Argentina Faces a Bleak Election

Argentines head to the polls this Sunday, Nov. 19 for the second round of the most divisive presidential election in decades. The choice couldn’t be more stark—between an establishment Minister of Economy who has presided over an inflation rate that stands at a staggering 140% and a firebrand libertarian that is making international markets jittery.

The establishment candidate, Sergio Massa, is part of the Peronist government of President Alberto Fernández. Javier Milei, a relative political outsider and self-described anarcho-capitalist, is the upstart promising to abolish Argentina’s peso and central bank as part of a campaign to radically reduce the Argentine state and its role in the economy.

Polls suggest a surprisingly tight race. If you’re asking how an incumbent economy minister in a country that is in an economic tailspin stands a good chance of becoming President on Sunday, you have not grasped the extent to which Peronists have dominated Argentina’s politics for the past seven decades and the outrageousness of his competitor, Milei.

The Peronists that Massa represents is no average party and was formed by Juan Perón in the 1940s by fusing right-wing elements of the military with a unified labor movement. That personalist, top-down movement has since evolved into the heterogenous political machine of labor unions, crony capitalists, neoliberal reformers, traditional leftists, and a vast network of neighborhood political bosses. This ideological flexibility—critics would say cynicism—and party machinery has been key to Peronism’s electoral successes.

Massa has remained a pragmatist who has served in several past Peronist governments of different ideological leanings, especially the leftist-populist governments of Néstor Kirchner (2003-2007) and his wife Cristina Fernández de Kirchner (2007-2015). A recent and massive tax reduction for the working classes and a cash give-away program for pensioners ahead of the Oct. 19 first-round presidential election have helped Massa’s chances. But it is his image as the status quo candidate—despite the government’s track record—that has helped him most among non-Peronist voters.

Milei, a TV personality who made his reputation trashing Argentina’s political class and state-centric economic model, has captured popular anger over the country’s chronic boom-bust economy. Argentines love to remind outsiders that at the turn of the 20th century, their country was richer than Italy and Spain, and on par with the U.S., Australia, and Canada. This historical slide, particularly in the past 20 years, stings for many Argentines. 

So, when Milei rails against the establishment it resonates with voters. This is particularly true for Argentina’s under 30s, many of whom have known little but a peso in free fall and dimming job prospects. It’s no surprise then that younger voters form a strong core of support for the moppy-haired outsider who used to be part of a Rolling Stones tribute band.

Given Argentina’s chronic inflationary troubles, stemming from political leaders’ inability to curtail profligate public spending by printing more money, some of Milei’s radical ideas make sense on the surface. Dollarization would eliminate the government’s currency printing presses and tie macroeconomic policy to a more stable U.S. monetary policy. But the Argentine central bank lacks sufficient U.S. dollar reserves to make it a national currency. It may be tempting to take monetary policy out of the hands of Argentina’s infamously spendthrift politicians and place it in the hands of the U.S. Treasury and Federal Reserve. Yet that would limit the scope and agency of a diverse, $630 billion economy to set its own policies domestically and internationally. A simpler and much-less disruptive approach would be to once and for all ensure the independence of Argentina’s central bank from political influence.

Milei’s pledge to cut public spending by 15% of GDP is, however, more sensible. But it would be painful to millions of Argentines who depend on subsidies on energy—which this year will total $8 billion alone—and on public transport. Slashing the state budget will directly reduce the standard of living for a large segment of Argentina’s population.

Milei’s radical agenda would of course face major obstacles considering that his Libertarian Party only occupies a handful of seats in the country’s Congress. But there are also concerns that a President Milei would test the fragile checks and balances of Argentina’s democracy given the lack of tolerance he has expressed toward opponents and the political system generally. The chainsaw he famously waves around at rallies to symbolize his slashing of the state is a not-so-subtle indication of his political temperament.

That’s not to say a Massa win will comfort voters. For one, it remains unclear what Massa will do beyond what he has already tried. The inflation rate has gone from 79% when he became economy minister in August 2022 to 140% today. He would also still need to contend with a diverse party that includes Cristina Fernández de Kirchner and her allies as well as the party’s labor wing that will contest many of the necessary efforts to reduce expenditures and tackle market distortions. Nevertheless, both Massa and the Peronist movement have shown a historical capacity to adapt and negotiate. It’s not a sense one gets from Milei.

Whoever wins this Sunday will inherit a complex economic crisis in which there are no easy answers. Argentina’s historic economic fragility is bound up in decades of inefficient—even corrupt—public policy and the lack of checks and balances on fiscal and monetary policy. But a majority of Argentines have come to depend on unsustainable state largesse that fuels market inefficiencies, public debt, and inflation.

The best that can be hoped for is a broad centrist coalition to brace the country for the difficult choices it needs to make. While Massa has detractors, a Peronist insider like him may be best positioned to fashion that support. This is one consideration that millions of voters will weigh up as Argentina braces for one of its most consequential elections yet. But the most important one is broad frustration—even anger—over the dire state of affairs.