Surprising support for Milei in primaries sows uncertainty in Argentine markets

Javier Milei Argentina

The markets and the currency of Argentina will face greater pressure this Monday after the excellent performance of the ultra-liberal candidate Javier Milei, who was the candidate with the most votes in the presidential primaries with his proposals to dollarize the economy and eliminate the central bank.

Although Milei had no internal competition in his La Libertad Avanza party, Sunday’s result provides clear indications of what could happen in October’s general elections, as the libertarian economist won 30.03% of the vote, according to provisional scrutiny advanced to 97.4 percent.

“The market did not expect these data from Milei, I think the government will have to be much more attentive to the exchange market, surely it will be a week with a lot of tension,” Dante Sica, an economist at the consultancy told Reuters. and former Minister of Production.

In the midst of a deep economic crisis that led to inflation of 116% and poverty of 40%, apathy won the majority of Argentines, who showed a higher degree of abstention than in previous elections and turned largely to an “anti-establishment” figure like Milei.

It is a much more uncertain scenario than expected,” said Ricardo Delgado, director of the Analytica consultancy.

Turnout at the polls on Sunday was 68.5%, eight points less than in the 2019 primaries, a figure that worries the entire political system due to the difficulty in attracting voters, annoyed with the traditional parties that cannot resolve a chronic economic crisis.

In the hard-fought primary of the center-right opposition, favorite for the presidential elections until Sunday, former minister Patricia Bullrich, who represents the most radical wing of the Together for Change coalition, won 17% of the vote compared to 11.3% of the mayor of Buenos Aires, Horacio Rodríguez Larreta. The alliance totaled 28.3% of the votes as a whole.

On the other hand, the center-left ruling coalition, led by the Minister of Economy, Sergio Massa, achieved 27.2% of the vote.

“Today we took the first step for the reconstruction of Argentina. Long live freedom, damn it!”, a euphoric Milei shouted before his followers on Sunday night, who again criticized what he calls “political caste”.

The result, considered a sweeping defeat for the traditional parties, has been unexpected even by political analysts and pollsters, who found it difficult to quantify Milei’s performance.

“It is a politically transversal vote, with emphasis on those under 30 (years), depoliticized and deideologized. A Creole Trumpism,” said political analyst Carlos Fara in an opinion column on Monday, referring to former United States President Donald Trump.

In many popular neighborhoods that have historically voted for Peronism, they opted for Milei. There is fatigue with Peronism and there are no other options that excite us,” she added.

The future president will find himself with a bleak financial panorama: the shortage of foreign currency has left the coffers of the central bank empty and the country has had a debt of 44,000 million dollars with the International Monetary Fund (IMF) for years.

In a report ahead of the primary, Goldman Sachs said Milei is creating uncertainty with her “radical” policy proposals.

“It attracts young, anti-establishment voters, but it does not have a well-established fan base and lacks a broader political platform to support it, unlike more traditional political parties,” the investment bank said.

Argentine shares were trading lower, with the Global X MSCI Argentina ETF shedding 4.3% in US premarket trading.

The result could weaken the price of the Argentine peso in the popular parallel markets on Monday and affect bonds, which have risen in recent weeks.

According to most polls, the electoral contest could be defined in a ballot in November, since no candidate seems to be able to reach 45% of the necessary votes -or 40% and a difference of 10 points over his follower- to win the presidency in the first round on October 22.