Free-market Argentine leader faces tricky tango in power

Buenos Aires (AFP) - He celebrated his election victory by dancing like it was his wedding, but Argentina's president-elect Mauricio Macri has no time for a political honeymoon, analysts say.

To push through his promised economic reforms, he must strike deals with populist "Peronist" leaders whom he has ousted after 12 years of leftist rule in Latin America's third-biggest economy.

He was the favored candidate of foreign investors who have been largely shut out of Argentina by the protectionist policies of outgoing president Cristina Kirchner.

He promised on Monday "to make room for those who can and want to invest in Argentina".

A former football executive, Macri, 56, drew allies of various political stripes into his Let's Change coalition to cause an upset in the vote.

But his narrow margin of victory -- less than three percentage points ahead of leftist Daniel Scioli -- laid bare the divisions in the country, an agricultural powerhouse with a history of class tensions.

"The challenges of government are much more urgent because of the scale of the economic and social challenges he faces," said Gustavo Cordoba, a sociologist and political consultant.

"The honeymoon period is already over. Argentina needs to start hearing what his main proposals are, who will be in his cabinet and what measures he will take."

- Resistance from lawmakers -

Macri has vowed to ease foreign trade and lift Kirchner's restrictions on the buying of US dollars which propped up the peso currency to protect poorer Argentines' spending power.

Macri said he will overturn Kirchner's tight control of monetary policy.

"The dollar limit is a mistake. Not having an independent central bank is a mistake. These are things we will correct," he told reporters Monday in his first press conference as president-elect.

"There will be just one exchange rate."

Scioli warned a sudden end to the controls would trigger a sharp devaluation of the peso, hurting ordinary Argentines' purses.

"There is a discussion within Let's Change about how suddenly or gradually they will introduce the changes they are planning," said Sergio Morresi, a political scientist at the state research institute CONICET.

Analysts also cautioned that Macri may struggle to get his reforms past hostile lawmakers.

"Although the president has certain discretionary powers, there are many things that have to pass through Congress, and he has very little support there," said Morresi.

"Every single new law will have to be negotiated."

- Economic policy shift -

Macri said Monday he would get to work straightaway to name a six-member team of economic ministers.

Yields on Argentine debt rose and the Buenos Aires stock market jumped more than 2.5 percent in early trading Monday, but later gave up its gains.

Foreign investors welcomed Macri's rise to power.

His victory "is likely to herald a much-needed shift towards orthodox economic policymaking", said Edward Glossop, an analyst at research group Capital Economics in a note.

But "even if Mr. Macri were successful in implementing his programme, the necessary macro adjustment would create short-term pain," he added.

He forecast that if Macri tightens fiscal and monetary policy, Argentina will fall into recession next year before recovering to growth of at least 3.0 percent by 2018.

Macri has vowed to negotiate with foreign creditors who have sued Argentina in the US courts for unpaid debts.

Meanwhile, there will be a fierce struggle for control in the Peronist movement which has dominated politics in Argentina for decades, said Morresi.

"It will be a long fight. In a few months we will know if Peronism is broken or not, and whether it can unite again and who will lead it."