Daniel Scioli, the favorite to win Argentina’s presidential election in October, chose a close aide to President Cristina Fernandez de Kirchner as his running mate, triggering a dive in bonds.
Scioli, the 58-year-old governor of Buenos Aires province, named Carlos Zannini as his vice president candidate, saying he represented continuity of the political project led by Fernandez and her predecessor and husband Nestor Kirchner, who have ruled Argentina since 2003. Zannini, a 60-year-old lawyer from Cordoba province, has been Legal Secretary for the government for 12 years.
“I consulted the president on this issue,” Scioli, a member of the ruling Victory Front alliance, said in an interview with the C5N television network. “Picking Zannini, a founding member of this movement with a history of proximity to Nestor and Cristina, gives certainty.”
The appointment tightens Scioli’s links with Fernandez and strengthens his chances of winning in the first round of voting on Oct. 25, according to Eurasia Group. Even as Argentina’s economy has stagnated amid annual inflation of about 25 percent, Scioli has widened his lead in recent opinion polls as he promises to maintain spending on welfare programs that benefit a quarter of the population.
Government notes due 2024 fell 2.28 cents to 95.8 cents on the dollar, the lowest level since Dec. 18. The extra yield investors demand to hold Argentine debt over U.S. Treasuries widened 0.25 percentage point to 6.13 points at 4:34 pm in New York. On average, the yield spread in emerging markets fell 0.01 percentage point, according to JPMorgan Chase & Co.
Zannini said that after speaking with Fernandez he had accepted Scioli’s offer.
“It’s the continuation of a path,” he told reporters in Buenos Aires.
Fernandez’s influence will become even clearer on Saturday when the deadline ends for parties to nominate candidates for president and vice president as well as congressional offices and the Mercosur parliament. Fernandez and her son, Maximo Kirchner, may choose to run as lawmakers for the province of Buenos Aires.
“Now the focus will shift to what role will CFK play in the elections, and if she will run for an elective position,” Citibank analyst Fernando Jorge Diaz wrote in a note to clients.
Zannini, who rarely speaks in public, has been central in drafting legislation for both Kirchners and appeared in Congress last year to defend projects to compensate Spain’s Repsol SA for a 2012 seizure of assets by the state.
“He has been the legal architect and brain behind many controversial measures and policies of CFK,” Daniel Chodos, a strategist at Credit Suisse Group AG, said in an e-mailed response to questions. “The market is taking this negatively because this appointment reduces the chances of a change of the current model under a new government.”
Having Zannini as vice president could signal policy continuity on the government’s position with holdout creditors demanding payment on defaulted debt, according to Eurasia.
“While the vice president is not a particularly powerful figure, having a true CFK loyalist will increase the costs for Scioli of taking measures that CFK opposes,” Daniel Kerner, a Eurasia analyst wrote in a report. “This bodes particularly poorly for a deal with holdout creditors.”
Opposition presidential candidate Mauricio Macri said Zannini was imposed on Scioli by Fernandez.
“It’s coherent with everything they’ve been doing,” Macri said in comments broadcast on TN. “We are also going to be coherent in pushing for the change that Argentina needs.”
Zannini, who was a member of the Communist party, was jailed during the 1976-1983 military dictatorship. After the return of democracy, he moved to Santa Cruz province in Patagonia, where he met the Kirchners and worked with them as an adviser as they climbed their way up in national politics.
Zannini didn’t reply to a telephone call seeking comment.
Primary elections will be held Aug. 9, followed by a general nationwide vote Oct. 25. If needed, a second round will be held Nov. 22 before the new government is sworn in Dec. 10.
Macri and Sergio Massa, the leading opposition candidates, have yet to announce their running mates.
Argentine government bonds have rallied 13 percent this year compared with a 1.05 percent gain on average in emerging markets, according to JPMorgan Chase & Co. indexes. A Scioli government with key figures from Fernandez’s administration like Zannini however, is bad news for investors, according to brokerage BancTrust & Co.
“The presumption that Daniel Scioli will have a much more market friendly posture can be questioned due to the naming of a person with such a Kirchnerism mind toward the market,” BancTrust said in a report.