Argentines will go to the polls on Sunday to vote in a presidential race that has been led by a far-right outsider who wants to shake up the political establishment and restore the economy to its long-lost growth potential.
Most of the polls suggest that this outsider, the libertarian Javier Milei of the La Libertad Avanza party, will come first but without enough votes to win the election outright, forcing a runoff on November 19. To avoid a runoff, the winning candidate would need 45% of the total plus one vote or 40% plus a 10 percentage point lead over the second-place finisher.
The latest polls show that Milei, who defied expectations to win the most votes in the August 13 all-party primaries, will get 34% on Sunday, trailed by Economy Minister Sergio Massa of the ruling left-of-center Peronist Party with 30% and Patricia Bullrich of right-of-center Juntos por el Cambio with around that or slightly less.
Only one recent poll, by Brazil-based Atlas Intelligence, found Massa coming first with 30.9% of the votes, trailed by Milei with 26.5% and Bullrich with 24.4%.
“Anything could happen,” Julio Burdman, a political analyst and geopolitics professor at the University of Buenos Aires, told LatinFinance.
His assessment of such uncertain results is based on the “absolute instability of the electorate,” given that Milei won votes in the primaries from a wide range of people, from conservatives to leftists and those in the center. It means that votes could go any way in Sunday’s election, he said.
Milei has gained popularity at a time when the economy is falling deeper into a financial crisis that began in 2018.
“My intuition is that Milei will have a very good election, that he is going to grow a lot,” Burdman said.
As an outsider, Milei has been deft at winning over votes from people who are angry at the failure of the political establishment to put the economy on track for sustainable growth. The economy is anything but good: inflation is touching 140% in September, the benchmark interest rate is at 133% and the peso is losing value every day.
This sour economy should be a nail in the coffin for the government’s top finance official as a presidential contender.
“If the vote was based on his performance, Massa shouldn’t have a chance at all,” Burdman said.
Massa, however, is doing better than expected — some call it a miracle — because a good chunk of the electorate is worried about the changes that could come with Milei as president, he added.
“They are going to vote for Massa despite the reality of the economy,” Burdman said.
Paradoxically, Bullrich has failed to harness this anger and turn it into more votes for her. The former security minister for President Mauricio Macri, who ruled from 2015 to 2019, has been campaigning on her ability to govern, her strong team, and her reasonable nature. But none of this has anything to do with change, Burdman said.
The vote likely will go to ballotage, with Milei facing off against Bullrich or Massa.
If so, Milei likely is unlikely to change his campaign strategy, given he has struck a chord with many voters who want to turn Argentina from an economic mess into something far better.
“There are a lot of people who want this,” Burdman said. “Milei knows that he can keep growing with his discourse. There is no ceiling for this. There are not many people who are against what Milei says. A lot of people don’t like Milei, but his discourse has been successful. It doesn’t make sense for him to change even a comma in what he has been saying.”
Milei is proposing to slash public spending to eliminate the primary fiscal deficit – now at 1.3% of GDP, excluding interest payments on debts – in his first year. He also wants to dollarize the economy, shut the central bank, privatize state companies, scrap capital controls, reduce taxes, streamline regulations, shift public works to the private sector, economize the government and much more in a quest to return Argentina to its status as a world power that was lost some 100 years ago.
Juan Cruz Díaz, a managing director of Cefeidas Group, an international advisory firm in Buenos Aires, said a big question mark is how the people who didn’t turn out for the primaries will vote. At 30% of the total, this could steer the result one way or another, given that voting is obligatory in Argentina.
Díaz thinks that there are two possible outcomes this Sunday. The first is that voters who picked Milei in the primaries may have become worried about what he could do as president, and so they may choose an established politician like Bullrich or Massa instead. The second possibility is the opposite, that more voters could turn to Milei to make the changes he is proposing.
“My sensation is that we are going to have a second round between Milei and Massa, but I’m totally open for a surprise,” he told LatinFinance.
The runoff is going to be a whole different game. Milei will have to win over the electorate who voted against him, as would Bullrich and Massa, he said.
Another uncertainty is what will happen in the financial markets after the election and in the run-up to both the final round and December 10, when the new president takes office.
Gustavo Neffa, director of research for Traders, an investment consultancy in Buenos Aires, said that much of Milei’s surprise rise in politics has been priced into financial assets, but his eventual win “won’t be welcome” by investors, many of whom prefer Bullrich.
The pressure on the peso to depreciate will be tempered if Massa advances to the second round, since as economy minister he will try to keep the official rate at a fixed ARS350 per dollar despite its disparity with the black-market rate, which is now at ARS890 per dollar.
The problem with keeping the official rate unchanged is that it will deplete international reserves as the central bank tries to keep the spread with the black-market rate under some sort of control.
International reserves have already tumbled 44% this year, falling to $24.8 billion on Wednesday from $44.6 billion at the start of the year as a severe drought slashed agriculture exports, a leading source of dollar inflows. The decline has come despite periodic influxes of dollars from a $44 billion loan with the International Monetary Fund and a recently enlarged currency swap deal with the People’s Bank of China.
Neffa said there are forecasts of a 160% devaluation of the peso by the end of the year, which would take the official rate to ARS800 per dollar.
“Some banks are estimating it will reach 850, 880, and some have forecasts that are even worse than that,” Neffa said.
“What is in store for Argentina is not going to be easy,” he said. “Today you have a scenario that if you don’t do anything and you continue this way, we will go directly to hyperinflation.”
[PHOTO: Argentine presidential candidate Javier Milei speaks at a rally. Credit: La Libertad Avanza.]