Argentina's presidential front-runner Alberto Fernandez is on a tightrope between the interventionist policies of his better-known running mate Cristina Fernandez de Kirchner and the stumbling free-market reforms of incumbent Mauricio Macri.
Whichever way he leans lies danger, with markets ready to pounce on any hint that he would follow Kirchner's example as a debt defaulter and voters ready to punish anyone who agrees with Macri's orthodoxy, which has led the economy to ruin.
"He is in a difficult position," said Martin Vauthier, an economist at the consultancy Eco Go. "He has to deliver messages that in many respects are contradictory."
Argentina's peso was flat on Tuesday at about 56 per U.S. dollar as investors looked for clues about Fernandez's policies as the Oct. 27 presidential election approaches.
Capital controls have stanched the bleeding of reserves triggered by Fernandez's unexpectedly severe beating of business-friendly incumbent Macri in the August primary election, a vote that all but guaranteed Fernandez will be sworn in as Argentina's next leader in December.
But the situation remains fragile, with Argentine stocks, bonds and the peso subject to wild swings depending on the signals to be sent by Fernandez in coming weeks.
"The government and the central bank have managed to calm the situation, but I think it is temporary because there is a lot of uncertainty about what will happen after October," said Juan Pablo Fuentes, an economist with Moody's Analytics.
"The market takes it for granted that Fernandez is going to win, but nobody knows what measure he will take."
The peso lost about a quarter of its value last month. It has regained some ground in September after the government announced limits on access to and international transfers of dollars, the preferred currency for Argentines nervous about the precariousness of Latin America's No. 3 economy.
Market players fret that Fernandez will take a harder stance than Macri towards investors as both political camps flirt with the idea of revamping Argentina's debt obligations in the face of a worsening recession and rising inflation outlook.
Kirchner's presence on the ticket has increased investor concerns about what policies will follow Macri's free-markets reform push, which have ended in recession and high inflation.
Macri and Kirchner are like the country's right- and left-wing bookends with the less-known Fernandez in the middle.
Fernandez straddled both positions in comments made on television on Monday night. "We are going to respect Argentina's debts, but without pressuring the people," he said.
Such comments offer little to investors hankering for clarity on how Argentina's likely next leader will handle a debt load that forced the Macri administration to say it would have to extend the maturities on about $100 billion in bonds and loans from the International Monetary Fund.
Macri struck a $57 billion loan deal with the fund last year to stop a previous run on the peso that had raised questions about Argentina's ability to honor its dollar-denominated debt.
Fernandez may be expected to give clearer debt policy statements after the election. "But his economic team is not going to know exactly what the numbers are until he is sworn in and sees the magnitude of the problem," Vauthier said.
