Winner between Sérgio Massa and Javier Milei will have to deal with debt mountain, soaring inflation, worsening poverty.
Opinion polls are neck and neck before Sunday’s presidential election in Argentina. The run-off vote will pit Sérgio Massa, the centrist candidate from the governing Peronist coalition, against hard-right libertarian Javier Milei.
In October’s first-round ballot, Massa – the current finance minister – won 37 percent of the vote. Milei, meanwhile, convinced just 30 percent of the voting public. Candidates must secure 45 percent of the vote to win in the first round.
Last month’s result surprised many political pollsters, given that Massa is presiding over an economy with an inflation rate of 142.7 percent, coupled with simmering frustrations about Argentina’s Peronist establishment.
On top of well-timed welfare handouts, Massa’s opening victory was influenced by a successful marketing campaign which warned of spikes in utility prices in the event that Milei, who has pledged to roll back state subsidies, wins.
Milei, a former TV personality turned congressman, is a political outsider who has drawn parallels with Donald Trump. Along with his hardline running mate Victoria Villarruel, Milei has downplayed the atrocities of Argentina’s military dictatorship.
His success has been fuelled by years of economic frustration. With four in 10 Argentines now living in poverty, the economy is edging towards its sixth recession in a decade. Inflation, a key concern among voters, is in triple digits and rising.
“The price of basic goods has skyrocketed,” said Jorge Lopez, a taxi driver from Buenos Aires. “The money I make buys me less and less. It’s simply not enough, and it’s getting harder to make ends meet.”
Still, Mile’s rhetoric has proved divisive. In a country where two-thirds of the population is Roman Catholic, his unflattering description of the Pope, an Argentian, as “a leftist son of a bitch” alienated moderate voters. He has also championed the sale of human organs.
Massa, though part of a left-wing Peronist administration, represents the more centrist wing of the party.
Peronists, who first came to power in 1946 under populist general Juan Perón, have been Argentina’s dominant political force for decades. Today, Peronism represents a patchwork of economic programs, including state-led industrial policy and subsidies for basic goods.
A seasoned operator, Massa is seen as someone able to negotiate across the political aisle. In August, he successfully brokered a $7.5bn payout from the International Monetary Fund (IMF).
The two candidates have opposing views on virtually every economic issue, including the size and role of the state.
“Massa will toe the Peronist line, attempting to roll back subsidies without endangering the welfare state,” says Pablo Bortz, a professor of macroeconomics at the University of San Martín.
Massa, who remains in charge of state coffers, spent heavily in the run-up to October’s election. He expanded income tax exemptions, boosted informal worker handouts and gave $100 – at the official exchange rate, which is 2.5 times less than the informal grey market rate – to pensioners.
To be sure, many of these measures are likely to be reversed after December 10, when a new government will assume office. “Massa is aware he’ll have to implement austerity measures … He’s now talking about a budget surplus of 1 percent of GDP next year,” said Bortz.
Last year, Argentina ran a budget deficit – where expenditure exceeds revenues – of 2.4 percent of GDP.
Argentina still owes roughly $43bn to the IMF and $65bn to external bondholders from debt restructured in 2020. Looking ahead, numerous obligations are due in 2024 and 2025. “To repay these debts, Massa has hinted at gradual fiscal consolidation,” Bortz added.
Milei, meanwhile, has pledged to slash government spending by a whopping 15 percent of GDP. His austerity programmes would focus on removing subsidies for utilities, like gas and electricity. He has also hinted at privatising state companies and scaling back public health expenditure.
“Clearly, this radical program spooked some voters,” said Bortz. “Massa’s plan is more politically feasible, given Peronism’s support in Congress. But even if he wins, he’d have to contend with very low reserves and no access to international capital markets.”