Source: Tomas Cuesta/AFP/Getty Images.
As Argentina marches its way towards the second round of its presidential elections, uncertainty reigns. Regardless of who wins, a painful economic adjustment awaits in a country where “la grieta” (the crack) has become a shorthand for its severe political, economic, and social cleavages.
Recent electoral events reveal a public torn between disgust at governance which has produced poverty, crime, and corruption, and fear of an abrupt change that will come at the expense of the millions who are barely getting by as it is. The first event, a primary held on August 13, in which coalitions chose their standard bearers, provided a unexpected shock.
The Last Shall Be First
Libertarian economist and media personality Javier Milei, uncontested leader of his personal political vehicle, “Freedom Advances,” who had been previously viewed as a fringe figure, came in first with 30.04 percent of the vote. He narrowly beat the center-right “Together for Change” coalition, which gained 28.27 percent while choosing former Minister of Security Patricia Bullrich to represent it in the general election. The “Union for the Fatherland,” essentially the Peronists and a few smaller allies, came in third with 27.27 percent, which was hardly surprising given the perilous state of the economy. It had rallied around Sergio Massa, a veteran politician and current Finance Minister.
Both Argentine and international observers began to digest the possibility that Milei, known for his mop of untamed hair, his devotion to a minimal state in a country where “social justice” has been a given in politics, his violent denunciations of the ruling political “caste”, and his range of personal eccentricities, might become president. The deck was then reshuffled, however, in the first round of the general election on October 22. Suddenly Massa was now first, having gained 36.68 percent of the vote, with Milei coming in second with 29.98 percent, and Bullrich third with 23.83 percent, thus excluded from the second round scheduled for November 19.
Politicians and pundits have sought to explain this dramatic shift in public opinion, which had not been perceived in polling. Milei’s loose talk—which extended to an impromptu denunciation of Pope Francis, an Argentine, as “close to communist” and provoked the Pope to warn against false messiahs—certainly didn’t help him. And Bullrich evidently had never fully recovered from a bruising primary fight within her coalition. She had tried to position herself as the candidate of serious, but sensible change, a stance which, while it may have had been well received by the urban middle class, lacked broader appeal at a highly polarized time.
Spreading Money and Fear
Credit must be given to Massa, however, for a brilliant, if cynical, campaign. After he was forced to implement a devaluation—which the government had long sought to postpone until after the election—inflation, already among the world’s highest, soared to an annualized rate of 140 percent and he was given up for dead politically. Also, a scandal arose involving a provincial official politically close to Massa. The press had a field day when photos surfaced of him off the Spanish coast on a yacht which rented for USD 8,000 a day, pouring champagne for his Rolex-wearing ex-model girlfriend. This lurid example of corruption was seen as the nail in Massa’s political coffin.
But in time-honored Latin American fashion, as Finance Minister he loosened the spending tap to visibly, if only partially, make up for the cost of spiraling inflation on lower income Argentines, even providing tax exemptions and payments for the unemployed. He also mounted a campaign to inspire fear of what Milei’s or Bullrich’s adjustment would mean, notably when Peronist unions placed notices at commuter train stations advising that without state subsidies the price of tickets would vastly increase. Finally, he benefited from the fact that the Peronists maintain a still impressive old-school political machine, down to “punteros” neighborhood leaders who can give or withhold favors crucial to everyday life.
The Vote Hunt Begins
In the second round, can Massa derail Milei, who has tapped into a vein of profound discontent with the politicians seen as responsible for grotesque levels of inflation and poverty? Both will be scrambling for the votes that went elsewhere on October 22. Each has his strengths and weaknesses.
Massa, though tarnished by his service as Finance Minister in the government of current President Alberto Fernandez, is in some way a reassuring figure. He is associated with the more conservative side of Peronism, a movement which has always incorporated both left and right in a confused populism. And unlike Fernandez, he is not beholden to Vice President and former President Cristina Kirchner, the paladin of the Peronist left, who inspires intense love and hate (more of the latter now) among Argentines.
Milei’s strength is his position as the outsider, who will clean the Augean stables of political life. Such candidates have had their share of victories in Latin America, from Hugo Chavez to Jair Bolsonaro. He has an appeal to younger voters who have only known hard times even as they have watched spectacular levels of official corruption. He will want to gain votes from Bullrich supporters, creating an anti-Peronist coalition (she has already endorsed him.) But to do so he will have to tone down his rhetoric without devaluing his unique brand. He has to deal with the fact that his signature idea—ending inflation by replacing Argentina’s peso with U.S. dollar—will require a lot of explaining and may inspire as much fear as it does hope in the electorate.
Massa, who now starts over six points ahead of Milei, will hope to gain votes from two other candidates who did not make the runoff. This would include those who voted for Cordoba governor Juan Schiaretti, a dissident Peronist who got 6.78 percent of the vote in the first round. He will also look to the 2.69 percent of voters who supported Míriam Bregman, representative of the “Left Front” grouping for whom Milei is anathema. Obviously he will need to gather a significant share of Bullrich voters, not all of who will be comfortable with Milei. And, of course, Massa must worry about whether Argentina’s economy will face some kind of major new shock between now and Election Day.
To the Victor Belongs the Crisis
There is a saying among economists that the one consolation of an unsustainable trend is that by definition it cannot go on indefinitely. This is precisely the situation that Argentina’s next president will face. Public confidence is already low and it would not be unthinkable to see panic leading to Weimar Republic-style hyper-inflation in which no one wants to hold pesos at any price. If a new government has a slow start it could get into trouble quickly.
At the same time, while the Argentine public may be ready for change—and the unpopularity of both Alberto Fernandez and Cristina Kirchner is indicative of this—it is not clear how much it is prepared to accept. Milei gained a following promising to take a “chainsaw” to public expenditure, but as Massa’s recent victory has shown, this may be just too much for it to bear. Massa’s free spending campaign carries an implicit promise to go easy on a weary public that he may not be able to keep.
Of course there is the global audience that is watching Argentina, which owes 44 billion U.S. dollars to the International Monetary Fund (IMF). While the IMF has been content to keep rolling over Argentina’s obligations in exchange for promises of relatively limited reforms, many unkept by Massa, its patience may have run out—especially as it has watched his electoral spending spree. Additionally, the U.S. government—the IMF’s largest shareholder, which has given top priority to seeing Argentina get to elections without a political crisis—may also be looking for action from a new president.
Which of the two would be better at walking the tightrope that governing Argentina will entail? Milei at least has staked out a position that spending has to be drastically reined in, but his devotion to dollarization causes concern. Its success would depend on enough dollars entering the economy to take the place of the battered peso. However, Argentina’s Central Bank is bereft of foreign exchange and it is hard to see the Fund making new lending beyond its current exposure. It is at best an open question whether enough dollars, either those held by Argentines or those belonging to potential foreign investors, will actually be forthcoming. Additionally, there are real questions about Milei’s political (as opposed to merely electoral) skills and indeed his emotional stability.
For his part Massa is a seasoned pro. He has spoken about bringing Argentines together and could conceivably create the consensus for change that the country needs. And as a Peronist, he may be in a better position to bring along the labor unions and the “piquetero” movements which organize the unemployed. However, his performance as Finance Minister has been discouraging, especially his pre-election spending, and he has lost much of his international credibility. One may ask whether he will do more than the absolute minimum.
With the second round on November 19 and a new president taking office on December 10, Argentina is in for a rough ride, regardless of who wins.
Richard M. Sanders is Senior Fellow, Western Hemisphere at the Center for the National Interest. He is also a Global Fellow of the Woodrow Wilson International Center for Scholars. A former member of the Senior Foreign Service of the U.S. Department of State, he served as Desk Officer for Argentina, 1997-99 and as Director of the Office of Brazilian and Southern Cone Affairs, 2010-13.
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