Photo Source: Juan Ignacio Roncoroni / EFE
The midterm elections dealt a historic blow to President Alberto Fernández and his Frente de Todos (FdT) coalition, while solidifying Juntos por el Cambio (JxC) as a competitive political rival. The Peronist Frente de Todos coalition received 33 percent (7,801,856) support, compared to Juntos por el Cambio’s 42 percent (9,752,860) share of the national vote. For the first time since the return of democracy in 1983, the Peronist coalition lost control of the Senate but maintained a majority in the lower house of Congress. In addition, electoral support for the President’s coalition declined 40 percent (5,200,000 votes) compared to the 2019 election outcome. While political alternation may strengthen Argentine institutional democracy in the long run, the opposition coalition also lost 1,700,000 supporters in the last two years.
Declining confidence in the two major political forces demonstrates a growing frustration with Argentina’s response to COVID-19, macro-economic instability, 40 percent poverty rates, and the impact of a projected 50 percent annual inflation rate. Furthermore, the high abstention rates and the growing number of supporters for the Trotskyite left and the far right, led by Javier Milei, also reflect a common perception that the country’s political elite are out of touch with reality. These anti-system votes echo the infamous rallying cry of “que se vayan todos,” a call for all political leaders to step down popularized during the mass protests that occurred during 2001 financial crisis. Argentina’s polarized and fractured electorate will likely complicate the Fernández administration’s attempts to address the country’s socio-economic and political problems.
The first governance test for Alberto Fernández and the opposition will be renegotiating payments of a $50 billion International Monetary Fund loan, signed under the previous administration of Mauricio Macri. The president’s political party will also have to establish a credible economic plan and negotiate its details with the new opposition in Congress. In addition, Argentina’s political leadership will have to strike a difficult balance, implementing IMF-recommended economic adjustments and preserving Central Bank reserves, all while mitigating the social impact of rising inflation, a devalued currency, and the value of the U.S. dollar. Finally, both of Argentina’s major coalitions will have to maintain unity as internal battles emerge between potential candidates for the 2023 presidential elections. These challenges present a range of scenarios for the future of Argentina.
An Optimistic Scenario
In an optimistic scenario, President Fernández and Martín Guzmán, the current Minister of Economy, would successfully re-negotiate IMF loan requirements and decrease upcoming payments for the country. Fernández would work with Peronist governors and Sergio Massa, the current President of the Chamber of Deputies, to establish a clear economic roadmap with buy-in from the opposition that goes beyond the end of his presidential term. Since the economic plan will likely require cuts in public spending for social programs and subsidies, Fernández would have to work with allied labor unions, social services, and civil society groups to cushion the impact of any short-term austerity measures.
A Middle-of–the–Road Scenario
In a middle-of-the-road scenario, negotiations with the IMF would stall due to mixed public messaging and internal disagreements between moderate Peronists and the populist wing of the party over cuts to existing subsidies and social spending. However, the country continues paying the IMF loan, draining the existing Central Bank reserves. Before the opposition takes control of the Senate, Alberto Fernández makes slight economic adjustments in an attempt to reduce inflation, and the Peronist coalition agrees to a series of executive decrees that guarantee funds for populist economic policies. These programs include mandated price ceilings for food and staple goods, energy subsidies for vulnerable groups, cash-transfer plans for supporters of the government, currency controls, and higher wealth taxes. The Peronist coalition also uses economic policy negotiations as a way to fracture the opposition coalition ahead of the 2023 elections. Fernandez then blames the Macri government for the IMF loan and the country’s debt problems, as well as the opposition coalition for the government’s inability to stabilize the economy.
The middle-of-the-road scenario likely leaves a favorable political landscape for the Juntos por el Cambio coalition to win the 2023 presidential elections. However, the winner of the election will have to address Argentina’s unresolved economic problems. The unity of the opposition will also depend on upcoming negotiations with the President Fernández, as well as whether the coalition shifts further to the right to attract disenchanted voters. Before the elections, former President Macri expressed that he shared “ideological affinities” with Javier Milei, signaling a willingness to expand the coalition.
A Worst-Case Scenario
In the worst-case scenario, the Argentine government would default on the IMF loan payments, fail to slow skyrocketing inflation, and spiral into a deeper economic crisis. The Peronist coalition would then impose stricter capital controls to prevent a run on the banks, while also limiting access to the U.S. dollar. As social tensions rise over the increased cost of living and low purchasing power of the Argentine peso, the country would erupt in nationwide street protests, similar to those recently witnessed in other Latin American countries. Desperate citizens in lower income areas would loot private stores, some protests might turn violent, and the federal government may deploy security forces and impose a curfew.
The worst-case scenario positions anti-system candidates as more serious contenders for the 2023 elections. Far-left and right-wing political leaders are able to build political party infrastructure and grow their base amidst a socio-economic crisis. Given the social cost and political outcomes of the 2001 financial crisis, it seems that Argentina’s more rational political actors will try to avoid repeating this traumatic experience.
Which outcome is most likely?
The optimistic scenario assumes that Alberto Fernández takes on a greater leadership role in his party and solidifies a coalition of moderate actors to counter the influence of Vice President Cristina Fernández de Kirchner. In the days after the election, the winds of change point towards a rupture between the moderate and populist wings of Peronism.
As a show of political strength, President Fernandez hosted a “victory rally” with allied union and social service organizations, sending clear messages about his desire to lead the Peronist party in a more democratic direction. The government also indicated that it will negotiate an economic plan, make the December IMF loan payments, and further restrict access to U.S. dollars for Argentines seeking to vacation abroad.
Additionally, the recent court decision reducing the number of open corruption cases against Vice President Fernández de Kirchner may keep her out of the political spotlight. Ms. Kirchner also published a letter identifying Alberto Fernández, the Congress, and the opposition as accountable for the outcomes of upcoming IMF negotiations. As an astute political strategist, the Vice President may be trying to avoid associations with future economic adjustments, while positioning her successors for the 2023 elections.
The next year may combine different elements presented in these scenarios. Ultimately, the country is bound to continue down an uncertain path if political leaders do not address the underlying macroeconomic problems that have haunted Argentina since the turn of the 20th century.
Patricio Provitina is a global affairs and Latin America expert. Follow him on Twitter @pprovitina. The views expressed here are the author’s and do not reflect those of any current or former employer.
