Argentina: Between a rock and a hard place | International

In two weeks the second round of the presidential elections in Argentina will take place. The candidates are Javier Milei, an exotic libertarian with radical proposals, who will face a representative of the ruling party, Sergio Massa, the current Minister of Economy. In the first round, Massa led the results by obtaining 37% of the votes, while Milei received 30% and Patricia Bullrich, from the alliance that brought Macri to the Presidency in 2015, was left out with only 24%.

The results of the first round were surprising, considering not only the results of the mandatory primary elections, but also what the polls anticipated, which gave Milei as a large favorite. However, the polls were fundamentally correct, that the runoff would be between Milei and Massa, which implied the emptying of the center-right position, represented by Bullrich, and the strengthening of the most polarizing positions. Thus, Argentina now finds itself facing a tremendous dilemma: either it endorses Peronism for four more years, with Sergio Massa as president, or it elects Javier Milei, that strange character who offers miraculous proposals and solutions to a tired and desperate Argentine people. .

A comparison between the results of the primaries and the first round reveals some interesting things. On the one hand, the hard vote for Milei is 30%, that is the percentage she obtained in both processes. These voters most likely will not change their minds, no matter how much they are warned about the risks of electing someone like Milei. On the ruling party's side, her vote rose from 27% in the primaries (adding the votes of Massa and Grabois) to 37% in the first round, a notable increase of 10 percentage points. This was the result of greater mobilization in the traditional urban strongholds of Peronism-Kirchnerism, although it possibly also occurred as a result of a realignment of voters concerned about the rise of Milei. This rearrangement in part explains the hollowing out of support for Bullrich, since his coalition, Together for Change, fell from 28% in the primaries to 24% in the first round.

Thus, the key to the second round elections is what Bullrich voters will do, who has already openly expressed their support for Milei's candidacy. For the runoff, Peronism possibly starts with a certain advantage, having not only the 37% it obtained in the first round, but also an additional 4-7% obtained by other parties closer to its political position. The key, then, continues to lie in the voters who brought Macri to power in 2015 and who voted for Bullrich in the first round. The vast majority of these voters are furiously opposed to the current Government and will most likely choose to vote for Milei or, where appropriate, to abstain. It will be enough, however, for a certain percentage of them to be sufficiently averse to the risk that the Milei option represents, to give the ruling party victory.

Regardless of what happens in Sunday's elections, a crucial issue is what will happen to the Argentine economy. There, neither of the two options seems to offer a real alternative to the underlying problems. The situation is critical: inflation close to 140% annually, poverty has grown from 26% in 2017 to 40% in 2023, indigence has almost doubled from 5% in 2017 to 9.3% in 2023, and The country is drowned by a very high external debt, important short-term commitments and an acute shortage of international reserves.

To address these problems, Milei offers quasi-magical solutions: dollarize the economy, disappear the Central Bank and eliminate Ministries, among many other things. This proposal makes no sense or economic viability. In a context of currency shortages, dollarization is a utopia. The country does not have foreign currency to even meet its most urgent commitments and has had to rely on lines of credit from China. In this context, the simple triumph of Milei would bring, first of all, a devaluation and a very significant price adjustment. Afterwards, the recession would come, motivated by the adjustment in relative prices between tradable and non-tradable goods. The economic adjustment would be tremendous and recovery from a shock of that magnitude would take years.

On the other hand, you already know what you have. Massa has been the Minister of Economy for just over a year. He has had to face the delicate economic situation that Argentina is experiencing. In July 2022, Massa replaced Silvina Batakis, who did not last even a month in office, and who had previously replaced Martín Guzmán, who was Minister of Economy from 2019 to 2022. The situation has not improved one bit since this began. administration. If anything, it has gotten worse. It is true that the conditions left by Macri were extremely complicated, but the Fernández Administration did not know how to deal with the circumstances and did not dare to take the difficult measures that should have been taken to confront the situation. Instead, Fernández tried to manage the crisis and that is how it has gone. The question remains as to what exactly Massa would do to improve the economy. Today, as a candidate, he makes promises of change. However, the incentives to keep those promises can easily change once elected. It would not be the first time that a Peronist candidate postponed difficult decisions once in power.

Thus, Argentina will face a real dilemma in two weeks: continuity or change. Milei offers change and is the option of the crowds who support the slogan “let them all go!” Argentines, fed up with Macrismo and Peronism, could opt for this option in a fit of boredom. On the contrary, Massa offers them more of the same, more of what they already know and that has not necessarily produced good results. If Massa keeps what he promises and finally makes the necessary fiscal adjustment, the Argentine economy and society will go through difficult times, but they could eventually move forward. If he doesn't comply, things will continue as they are and could quickly deteriorate. The choices are difficult. Argentina is between a rock and a hard place. Or, perhaps better said, between the sword and the void.

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