What’s at Stake in Argentina’s Midterm Primary Sunday

(Bloomberg) -- Argentines take to the polls Sept. 12 in a primary vote that will measure the political strength of the federal Peronist government and the opposition ahead of midterm elections on Nov. 14. This guide will help you navigate what to watch closely on Sunday: 

1. What’s at stake in the election?

On the November ballot, half of Argentina’s lower house seats in congress and a third of the senate are up for grabs. In a broader sense, Sunday’s primary vote serves as an informal referendum for President Alberto Fernandez and his left-wing coalition’s first two years in office. It could also provide some early signals into the 2023 presidential race. City of Buenos Aires Mayor Horacio Rodriguez Larreta, a key figure in the opposition, is seen as a likely presidential candidate in two years, and his top deputy, Diego Santilli, is on the ballot in the province of Buenos Aires. Since voting in the primary is mandatory, it acts as a big opinion poll ahead of the final midterm vote. 

2. What are the main differences between the two main coalitions? 

Despite an array of parties running in the primaries, Argentines are largely split between Fernandez’s populist coalition, Frente de Todos, and the more investor-friendly opposition, Juntos por el Cambio. Fernandez’s government never gained credibility in the eye of foreign investors after a series of anti-business decisions including defaulting on its dollar debt and tightening capital controls. The opposition, led by proteges of former President Mauricio Macri, aims to open up the country to foreign investment and trade, though Macri failed to manage the economy well during his time in office.  

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3. Why are there so few public polls ahead of the vote? 

Pollsters are shying away from publicly predicting voters’ intentions after a nightmarish experience during the last primary vote in August 2019 ahead of presidential elections. Back then, many pollsters suggested Macri would lose the primary to Fernandez by no more than five percentage points, a gap he could conceivably recover in the final vote. But instead, he lost by 16 points, triggering a mass selloff of Argentine assets. The peso lost 18% of its value just in the week after that primary. Macri blamed the pollsters for getting it wrong.

“Equities seem to be pricing a technical tie at the Buenos Aires province. How likely is that? That’s the average of all polls, roughly. How reliable are them? Not much, as pollsters must contend with sanitary restrictions in their already challenging job,” said Pablo Waldman, head of strategy at StoneX Argentina.

4. What are the key races to watch?

The two key races are in the city and the province of Buenos Aires. Together, they make up almost 40% of Argentina’s population. In the province, a Fernandez’s ally, Victoria Tolosa Paz, leads the government’s candidates for the lower house. The main opposition coalition has two candidates in that primary, Santilli and Facundo Manes, who are both promising to support the other after Sunday’s vote. In the city, opposition leader Maria Eugenia Vidal is competing against an array of candidates, including libertarian economist Javier Milei, whose bombastic style has won over some voters.  

5. How will the midterms impact Argentina’s negotiations with the IMF? 

Argentina owes the International Monetary Fund $45 billion stemming from an agreement given to Macri’s government in 2018 that failed to stabilize the economy. Negotiations to restructure the deal never made concrete progress since Fernandez took office. With a disastrous history between the IMF and Argentina, the midterms have become a political hurdle for the president before he can consider a new agreement with the Washington organization. Analysts also note that if Fernandez coalition doesn’t perform well, it could jeopardize the job security of Economy Minister Martin Guzman, who is leading talks.

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6. How will Covid-19 affect the vote?

More than 17,500 voting centers will open nationwide at 8 a.m. local time, but first results aren’t expected until 11 p.m. as special measures related to Covid-19 could delay the vote counting. 

Participation levels are historically lower in primaries compared to general elections, as some voters skip the task despite being mandatory. “We expect a lower participation rate in this primary because some people might choose not to go to voting centers due to Covid,” said Jimena Blanco, director of Latin America research at consulting firm Verisk Maplecroft. Federal judges have also ruled that people with Covid-19 symptoms or close contacts to positive cases can’t go to the voting centers.

7. How are markets expected to react?

The S&P Merval, Argentina’s stock index, has extended gains this month amid growing signs that Fernandez’s left-leaning coalition is losing ground. Investors would cheer if the ruling coalition looses or shows a poor performance, specially in the Buenos Aires province. But in the short term, an open question remains whether an election loss would force Fernandez to be more pragmatic, or instead double down on unorthodox measures to rile up his base. “We are skewed to believe the latter is to dominate. If so, we would entertain more of a rocky negotiation with the IMF,” says Diego Pereira, Latin America economist at JP Morgan Chase and Co.

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