Who’s to blame for the epic Argentina market sell-off over the past two days?
For President Mauricio Macri it’s clearly being caused by investors who are terrified of a return to a protectionist Peronist government that could reinstate currency controls, seize businesses and loosen fiscal discipline.
On Monday, he said as much, and asked voters to reconsider supporting Alberto Fernández since the market was giving a glimpse of what’s to come.
For front runner Alberto Fernández, the sharp move is the market punishing the government for loading up on too much debt, too quickly in the past few years and it’s now up to Macri to fix. While he says he doesn’t want to default, he hasn’t offered any olive branches to financial markets to calm their fears.
Government debt is falling another six percent or so on today.
Regardless of who you believe, neither seems prepared to send the messages needed to market participants that they can agree on a smooth transition (if the primary result holds in October) and that no one will benefit from chaos in the coming months.
Essentially, they’re playing a game of chicken to see who flinches first as markets gap wider and price in a high probability for another disorderly debt default.