Argentine ruling coalition defies expectations

Economy minister pulls ahead with run-off on Nov 19 as economy remains key amid runaway inflation

Argentina's ruling Peronist coalition exceeded expectations in the country's general election on Oct 22 to set the stage for a run-off vote on Nov 19 for the presidential race. The run-off will be between Economy Minister Sergio Massa and Javier Milei, a congressman and relative outsider.

That the presidential election has proceeded to a run-off was not in itself surprising, since Massa and Milei were running in a tight race, but the strong performance by Massa took many by surprise.

Ahead of the vote, Milei had been widely touted as the candidate to beat after he came in first during a primary round of voting in August.

Massa, 51, is a moderate and an establishment figure who has served in President Alberto Fernandez's cabinet since 2022. He took 36.4 percent of the votes cast with 93 percent of the 24.6 million votes counted.

He promised to foster economic growth and pay off the country's $44 billion external debt to the International Monetary Fund – something he was not able to do as finance minister – as well as improve public safety by enhancing the police's capabilities and building more prisons.

Milei, who turned 52 on the same day of the vote, is a libertarian economist and a former economics professor. He is an outsider who entered politics in 2019, after working for 15 years as the chief economist at one of the country's largest corporations.

He obtained 30 percent of the vote with promises of shrinking public spending and cutting taxes, adopting the US dollar as the official currency, shutting down the central bank and opening the trade and economy, by deregulating it.

Milei also promised to implement a labor flexibility scheme that, in his view, will trigger economic growth.

"We are going to decide whether we can make Argentina a power again or turn ourselves into the biggest shantytown on Earth," said Milei on Oct 22 as he cast his own ballot.

A third candidate, conservative Patricia Bullrich, won 23.8 percent of the vote with a campaign that focused on issues of public security.

"The economic discussion was very important, and this was also noticeable in the presidential debate because the central issue of the campaign is inflation. We have accumulated inflation of 140 percent in the last 12 months, so the economic issue is exclusive," said Miguel Boggiano, CEO and chief investment officer at Carta Financiera.

Pollsters had expected Milei to win the presidential poll on Oct 22 by a narrow margin.

During a primary election in August, candidates of each political party were elected to run for president. The results then were a clear victory for Milei, who obtained 7.3 million votes, compared to Massa, who obtained the second-largest block with 5.2 million votes. In third place was Bullrich, who obtained 4.1 million votes.

Bullrich's support for Milei could be key for his election in the November run-off.

The economy is the most important topic in Argentina. The annual inflation rate reached 138.2 percent in September. It topped 100 percent in March for the first time in more than three decades.

"A common denominator is that, I believe, everyone is going to remove the clamp (barriers to the free exchange of currency)," Boggiano told China Daily.

"We will have to see how fast they will do it. I think Milei is very clear that it has to be immediate. Bullrich is probably not so clear, and Massa will probably have difficulties doing it."

The high inflation rate is causing significant challenges for the people of Argentina, with prices increasing rapidly and supermarkets not respecting the fixed prices that Massa introduced.

The government introduced price caps on food and staples to contain soaring costs, but these measures have been unsuccessful. In addition to supermarkets, all economic sectors are frequently adjusting prices to keep up with rising costs.

Argentina and China signed a currency swap agreement in 2009, and it was renewed in June 2023. Under the terms of the currency swap, Argentina may exchange the yuan for Argentine pesos through the People's Bank of China and the Central Bank of Argentina.

President Fernandez, who made a state visit to China in early October, revealed that the currency exchange between Argentina and China will be extended to an amount of 47 billion yuan ($6.4 billion).

The author is a freelance journalist for China Daily.