2018/2019 Edition of the Global Regulatory Update

Global Regulatory Update  | Corporates Edition 61 With respect to the agenda for the rest of the year, there is a narrow path for approval of legislative measures given congressional recess and the campaign calendar. It is also expected that opposition legislators will continue to protest the arrest of former President Lula by obstructing sessions and postponing votes. For the banking sector, the positive credit bureau bill remains in play. Other bills with chances of passage include the amendments for the privatization of Eletrobras, transfer of pre-salt rights, real state contracts and the regulatory framework for roadway cargo transport. 2) Argentina: Market Volatility and Capital Markets Law a) Market Volatility and Political Implications Emerging markets have been negatively impacted by the current trade, monetary and geopolitical environment. Argentina is particularly vulnerable to external shocks given the country’s fiscal and current account deficits and persistent high inflation. Starting in May, pressure on the peso intensified over market concerns about the Central Bank’s independence and the effectiveness of President Mauricio Macri’s gradualist reform agenda. A peso sell-off ensued, and the currency lost up to 50% of its value since the beginning of the year. After a series of measures and cabinet reshuffles, the government resorted to the IMF, which approved a $50 billion line of credit until the end of 2019, exceeding expectations. While Macri was able to secure financial needs until the end of his term, the IMF agreement has come at a high political cost. Societal mood has soured and economic growth projections have been adjusted downward. Macri’s broader reformist agenda has stalled given lack of political capital, but the government has hardened its stance on tackling the fiscal deficit as its top priority. Despite a continuous but not indefinite lack of unity among the opposition, once-comfortable re-election prospects for Macri and his Cambiemos coalition in October 2019 now seem challenged and will be heavily dependent on how the economic situation evolves. b) Capital Markets Law Fortunately, prior to the current turmoil, the Macri administration advanced a key component of their financial reform agenda: the passage of the Capital Markets Law. The law is a positive step to deepen local capital markets, and seeks to modernize the local securities market regulator, permit investors to create new investment vehicles, improve banks’ ability to securitize mortgage loans and give smaller companies more funding options.