Argentina Elections: Potential Runoff Scenarios

The first round of the elections concluded with a runoff between Massa and Milei

Welcome Avatar! Yesterday was a slap in the face as a reminder that the X bubble we cherish is not a carbon copy of reality, as the results of the general election in Argentina came rolling in. What are the consequences in the short term, and what are the scenarios in a runoff? For potential investors in Argentina, did anything change after yesterday?

With 150% inflation and a potential hyperinflation at the doorstep, the dollar rate at $1100, poverty levels of almost 50%, retirees receiving pensions of less than $100/mo and various political corruption scandals, Sergio Massa was the clear winner in yesterday’s general elections in Argentina.

For the libertarians in the room, this was a cold shower many did not expect. Sure, there were cases of fraud here and there, but these kind of shenanigans happen every single election and do not move the scale with a shift like yesterday.

After the final results of the general elections came in and it became increasingly clear a run off was inevitable, one thing stands out: Massa was only 3.32% away from winning in the first round (at least 40% and a 10% difference with the next candidate).

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Autist note: to learn more about Massa’s “interesting” background, this article sums it all up:

Massa: The Eye of the Tiger

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Whereas in the primary elections in August most of the map was pink (Milei), after the general elections the election map looks like this:

Sunday’s General Election Results

Noteworthy is that Juntos x el Cambio (Bullrich), lost almost all dominance to the Peronists again, and only kept their majority in the city of Buenos Aires.

Massa’s Fear Campaign

In 2022 Kirchnerism removed Minister of Economy Guzmán and replaced him with Batakis, and after 23 days Massa comes into the picture.

Accumulated inflation per administration (Ministers of Economy of this admin in Blue)

A year later the ruling party put forward their main candidate, Wado de Pedro, who doesn’t even last 2 days before they announce at the last minute that the real candidate is Massa.

Massa wins the election and was close to winning in the first round.

This would not have happened unless Massa had huge backing behind him from many different sectors (industry, unions, etc).

The result of the first round seem to show that people are not so bothered that Massa has brought inflation to monthly double digits, nor the increase in poverty and destitution nor the lack of dollars for imports, etc.

Let’s prepare for moar inflation soon, folks, we can do it!

Massa focused on installing fear around a potential Milei win. The State apparatus was well prepared to lend a helping hand, and public universities, public hospitals and even train station monitors helped out by basically indicating Milei would burn it all to the ground if he won.

Public healthcare and education would disappear (not true), and bus- and train tickets would triple if subsidies are taken off.

Fear campaign around the sale of organs (Milei had once hypothetically theorized about the fact that anyone should be free to sell his organs on the open market if he wanted to in various interviews as a purely theoretical exercise, but it was used against him very effectively).

This strategy worked, as many Argentines depend on State subsidies in one way or another, and even with those subsidies it’s hard for them to make ends meet.

Massa’s crackdown on “speculators” and cuevas can also be considered as successful, since many of the people who voted for him really view the flight to the dollar as an attempt by a group of vile speculators to destabilize the economy.

Potential Scenarios

In the run off, the votes at stake make up about 33% of the total, and are divided between Bullrich (23.8%), Schiaretti (6.7%) and Bregman (2.7%):

As we’ve seen above, the majority of Massa’s gain came from Larreta voters, since Bullrich hardly gained any votes after the primaries. Her party JxC actually lost votes.

Milei has only lost a relatively insignificant fraction of votes compared to the primaries (-0.06%), but La Libertad Avanza did not manage to increase its voter base. Massa on the other hand increased his voter base by almost 10%.

These are almost all Laretta voters, who did not want to vote for Bullrich.

The upcoming run off scenario will be tough for Milei, since many of the radicales within Juntos x el Cambio (Bullrich) prefer to vote for Massa, how incredible this may sound.

Remember: these people have never been real opposition to Kirchnerism/Peronism, and have voted most of the socialist law proposals by Massa’s party.

The below tweet is reflective of much of this mindset:

Milei needs ex-president Mauricio Macri to come out and show his support for La Libertad Avanza in order to try to get as many Bullrich voters in the Milei camp.

The tweet above is by one of the bigger influencer accounts for Bullrich & Co, and he already indicates that “if Mauricio Macri joins Milei I will vote for Massa”, because he would consider Macri to be a traitor if he supported Milei.

In the run off, the winning candidate needs to get more than 50% of the votes. With Milei at 30% now, I find it hard to imagine a scenario where even 20% of Bullrich’s votes will end up with Milei.

At least half of the Schiaretti votes and all of Bregman’s are likely to end up with Massa.

Another “radical” politician within JxC who is saying he will never vote for Milei

I am not throwing in the towel yet, but we have to be realistic about the potential of Massa becoming the next president, how undesirable that may be.

Milei during his speech last night

Milei’s speech after the results were known was solid, and he mainly focused on the stark differences between Massa’s party (Kirchnerism/Peronism) and his, also appealing to Bullrich voters that his party is the only real opposition to that status quo:

"In front of us we have a criminal organization. Kirchnerism is the worst thing that has happened to Argentina. They have enriched themselves and benefited at our expense. We cannot continue allowing them to destroy our lives. The choice is very clear, either we change or we perish".

Argentina is at a crossroad right now, and can choose more of the same with a gradual destruction of quality of life and purchasing power for the average Juan earning a peso salary, or they can take a leap of faith and vote for more economic freedom.

Both roads contain one of the largest crises Argentina has ever faced, which will unfold towards the end of this year and 2024. There is no escaping that or sugar coating it, and most people know this.

The road to the 19th of November

Massa’s helicopter money and fear campaign worked: there will be a runoff between Massa and Milei. On November 19, Argentina will choose between Kirchnerism or Freedom.

The common denominator of both candidates is that neither of them will have their own majorities in Congress to carry out the structural reforms that the Argentine economy requires.

Javier Milei does not have a single governor who could give him support. Even though he won as the presidential candidate, none of his local candidates came even close to winning a governor seat. That means that to eliminate or lower co-participating taxes, Milei would have to have the support of senators (which he doesn’t have).

The big question is whether Massa continues to promote populism and monetary expansion between now and November or reduces the pace of populism.

Since he managed to come out on top in the elections, why would he change strategies between now and November?

If Massa were to win the second round, he will inherit his own chaos: a public spending spree, a tax burden that suffocates the private sector, an closed off economy with zero competitiveness, labor legislation that scares businessmen and discourages job creation.

If Massa wants to break that cycle he will have to break with the more leftist wing in his own party, and start a gradual opening up of the economy and reduction of public spending.

The most hopeful scenario is that Massa turns out to be a new Menem, who was also a Peronist but opened up the economy and privatized many sectors. Do not get your hopes up however, so far Massa has shown the opposite.

Massa with Menem sideburns.

Final Thoughts

Up until the run off, we can expect another month of uncertainty with exchange rate pressures, more restrictions and more helicopter money in a paralyzed economy.

Businessmen are on alert with regards to the economy and fear that Massa's plan is more of the same. They have legitimate concerns about currency shortages and rising inflation.

There are many economic data points before the run off: 20 days of exchange rounds, new inflation data, price agreements, peso debt maturities, two IMF payments, and some new bills in progress.

Besides this general turbulence many have grown accustomed to in these last few months, a sliver of hope remains.

The fact that Milei was already able to capture 30% of the votes after only being politically active for less than 2 years, is astonishing and historic to say the least.

Never before has an outsider had such a fast rise with so little budget and political infrastructure. This is hopeful for the future, even if Massa ends up winning the run off, because it indicates a cultural change (especially in younger voters) that aspires more economic freedom and less dependency on the State.

One thing you can rest assured about: Argentina will never be boring.

See you in the Jungle, anon!