Senate suspends primary vote in reprieve for Milei

Argentina’s Senate voted on Thursday to suspend primary elections for this year’s midterm vote, handing President Javier Milei a welcome political victory as he navigates a cryptocurrency scandal engulfing his administration.

The upper chamber voted 43-20 in favour of Milei’s bill, boosting his chances of expanding his party’s representation in Congress ahead of October elections. The bill passed the lower house of Congress earlier this month. Six lawmakers abstained.

Milei’s government, which has trumpeted a slate of massive budget cuts, argues fewer elections will save millions in frivolous government costs. But by skipping the usual August primaries and going straight to October elections, Milei also extends the runway for his economic measures to pay off and recruit lawmakers from a rival pro-market coalition, while avoiding the currency volatility that usually precedes voting.

“The real goal is to buy time and let history keep taking its course, keep lowering inflation, allow real salaries to continue recovering and eventually obtain a better result at the polls,” said Pedro Siaba Serrate, head of research and strategy at Portfolio Personal Inversiones, a Buenos Aires broker.

Investors had already priced in the suspension, Siaba Serrate added, but it gained new relevance as the first political test following the memecoin debacle set in motion late last Friday. Milei promoted a cryptocurrency that surged and quickly collapsed in value, raising questions about his involvement. Milei has denied any wrongdoing.

“What the government needed is to turn the page,” said Juan Negri, director of political science at Torcuato Di Tella University in Buenos Aires.

Political implications

The October midterm vote will decide half of the lower house of Congress and a third of the seats in the Senate.

Milei holds only six of the Senate’s 72 seats and roughly 15 percent of the lower house. A resounding victory would signal Milei has the political support to cement his economic reforms in the long term and open up the country to foreign direct investment, which the long-stagnant economy desperately needs to grow again.

Before the session, opposition lawmakers played coy on whether the vote would even take place, reluctant to hand over political capital with the government on its backfoot. Several opposition lawmakers voted in favour to push it through nonetheless, while the closest allies to former president Cristina Fernández de Kirchner voted against it. That support should not be misread as a vote of confidence for Milei, according to Juan Cruz Díaz, a political analyst in Buenos Aires.

“The majority the government gathered to suspend the PASO likely reflects some of the opposition lawmakers’ desire to eliminate a mechanism misaligned with their provincial electoral strategies, rather than genuine support for the government,” Diaz said.

Before the vote, lawmakers spent hours debating the crypto scandal. Senators eventually rejected a proposal by the opposition to create an independent commission to investigate the matter, into which Milei’s administration has already launched its own probe.

The primary election, established during Fernández de Kirchner’s presidency in 2009, has long been a source of controversy among investors as it prolongs market rumblings in an already volatile economy. In 2019, business-friendly former president Mauricio Macri’s re-election bid collapsed when he lost the primary in a landslide, sending Argentina’s bonds and currency into freefall. In August 2023, Milei shocked the nation by winning the primary, and his predecessors devalued the peso a day later.

Milei landed in Washington Thursday, offering him a perfectly timed opportunity to be seen as a statesman with international standing. He already met with Elon Musk, whom he gifted with a chainsaw before a roaring crowd at the Trump-friendly Conservative Political Action Conference. Milei is poised to deliver a speech at the conference Saturday.