1 million new homes in four years and strengthen the state pension fund nationalized by Fernandez.
“Development isn’t about change,” Scioli said. “It’s about building on what’s already been built.”
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