Post-PASO Analysis - 14 August 2023
A three-way tie in the primaries means October general elections will head into an almost-certain runoff.
Hello and welcome to the Road to the Casa Rosada! If you find this newsletter useful, please consider sharing it with your colleagues and network.
Amidst chants of “La casta tiene miedo” (“the [political] caste is afraid”) in his party’s bunker last night, libertarian Javier Milei welcomed a resounding victory in Argentina’s PASO primary elections, with a strong showing against the traditional opposition coalition Juntos por el Cambio (JxC) and ruling coalition Unión por la Patria (UxP).
Former security minister Patricia Bullrich bested internal rival Buenos Aires City mayor Horacio Rodríguez Larreta 16.75% to 11.14% for the JxC nomination.
Economy Minister Sergio Massa breezed through UxP’s primary with 21.11% compared to leftist social leader Juan Grabois’ 5.79%. The relatively weak showing for the Peronists confirmed the country’s anti-incumbent mood.
While the Milei victory narrative is dominant in the media, the big story is the new three-way tie in Argentine politics, with three different coalitions each representing slightly less than a third of the vote.
Just under 69% of the population voted on Sunday, below the consistent 72% statistic of voter participation in previous elections (with the exception of 2021, due to Covid-19).
Milei claimed victory in 16 of Argentina’s 24 provinces, defeating traditional Peronist strongholds across the country and defying - admittedly historically inaccurate - polls that had him coming in third place. JxC won in only three provinces, and UxP in 5, including the Autonomous City of Buenos Aires.
The most important story of the night, however, is the essential three-way tie. With votes split 30-28-27 among parties (La Libertad Avanza, JxC, UxP, respectively), the October elections are likely to head into an almost-certain runoff, with any Milei-Bullrich-Massa combination possible. For a country whose politics have historically been dominated by two major parties or ideologies, Peronism and Radicalism, the appearance of a political outsider with an actual shot at the presidency could upend the future of Argentine politics.
A rightward political shift, demonstrated first by the choice of more centrist Massa over more left-wing candidacies for UxP and solidified by the resounding victory of hawkish Bullrich over coalition-based Larreta, highlights citizen discontent with the current administration and Kirchnerismo’s failed promises, and gives voice to those like Milei who espouse anti-establishment rhetoric and seek to end the domination of the political elite. However, even if Milei wins the projected 35-40 seats in the House of Deputies and the 8 of the 72 seats in the Senate, the representation in Congress will not be enough to help him govern easily, nor effectively.
While the Peronists are likely to lose, markets are not going to like the uncertainty that will lead to the first round. Bullrich and Milei both promise economic reforms, but Milei’s proposals are more radical and less likely to be successfully implemented by a political neophyte with extreme views and weak legislative support. Milei’s economic proposals, with the exception of “dollarization” and burning down the Central Bank, have also been wildly inconsistent during his entire campaign. Bullrich would bring optimism to markets (though that may say more about market psychology than her actual chances for economic success) while Milei would bring chaos and uncertainty. Massa has a good relationship with Washington and is seen by markets as the most economically rational of the three candidates, despite 115% inflation and a $44 billion IMF debt repayment.
Milei and Bullrich would both prefer to compete against Massa in a runoff election, rather than each other. Both Milei and Bullrich adhere to a similar citizen base; in fact, one poll had predicted that “Should Bullrich not win the primary, 30.2% of her voters would turn away from JxC in the general election to support libertarian Javier Milei.” This overlap means Bullrich is not likely to adopt even more right-wing views, as she would find herself competing for even more Milei voters. It will be critical to see the percentage of Larreta voters turning to Bullrich as opposed to Massa in the general election. Massa, armed with a PASO underperformance, >100% inflation, and low approval ratings for the administration he helps lead, faces an uphill battle no matter which way he looks at it.
Special thanks to Boz for helping write this week’s newsletter!
Hxagon provides risk analysis and bespoke investigations in emerging and frontier markets, primarily in Latin America. If you are interested in our work or acquiring our services, do not hesitate to contact us!
Contact: info@hxagon.com
~~~
If you have any feedback or comments regarding the newsletter, or would just like to connect, feel free to reach out!