Elections in Argentina: What’s Next?

By Federico N. Fernández*

What went wrong? This is what the members of the Peronist party leadership must be asking themselves after the first round of the presidential elections, held on Sunday October 25th. Just two months ago they were repeating the mantra that their candidate, Daniel Scioli, “had already won.” They were convinced that their candidate would almost certainly avoid having to compete in the second round or at least get between 8 and 10 % more votes than his closer contestant. The meager 2.5 % difference Mr. Scioli actually got over Mauricio Macri, current mayor of Buenos Aires and main opposition candidate, came as a shock for all the political landscape. Now the government has to face a second round starting from a very weak position.

Mr. Scioli is a victim of both himself and of the current national administration he represents. Indeed, Cristina Kirchner’s government has not done much to secure his victory. The economy has been in recession since 2012. Many small and medium businesses have ceased to exist. Unemployment, though still not rampant, has risen. Inflation is another byproduct of Kirchner’s policies. Argentina has the questionable honor of the second highest inflation rate in the world – only behind Venezuela. The country has been running huge deficits. The Central Bank works as the money printing shop of the government and many economists claim that will be literally dried up of any foreign currency reserves by the end of the year. Last but not least, for the past four years the government has applied growing doses of financial repression to deal with the exchange rate. The result is that the black market price of the US dollar is more than 50% higher than the official exchange rate.

Mr. Scioli is, at best, a very inefficient administrator. He has been governor of the province of Buenos Aires since 2007. During his tenure crime has done nothing but rise. Particularly menacing is the case of drug trafficking and drug related violence – both have skyrocketed. Mr. Scioli is also notorious for his lack of infrastructure spending. As consequence, in August large areas of his province were flooded. Crops, houses, and human lives were lost as result.

What is more, Mr. Scioli based his campaign in ambiguity. On the one hand, he is a vociferous defender of the so-called “model” Néstor Kirchner inaugurated in 2003. On the other, he seems to tacitly admit that reforms are desperately needed in order to stabilize the economy. In this sense, he offers total submission to the party line today and betrayal tomorrow. As consequence, he is not trusted by the Kirchner loyalists and despised by a large part of the society that wants real change.

Bad news for the Peronists do not end with Scioli’s underperformance. The very structure of power they have built for the past three decades runs the risk of being dismantled. Scioli’s successor as governor of the province of Buenos Aires will be María Eugenia Vidal, a member of “Cambiemos” (Let’s change), the main opposition party. In the province of Buenos Aires live close to 40% of the Argentinian voters. It has been governed since 1987 by the Peronist party, being the corner stone of the populist project of Néstor and Cristina Kirchner. Moreover, Peronists also lost control of many municipalities within the province at the hands of Cambiemos. Even in the impoverished north of Argentina, a traditional prey of political clientelism, the Peronists lost thousands of votes and many municipal and provincial governments.

A ballotage for the presidential election is completely unprecedented in Argentina. In 2003 Carlos Menem, Daniel Scioli’s political mentor, relinquished the possibility of a run-off against Néstor Kirchner. Like Scioli, Menem had won the first round by two percentage points. But he knew that in the second round almost everybody else would vote for his opponent. The case may not be the same for Scioli, but some pundits insist on that he will shortly abandon the race.

In any case, the steps taken so far by Mr. Scioli and his allies may not be the most conducive. The night of the elections, still shocked by the results, Scioli repeated once again the Manichaean logic of social clash. Thus, he said that two totally opposing views will be competing. The pro-government media amplified this message with the divisive slogan of “two countries.” The problem for this strategy is that all the other presidential candidates included in their platforms a message for national reconciliation and in favor of closing the social gap created by the Kirchners. This toxic message may alienate Mr. Scioli further from a society exhausted by confrontation.

Another mystery to be revealed in the next few days is how Peronism will react to this electoral debacle. The Peronists tend to be extremely adaptable to most situations. However, they do not forgive nor forget defeat. It is likely that an “uncivil war” ignites between the Kirchner loyalists and the rest of the party in order to find whom to blame. A party in disarray would hardly help Scioli’s chances.

But it is too soon to rule out Peronism. If this were a boxing match, Cambiemos would be winning by points. However, the fight is not over and the champ has not been defeated.

* Federico N. Fernández is a Senior Fellow of the Austrian Economics Center (Vienna, Austria) and the Vice President of Fundación Bases (Rosario, Argentina).