Argentina heads to run-off as Massa gained edge over Milei

Argentina’s election will be settled in a presidential runoff between Economy Minister Sergio Massa, who defied expectations to snatch the lead in Sunday’s election, and libertarian outsider Javier Milei.

It’s a politically polarising scenario that investors had feared the most.

With most of the votes counted, Massa secured 36 percent while Milei received 30 percent, the country’s election authority said, leaving both below the necessary thresholds to win outright. Massa, 51, and Milei, 53, will face each other in a second round on Nov. 19. The results mark a reversal of fortunes for Massa, whose ruling coalition had come third in August primaries.

Patricia Bullrich, the establishment pro-business candidate, finished third with 24 percent of votes. Her exit raises concerns about the future of a coalition that until recently was seen as the most likely successor to the ruling Peronist alliance. It also means that her votes are now up for grabs.

The run-off will finally settle the drawn-out question of who will be saddled with the impossible task of saving a once-rich country on the verge of collapse.

It pits two candidates with diametric opposing views: the enduring Peronist movement — which governed Argentina for most of last 20 years and refuses to die despite its catastrophic economic results — against the radical libertarian with no government experience who wants to dollarise the economy to kill inflation galloping above 138 percent.

Argentina will endure another month of volatility as Massa and Milei fight to win the votes needed to clinch the top job. In his double role as economic czar and presidential candidate, Massa has in past weeks cut taxes and increased social spending in a desperate attempt to garner popular support at the cost of accelerating an economic crisis. His first round lead indicates that it’s in his political interests to stick with that strategy.

To stay competitive in the race Massa will likely try to avoid devaluing the currency, which he did the day after the primary vote.

The Massa-Milei final was the outcome that bond investors worried about because it prolongs the uncertainty at a time Argentina desperately needs policy changes. Most of its international notes have lingered below 30 cents on the dollar in recent weeks, with surging yields that signal a 10th default is looming as major debt repayments resume next year.

“Massa first, Milei second is possibly the worst-case scenario for markets. It prolongs already-high uncertainty for another four weeks, with neither likely to provide granular detail on their policy plans. Massa could now double down on his populist approach of an artificially strong peso, interventionism and fiscally costly measures," said Adriana Dupita, Argentina’s economist.

The country is facing its sixth recession in a decade and saw inflation spike to the highest level since in the nation exited hyperinflation in the early 1990s. The continued slide of the Argentine peso has led to the gap between the official and parallel rates surging past 170 percent.

Milei, who wants to replace the peso with the US dollar as Argentina’s currency and close the central bank, may have struggled to win over voters that are concerned with the kind of extreme policy medicine he proposed, such as ditching the national currency.

Even if most polls showed Milei ahead before the vote, the scenario of Massa in lead was predicted in one poll tracker by São Paulo-based Atlas Intelligence, which on Sunday morning showed Massa ahead with over 32 percent of the votes, followed by Milei with almost 27 percent and Patricia Bullrich coming out third with 23 percent.