The Incredible Sinking Argentina

Markets reeled as the country whipped back toward protectionism

- Juan Pablo Spinetto and Daniel Cancel

Over the last 70 years, Argentina has endured hyperinflation, government collapse, and the world’s largest sovereign debt default. It’s spent a third of that time in recession, a record that almost deserves its own chapter in economic textbooks.

And yet even the embattled Buenos Aires stock exchange had never experienced anything like the 48% plunge it took on Aug. 12, a day after left-wing candidate Alberto Fernández bested the fiscally conservative incumbent Mauricio Macri in the presidential primary by more than 15 points, winning more than 47% of the vote. The primary is meant to winnow the slate of candidates, but in reality it serves as a nationwide poll to preview the official vote for the presidency, still 10 weeks away.

Macri will stay in the race, but investors and pundits consider his deficit in support too vast to make up. Fernández, meanwhile, is seen as a promoter of the same policies that have failed in Argentina for decades. The whiplash was too much for investors—poll numbers only days before the vote had showed the two candidates in a much closer race. “We have this long transition where it looks like Alberto Fernández is going to be the president, but he still has to be elected,” says Daniel Kerner, Eurasia Group managing director for Latin America. “With the market tanking and the government not knowing how to manage it—and actually playing on this fear—we are entering a very, very delicate situation in Argentina for the next several months.”