Far-right libertarian candidate Javier Milei celebrates the outcomes of Argentina’s primary elections on August 13, 2023.
Alejandro Pagni | Afp | Getty Images
Argentina’s markets face an election hangover on Monday after a shock primary election win for far-right libertarian Javier Milei, who desires to axe the central bank and dollarize the economy, shook up the race towards general elections in October.
Rock-singing, wild-haired economist Milei far outperformed forecasts to get some 30% within the vote with over 90% of ballots counted, the biggest vote share.
The first to elect party candidates acts as a dress rehearsal for the final election in two months time.
Markets had hoped for a powerful performance by more moderate candidates, who had a foul night. That would weaken the peso currency in popular parallel markets on Monday and weigh on bonds which have risen in recent weeks.
“The market didn’t expect these numbers from Milei. I believe the federal government may have to be very attentive to the exchange market, it’s going to surely be per week with quite a lot of tension,” said Dante Sica, a consultant and former production minister.
Argentina’s markets have long been wobbly with years of economic crisis.
After an analogous primary election shock lead to 2019, bonds and the currency crashed and remain in distressed territory, with the peso now held in check by capital controls the federal government has been unable to unwind.
Milei’s win adds an additional unknown factor that would dent market confidence, though that could possibly be tempered by the very fact he still faces a troublesome fight in October and a probable November run-off, which might test his ability to win over more voters.
Goldman Sachs said in a note before the vote that Milei backs more “radical policy proposals” including dollarization and sharp spending cuts, and brought some uncertainty given his lack of a longtime political machine.
He’ll compete in a three-way race in October against former security minister Patricia Bullrich, who won the essential conservative Together for Change nomination, and Peronist coalition candidate Economy Minister Sergio Massa.
A candidate needs 45% of the Oct. 22 vote to win outright or 40% and a 10-point lead over second place. If there isn’t any outright winner, as seems likely, a head-to-head vote between the highest two candidates will probably be held in November.
“What we’re left with is a rather more uncertain scenario than the one we expected,” said Ricardo Delgado, director of the Argentine economics consultancy Analytica.
