Argentina: Elections Shapes up
Argentina’s upcoming primary election will feature two candidates from the ruling coalition “Unión por la Patria” and two candidates from the opposition coalition “Juntos por el Cambio”, while Javier Milei will be the sole candidate for “La Libertad Avanza”. We expect the ruling coalition to lose the national elections and either Javier Milei or the opposition candidate to win it. Challenges await the next government: soaring inflation, depleting FX reserves, and IMF negotiations to manage the fiscal deficit and monetary emissions.
Argentina's upcoming election is taking shape, with Presidential candidates for the primaries now well-defined. The ruling coalition, now operating under the new name "Unión por la Patria," has nominated two candidates: Economy Minister Sergio Massa and youth leader Juan Grabois. On the other side, the main opposition force, known as "Juntos por el Cambio," has presented their two candidates: Horacio Larreta, Governor of Buenos Aires City, and Patricia Bullrich, President of the Republican Party. Meanwhile, the main third force, led by far-right candidate Javier Milei, will run as the sole candidate for "La Libertad Avanza" in the primaries.
The national primaries (PASO) are scheduled for August 13. It is widely expected that Sergio Massa will emerge as the ruling coalition's winner in the primaries and become their final candidate for the National Elections. However, the results for the main opposition force are currently uncertain. The national elections are set to occur on October 22, and there is a significant possibility of a run-off, though it remains unclear which candidates would be involved. In any case, if Sergio Massa figures in the run-off, we believe the ruling coalition candidate will lose either to the opposition candidate or to Javier Milei.
The next Argentine government will inherit a delicate situation. Inflation has surpassed the 100% mark, and the country's resources at the Central Bank are dwindling due to continued financing of part of the deficit through monetary emissions. Moreover, severe droughts are impacting the grain harvest, which serves as the primary source of dollars for reserve accumulation. Additionally, Argentina is currently under an IMF deal, which is set to conclude disbursements in the next year. Economy Minister Sergio Massa is expected to continue negotiating with the IMF to ease the quantitative targets of the deal, as the dollar accumulation target is unlikely to be met.
Whichever leader assumes power after the election will need to implement a comprehensive plan to reduce the fiscal deficit and limit monetary emissions by the BCRA. Ensuring that interest rates are positively adjusted to encourage savings in domestic currency and boosting exports to increase international reserves will be crucial. Moreover, it's highly probable that negotiation with the IMF will be necessary to restructure the current deal repayment terms.