While the current economic crisis amplifies support for far-right stances, risky policies could deter private sector involvement, and confrontational rhetoric heightens the risk of social unrest
As political uncertainty will remain high and Congress is expected to be more fragmented, MNCs should establish proper inroads with the candidates’ economic teams and potential legislators across the board to discuss their economic policies. Although Javier Milei’s administration will likely mean a more favorable business environment, uncertainties about dollarization imply heightened FX instability, and an unclear fiscal adjustment program will create a high potential for social unrest. Moreover, amid persistently high inflation pressures and expectations of a further devaluation after the election, clients should consider that meeting targets in hard currency will be more challenging, and IT solutions for inventory management will be crucial to address an inventory glut effectively.
Overview
- Recent polls consistently position Milei at the forefront, with support hovering around 33%. However, the libertarian candidate finds it challenging to secure the requisite 45% of total votes or attain 40% with a 10-point advantage over the nearest competitor to clinch a first-round victory.
- Sergio Massa has introduced several measures to counteract dwindling real salaries, aiming to bolster his chances for a second-round spot. Even though persistent inflation might dent his popularity, the Peronist contender garners about 29% support, and his populist policies might serve as a buffer against declining voting intention. Moreover, surveys indicate that Patricia Bullrich, the Juntos por el Cambio candidate, faces hurdles in unifying her coalition, with an average support of around 24%.
- On the economic front, monthly inflation was 12.4% in August, marking its highest level since February 1991. This surge was driven by significant price hikes in food and beverages (15.6%), notably beef and cereal products, and by higher healthcare costs (15.3%), attributed mainly to escalating medicine prices. We foresee monthly inflation ranging from 10% to 14% in the upcoming months, concluding the year near 175%.
Our View
While the political landscape remains fraught with significant uncertainty, we expect a run-off election between Milei and Massa. The libertarian candidate will likely attract most of right-wing Bullrich’s voters and, coupled with anti-political establishment rhetoric and expected subdued voter turnout, Milei is anticipated to secure a second-round victory. However, Milei’s individualistic campaign strategy has adversely impacted provincial outcomes. The Libertarian party will lack gubernatorial representation, and both Juntos por el Cambio and the Peronist factions are poised to govern approximately 12 provinces each. Regarding Argentina’s congressional races, 130 out of 257 seats will be renewed in the House of Deputies and 24 out of 72 in the Senate. Our projection indicates that the Libertarian party will only secure around 45 of the 329 seats across both chambers. Thus, we anticipate political uncertainty to remain significantly high, given concerns about Milei’s policies and his administration’s limited capability to implement an effective stabilization program.
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