Milei faces notable governability challenges due to a lack of support from governors and a legislative majority
On Sunday, libertarian economist Javier Milei won Argentina’s presidential election by a margin of more than 10 percentage points. In his first speech as president, Milei stated that there is no room for gradualism, implying the implementation of a shock approach starting on December 10. At the outset of his consensus-building strategy, Milei expressed gratitude to Mauricio Macri and Patricia Bullrich, leaders of Juntos por el Cambio, the current opposition coalition block. He also invited all politicians to support the new government, irrespective of their political affiliations. This outreach is particularly significant in understanding Milei’s relationship with the legislature. A prime example is Cristian Ritondo, a key member of Juntos por el Cambio, who backed the libertarian candidate in the second round and is now the leading candidate to preside over the Chamber of Deputies. Furthermore, Milei’s forthcoming appointment of his Cabinet will be crucial, as it is expected to clarify his economic program, with a particular focus on dollarization and the anticipated fiscal shock. Regarding the minister of finance, the most frequently mentioned candidates are Federico Sturzenegger, the former minister of finance under the Macri administration, and Guillermo Nielsen, former president of the state-owned oil company YPF. Finally, Emilio Ocampo, the economist, professor of finance, and dollarization guru, will likely be appointed as the president of the central bank.
- After processing nearly all the ballots, Milei secured 55.7% of the total votes, an increase of around 25 percentage points. The libertarian vote tally surged from 8.0 million in the October first round to 14.5 million in the November second round. The increase could be explained by the candidate’s ability to attract the majority of voters from Bullrich and anti-Peronist voters from the province of Cordoba.
- Sergio Massa, the Peronist candidate, garnered 44.3% of the overall votes. Between the first round and the runoff, the total votes for the candidate grew from 9.9 million to 11.5 million. The disappointing increase could be attributed to Massa’s inability to appeal to centrist voters from Bullrich and Schiaretti, a poor performance in the suburbs of Buenos Aires, and the severe economic crisis.
- Voter turnout was 76.3%, slightly lower than the first-round participation of 77.7%. Given the anticipation of a subdued voter turnout, the second-round participation marked the lowest level for a presidential election since 2007 and was significantly lower than the 2015 runoff turnout of 80.8%.
As FrontierView projected a Milei victory, we are upholding our view of relatively high political uncertainty due to concerns about Milei’s policies, such as dollarization and his administration’s limited capability to implement an effective stabilization program. We expect the libertarian block to seal an alliance with the most right-wing faction of Juntos por el Cambio. However, the libertarian party may face challenges in securing votes from centrist deputies of the Union Civica Radical. As we maintain our pessimistic outlook for the economy in 2024, the risk of social unrest is high, considering that policies to correct severe macroeconomic imbalances could result in increased inflationary pressures and reduced real wages in the short term. Nevertheless, if the new government successfully articulates its policies and implements a stabilization program, the likelihood of an economic rebound and reduced political uncertainty in 2025 becomes considerably more significant.
Political and overall governability signposts to watch:
- Consensus-building strategy: Given Milei’s lack of legislative power to secure an absolute majority for his agenda, the Libertarian Party must adopt a consensus-building approach to advance its policies. Thus, monitoring the party’s efforts to collaborate closely with the more right-wing factions of Juntos por el Cambio and to negotiate with the more moderate Peronist deputies and senators will be crucial.
- Juntos por el Cambio coalition: As we covered in our first-round Insight Bite, the opposition coalition consists of two primary political parties: Propuesta Republicana (PRO) and Union Civica Radical (UCR). PRO clearly supported Milei in the second round, while some key UCR figures advocated for Massa. Although there is no official statement, ideological differences could destabilize the coalition, and the likelihood of higher fragmentation in both legislative chambers is increasing.
- Peronist leader: Massa’s acknowledgment that the election defeat signaled the end of his political career has intensified the focus on who will emerge as the next leader of the Peronist movement. This situation is further accentuated by President Alberto Fernandez’s markedly low support and Cristina Fernández de Kirchner’s reiterated assertions that she will not seek the presidency again. One prominent figure to monitor is Axel Kicillof, the current Governor of Buenos Aires, who could potentially emerge as a key influencer in shaping the movement’s future.
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