The result of the second round of Argentina’s elections means that the third (and decisive) round will represent a distinctly binary choice.
The first round of voting (August 13) in the contest for president was, effectively, a three-way split at the top. It was unexpectedly won (with 30.4 percent of the vote) by Javier Milei, a self-styled anarcho-capitalist, who has promised to dollarize the Argentine economy and take a chain saw to Argentine’s bloated state. Second came the conventional center-right candidate Patricia Bullrich who, if we add the tally of an ally, ended up with 28.28 percent, after a campaign in which she unwisely talked more about crime than the country’s economic crisis. The third to make it to the second round was Sergio Massa, the Peronist current minister of the economy, who (with his sidekick) scored 27.27 percent.
Having come from “nowhere,” Milei seemed to have momentum behind him, but the second round of voting this weekend delivered a different message. Massa came out top with 36.69 percent, Milei had slipped back slightly to 29.9 percent, and Bullrich came in third with 23.84 percent (two other cand idates also made it to this round). The runoff (November 19) will thus be between Massa, the latest incarnation of Argentina’s disastrous, yet persistent, Peronist tradition, and Milei, its diametric opposite. The “easier” alternative, Bullrich, has now been voted off the scene.
If elected, Mr. Milei has pledged a drastic free-market overhaul. He wants to lower taxes, slash regulations, privatize state industries, shutter 10 of the 18 federal ministries, shift public education to a voucher-based system and cut federal spending by 15 percent of Argentina’s gross domestic product.
His biggest proposals are to get rid of the Argentine central bank and the Argentine peso, which he says will end inflation.
Yet many economists worry that Mr. Milei’s libertarian economic theories, which have little history of real-world application, could instead inflict even more damage on an already fragile economy, one of Latin America’s largest.
Little history? In part, that’s an exaggeration, unless this refers to Argentine history, in which case, that statement, unfortunately, is true enough. Beneath the demagoguery and the cronyism that has long marked Peronism is a policy mix that includes industrial policy, tariffs, a destructive form of nationalism, an unhealthily close relationship with the unions and a form of “social justice” with some connections to Catholic social theory. Any resemblance to some of the ideas being put forward by conservatism’s “new right” in the U.S. are, of course, unfortunate, but there we are.
It is worth adding that the underlying reason for the “fragility” of Argentina’s economy is the failure of the current government, of which Massa is, of course, a prominent member. Inflation now stands at 138 percent. The country’s dollar-denominated debt is trading in the mid-20s to the dollar (yet another restructuring is inevitable), and capital controls (the country has a complicated set of official exchange rates) are taking the country even further away from the disciplines of a market economy. Massa’s win hit bond prices, while the black-market price of the dollar (the “blue dollar”) rose to 1,100 to the peso. When I wrote about the peso at the end of August, the blue dollar cost 728 pesos, up from 292 at the end of August 2022.
To choose the distinctly unorthodox (personally as well as politically) Milei might be a gamble, but would it be any less risky than sticking with the Peronists who, over the decades, have inflicted such ruin on what was and what should be again a rich country?
We may never find out. Massa fought a smart, if cynical, campaign, talking of national unity, dialogue, and as he did so, taking advantage of incumbency to boost welfare payments and pensions, bring in more price controls, and hand out some tax breaks.
Mr Massa’s spending spree in the past month or so is estimated to have cost the equivalent of more than 1% of GDP. It included a bonus for pensioners in pesos worth $100 and the scrapping of income tax for 99% of all workers. Peronist campaign tactics also scared many voters into voting for the status quo. Two days before the election, bus and train stations began showing customers how much their ticket prices would increase if subsidies were removed by Mr Milei or Ms Bullrich.
Massa’s approach may not have been what the IMF advised, but it’s not hard to see its appeal to a hard-pressed population (40 percent of whom have been reduced to poverty). Better the devil you know, especially if he is offering handouts.
The best guess is that the same formula will be enough to take Massa to victory in the third round. After all, it will be hard for Milei, an insurgent candidate promising to overturn the status quo, to recast himself as a unifying figure. Besides, this is not exactly the chain saw–wielding Milei’s style. Milei has also cast his opponents on the center-right as a part of the failed establishment and is, to put it mildly, not afraid to throw around insults. These have included some directed at his fellow Argentine, the more or less Peronist Pope, whom he has described as, among other things, “an imbecile,” a risky tack to take in a country that is two-thirds Catholic.
A divided congress does not point to an easy ride ahead whoever wins.
Projections from the congressional vote showed the Peronists will have 108 seats in the lower house, 21 short of a majority, with the [center-right] JxC at 93, Milei’s party at 37 [up from two] and the remainder going to small blocs. In the Senate, where a third of the 72 seats were up for grabs, the Peronists will have 34 seats, JxC 24 and LLA eight.
The Economist:
The least bad outcome to hope for is that Ms Bullrich, who refused to congratulate Mr Massa, since he is “part of the worst government in Argentina’s history”, backs the libertarian outsider. With her support, along with [former President] Macri’s, Mr Milei may be able to appeal more broadly to centre-right voters. Such compromise would become politically expedient, too. Neither of the two contenders for the second round will have a majority in Congress. If Mr Milei were able to form a coalition of politicians keen to reform the country, Argentina might conceivably have a chance to change its fortunes. If it sticks with Peronism, however, it will just descend further into chaos.
Milei has extended an olive branch to Bullrich’s supporters, although she has yet to endorse him:
“Everyone who wants to change Argentina, who wants to embrace the ideas of freedom, are welcome,” Milei said. “It’s not a matter of labels; it’s a matter of who wants to be on this side.”
Meanwhile, Massa, an arsonist now posing as a firefighter, took the opportunity of a press conference to criticize Milei (if not, AP reports, by name) for some of his statements:
“In the end what the world expects from Argentina is balance, rationality and common sense.”
Oh.