Shale-rich Argentina's government moved to check capital flight after leftist Alberto Fernandez triumphed over business-oriented incumbent president Mauricio Macri.
Although the outcome came as no surprise following August primaries that gave Fernandez a wide lead, Macri's better-than-expected performance in yesterday's elections could pressure the president-elect to pursue a more conciliatory approach toward the business community. Fernandez garnered 48.1pc of the vote compared to Macri's 40.4pc, a clear victory that averted a runoff, but still marking a narrower victory for Fernandez after Macri's 16-point rout in August.
But investors are already spooked by Fernandez's running mate, former president Cristina Fernandez de Kirchner. Her 2007-15 tenure was marked by heavy state controls over economic activities that Macri partially dismantled after taking office in late 2015. Among the hallmarks of her presidency and that of her predecessor and late husband Nestor Kirchner were export taxes on natural gas and other goods that were designed to prioritize the domestic market. She also oversaw the 2012 state takeover of oil company YPF, which was formally controlled by Spain's Repsol. The divisive former president has been charged in 11 corruption-related cases.
Investors are now awaiting signals about which direction Fernandez will take, and how much of an influence Cristina Fernandez will have in his government. The two are not related.
Hours after the election results were announced last night, Argentina's central bank said it would slash limits on foreign-currency purchases to just $200 per month for individuals. Following August primaries in which Fernandez came out 16 points ahead of Macri, the central bank had barred companies from buying dollars for savings and imposed a $10,000 per month limit on individuals.
Although Fernandez has yet to outline a clear plan to lift Argentina's economy out of a deep recession when he takes office on 10 December, his election will likely have a profound impact on the energy sector, most conspicuously in prices for electricity and natural gas.
Fernandez pledged during his campaign that one of his first measures as president would be to unpeg wholesale energy prices from the US dollar to insulate consumers from external price shocks.
During his four-year term that winds down in December, Macri moved to dismantle a broad system of consumer subsidies that were implemented during the Kirchner-Fernandez years.
The subsidy cuts sent power and gas prices soaring, contributing to inflation that has climbed to an annualized 55pc, compared with 35pc-40pc when Macri took office.
Apart from energy subsidies, president-elect Fernandez has espoused continued development of Argentina's Vaca Muerta shale formation, and has proposed legislative initiatives to accelerate it.
But above-ground risks, such as potential strife by emboldened labor unions that are part of the Fernandez constituency, may prove to be a drag on development.
Under Macri's government, Argentina saw a boom in unconventional hydrocarbons production, allowing the country to resume exporting crude and pipeline gas to its neighbors, mainly Chile. Argentina also turned into a modest LNG exporter with the installation of a 2.5mn m3/d liquefaction barge in Bahia Blanca, Buenos Aires province.
