Outsider Milei leads Argentina’s primary with strong showing

Argentina’s outsider congressman Javier Milei is leading a crucial primary vote with a stronger-than-expected performance that is set to upend the country’s presidential race, increasing uncertainty ahead of the October election.

With 60 percent of ballots counted, the congressman often compared to Donald Trump was the most voted individual candidate with 32.6 percent. He was even ahead of the pro-business coalition led by Patricia Bullrich — who together with defeated hopeful Horacio Rodríguez Larreta garnered 27.6 percent of votes — and dwarfed the ruling Peronist bloc of Economy Minister Sergio Massa, with 25.5 percent.

The result is a clear rejection to Argentina’s political establishment after years of economic hardship and runaway inflation. It also makes a run-off vote more likely in November, and is likely to scare off investors who fear his economic proposals would trigger financial mayhem. Lack of congressional support could also be an obstacle for Milei to pass the tough legislative reforms needed to get Argentina’s economy back on track, according to political analysts.

Milei, who received the endorsement of Brazil’s former president Jair Bolsonaro before the vote, also stands to shake regional politics. An eventual win by the libertarian candidate would clash with the leftist leaders currently governing Brazil, Mexico, Colombia and Chile.

The primary vote, designed to allow Argentines to choose the candidates who will compete in the October 22 general election, plays the role of a trusted barometer of public sentiment in a country with a long history of unreliable opinion polls. Four years ago, local markets had a meltdown when the primary results caught investors off guard.

Whoever wins Argentina’s highest office will have to quickly put in motion a plan to cut government spending and stave off hyperinflation while addressing growing concerns about public security and a looming recession.

The challenge is immense. Consumer prices are rising by more than 115 percent a year as the Central Bank prints pesos to finance the social programmes and subsidies that have so far ensured the subsistence of millions of Argentines. But that same strategy is at the root of the inflation and currency crises that are tearing the country’s social fabric.

More importantly, this year’s election will gauge Argentines’ appetite for the tough economic reforms needed to pull South America’s second-largest economy from the brink of a precipice. The country didn’t get here overnight, but after decades of failed policies, debt defaults and economic recessions — at least 15 of them since the 1950s.

Support from the International Monetary Fund will be crucial in any recovery plan for Argentina, which received a record US$44-billion bailout from the IMF in 2018, during Mauricio Macri’s term. The programme has been renegotiated under President Alberto Fernández, more recently in a deal brokered by Massa last month.

The economy minister managed to get just enough money — as much as US$10.8 billion by year-end — to repay the Fund and keep the economy going without the need for drastic measures until a new president takes over. Yet investors consider a significant peso devaluation — not smaller than 20 percent — as inevitable. The question is whether the government will be able and willing to delay it until a new president takes office in December.

Argentina may need to wait three more months to know who its future president will be. An outright victory in October requires the top candidate to receive 45 percent of valid votes, or 40 percent of them with a 10 percentage point difference from the runner-up. If neither scenario materialises, there will be a run-off vote on November 19.

Burn the Central Bank

Milei’s recipe to fix Argentina’s economy sounds as bombastic as his style. He has proposed replacing the struggling national currency with the dollar and said he would “burn down” the Central Bank for mismanaging the economy.

The economist-turned-politician rose to fame in recent years for his combative profile in television programmes and social networks. With an eccentric look and an energetic tone, he won followers by pushing against state interventionism. Some of his controversial opinions include the defence of gun ownership, his stance against abortion and the sale of human organs.

Milei’s election strategy isn’t complicated: Make it to the second-round and light the fuse, he has said.