What the Shakeup in Buenos Aires Means for Latin America

Mauricio Macri’s victory is an inflection point for Argentina and its neighbors. 

Just a month ago, in a land where all politicians cloak themselves in the comfortable smock of peronismo, it seemed improbable.

Yet Mauricio Macri—the son of an Italian entrepreneur, himself a businessman before entering the world of Argentine politics, a one-time owner of the Boca Juniors soccer team and, of course, the accomplished outgoing two-term mayor of Buenos Aires, the cosmopolitan capital of the country he is now set to lead—made his peace with peronismo en route to the Casa Rosada, the presidential palace that he’ll now call home for at least the next four years.

Macri narrowly won the Argentine presidency in a runoff Sunday evening, the first runoff campaign since the return of Argentine democracy and the end of military rule in 1983. His victory brings to an end three consecutive terms by two presidents, the late Néstor Kirchner and his widow Cristina Fernández de Kirchner that, together, put a decidedly socialist stamp on the face of twenty-first century peronismo, charting a statist course for the country’s economy, shutting it out of global debt markets and nationalizing everything from Argentina’s pension system and airlines to its largest oil company, all in a quest to fund its anti-poverty and welfare programs.

Global investors are taking note—and with good reason. Macri’s victory represents one of the sharpest turns in Latin American politics this decade. If he is successful, he could remake regional politics for years to come; if he fails, voters might easily double down on the kirchnerista left.

Macri, Buenos Aires’s moderate, business-friendly mayor, pulled ever more to the center during the marathon presidential campaign against the kirchnerista candidate, Daniel Scioli, a former vice president and the outgoing governor of the sprawling Buenos Aires province. Though Scioli narrowly led voting in August’s “jungle” primary and the election’s first round on October 25, the runoff gave Macri, leading a broad center-right coalition called Cambiemos (Let’s change!), the chance for a direct challenge to twelve years of Kirchner rule.

But Macri’s shifts to the center were so unwieldy that rivals taunted that the only “change” Macri promised were in his day-to-day stands on the issues. By the eve of the first round, Macri had promised not to re-privatize the state oil and airline companies, and on the eve of the runoff, Macri made a blatant bid for disaffected Kirchner supporters. When Macri unveiled a statue of Argentina’s legendary twentieth century leader Juan Péron in Buenos Aires during the campaign, he all but embraced the legacy of peronismo. (That, perhaps, is not so difficult, given that over the course of his own career, Péron shifted from a pro-labor leftist into an autocratic nationalist). Among an electorate where memories of the brutal currency crisis of 1999-2001 have made ‘neoliberalism’ an impossibly difficult sell, Macri’s shift to the middle was politically crucial. Throughout the runoff, Macri pledged that his administration could be just as effective at reducing poverty as kirchnerismo. A successful Macri administration will be expected to show progress on Kirchner’s popular anti-poverty and social welfare goals while bringing a more orthodox economic perspective to boost Argentine growth and investment.

While predictions of a 180-degree turn to neoliberal ‘shock therapy’ are farfetched, Macri’s victory represents a clear rupture with the past and the first clear repudiation of kirchnerismo since the rise of the Kirchners in 2003. Like it or not, Macri’s victory in Argentina, one of Latin America’s three largest economies, looks to resonate across Latin America in at least three important ways.

First, a gradual end to capital controls in Argentina will reignite interest in foreign investment.

For years, the official value of Argentina’s peso and its real ‘blue dollar’ value have widely diverged. Today, the difference is perhaps as much as 40 percent, due to capital controls that have limited the flow of capital out of the country—and U.S. dollars into the hands of everyday Argentines. It was clear, even to many diehard kirchneristas, that the next Argentine president would have to eliminate capital controls sooner or later to bring the currency’s value back in line with its real value. Even Scioli indicated he would work to remove controls gradually.