Argentina’s government suffers heavy defeat in PASO primaries which took place on 12/09/21. The ruling Peronist coalition (Frente de Todos) lost heavily in the key province of Buenos Aires Province, the movement’s traditional heartland, while recording notable losses in Buenos Aires City (together, they make up almost 40% of Argentina’s population) as well as in other major provinces like Córdoba, Santa Fe, Corrientes and Mendoza, piling pressure on President Alberto Fernández and his government. Unexpected, and unwelcome, defeats then came in Chaco, Jujuy, Santa Cruz, La Pampa and Chubut. Frente de Todos also fell in Entre Ríos, Misiones, Salta, Tierra del Fuego and San Luis. In Neuquén and Río Negro, the ruling coalition lost to local parties.

The primary election serves as early test on the political strength of President Alberto Fernández’s ruling coalition. Voters will pick candidates to lead their parties or coalitions ahead of the final midterm vote on November 14, when 50% of the lower house seats in Congress and a 1/3 of the Senate are up for election. If the same results were to be repeated in November, Frente de Todos would lose six senators and its majority in the upper house. In the lower house, its bloc would drop from 120 to 111, versus 118 for Juntos por el Cambio. It could also provide some early signals into the 2023 presidential race.

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.

Investors and markets will cheer on Frente de Todos heavy defeats: Argentine stocks traded on Wall Street soared prior to the opening of the market on September 13 and the country risk fell. But in the short term, an open question remains whether this election loss is going force Mr Fernandez to be more pragmatic, or instead double down on unorthodox measures to rile up his base. To be continued …