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  • Emerging Markets Debt Daily

    Argentina: New President, New Agenda

    Natalia Gurushina, Economist, Emerging Markets Fixed Income
    October 28, 2019

    Argentina begins this week with a new president and tighter capital controls. Mexico’s foreign trade dynamics point to weakening domestic activity.

    The opposition candidate, Alberto Fernández, was elected Argentina’s new president this weekend. Initial statements indicate that both sides want a smooth transition, which would be appreciated by the market. Still, policy uncertainty is massive, and this is one of the reasons behind the significant tightening of limits on retail U.S. Dollar purchases effective this morning. There were, however, no additional restrictions on currency operations related to trade or debt payments. The tail risks of a bank holiday and mass protests had been avoided as well—which is positive. The central bank hopes that the new rules will stop the hemorrhaging of international reserves, giving policy-makers much-needed breathing space. Commentators noted that Fernández’s victory margin was unexpectedly tight, leading to suggestions that it might be difficult to roll back reforms implemented by the outgoing administration.

    Mexico’s trade balance flipped into deficit in September, but the numbers (including the non-oil balance) look better than a year ago. The improvement was driven by weaker imports—especially capital imports—which is indicative of softer domestic activity and is another argument in favor of continuing policy support from the central bank.

    In China, the “delayed” 4th plenum of the 19th Central Committee of the Communist Party convened today and it will keep the markets occupied for the next few days. The long delay was largely technical, but it sparked numerous comments about the internal power struggle. Many commentators doubt that the plenum will produce meaningful economic policy initiatives, given heightened geopolitical noise, the trade dispute with the U.S. and protests in Hong Kong. We’ll keep our eyes open—just in case.


    PMI – Purchasing Managers’ Index: economic indicators derived from monthly surveys of private sector companies; ISM – Institute for Supply Management PMI: ISM releases an index based on more than 400 purchasing and supply managers surveys; both in the manufacturing and non-manufacturing industries; CPI – Consumer Price Index: an index of the variation in prices paid by typical consumers for retail goods and other items; PPI – Producer Price Index: a family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time; PCE inflation – Personal Consumption Expenditures Price Index: one measure of U.S. inflation, tracking the change in prices of goods and services purchased by consumers throughout the economy; MSCI – Morgan Stanley Capital International: an American provider of equity, fixed income, hedge fund stock market indexes, and equity portfolio analysis tools; VIX – CBOE Volatility Index: an index created by the Chicago Board Options Exchange (CBOE), which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities on S&P 500 index options.; GBI-EM – JP Morgan’s Government Bond Index – Emerging Markets: comprehensive emerging market debt benchmarks that track local currency bonds issued by Emerging market governments.; EMBI – JP Morgan’s Emerging Market Bond Index: JP Morgan's index of dollar-denominated sovereign bonds issued by a selection of emerging market countries; EMBIG - JP Morgan’s Emerging Market Bond Index Global: tracks total returns for traded external debt instruments in emerging markets.

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