Argentina Elections: Pivoting Peronism or Charting a New Course?

With the upcoming general elections scheduled for October 22, 2023, Argentina finds itself at a crossroads between sticking to the long-standing populist trajectory synonymous with the country's governance for over five decades (Peronism) or embarking on a potentially divergent path.

The electoral season in Argentina is now on the horizon, as August primaries loom, followed by the presidential ballot in October. Amidst this political landscape, four prominent candidates are vying for attention in the primary polls: Horacio Rodriguez Larreta and Patricia Bullrich (Juntos por el Cambio), Sergio Massa (Unión por la Patria, a Peronism-aligned candidate), and Javier Milei (La Libertad Avanza).

The upcoming President will inherit an array of daunting challenges, including a faltering economy marred by a dire shortage of foreign currency, a staggering inflation rate of 114%—ranked third highest globally—recession, mounting unemployment, and more.

Strikingly, the economic concerns have inadvertently boosted certain presidential contenders' prospects. Argentina is under a central-left Peronism administration led by President Alberto Fernandez. However, given the severe financial crisis, President Fernandez has ruled out seeking re-election, thus casting doubt on the Peronism party's ability to retain power.

This void has allowed central-right and right-wing candidates to resonate with a significant portion of the electorate. The rampant inflation and excessive public spending are essential factors contributing to Argentina's current economic turmoil. Moreover, the country's limited options for securing financing due to past sovereign debt defaults have exacerbated the predicament, although funding from multilateral entities like the IMF has provided some relief.

Meanwhile, the Central Bank of Argentina's relentless money printing, mainly to underpin government policies, continues to fuel the inflationary spiral. Additionally, the devaluation of the Argentine peso and persistent barriers to foreign trade persist.

This evolving scenario could signal a transformative shift in Argentina's governance as the traditional center-right opposition party, "Juntos por el Cambio," led by the prominent figure Horacio Rodriguez Larreta, takes the lead. Larreta aims to curtail the Central Bank's peso emissions, reduce the fiscal deficit, and dismantle exchange market controls, albeit with a gradual approach.

In contrast, a more radical right-wing contender, Javier Milei, proposes replacing the Argentine peso with the American dollar. Economists, however, argue that this proposition may not be feasible due to the Central Bank's limited reserves. Nevertheless, Milei's audacious style resonates with many young voters, fueled by widespread social discontent.

What Lies Ahead for Argentina?

Given the considerable strain on Argentina's economy, the immediate future appears challenging, irrespective of the outcome of the Presidential elections. The incoming leader must exhibit leadership insight to steer the nation toward improvement.

Several factors could favor the next President's efforts to bolster Argentine revenues. The robust export of soybeans, considering Argentina's status as a significant global soybean exporter, can enhance the trade balance in the years ahead. Moreover, the country boasts substantial lithium, shale gas, and oil reserves, projecting higher investments and increased revenues. Transforming the energy sector into a prime driver of exports would enhance Argentina's financial standing.

However, quick fixes won't remedy Argentina's systemic issues. Despite this, optimism abounds within specific industrial sectors that the stringent foreign exchange policies might witness some relaxation, potentially benefitting imports.

In summary, Argentina's impending elections mark a crucial juncture, with the chosen path likely to shape the nation's trajectory in an era fraught with economic uncertainties and potential opportunities.

Written by:? Claudia Espinoza & Guido Soria

*This article is informative and is not to be used as legal, economic, or commercial advice.