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Candidate Javier Milei greets his supporters as he arrives at the school where he votes, in Buenos Aires, Argentina, on Nov. 19, 2023.
Milei’s victory plunges Argentina into uncharted waters
Far-right libertarian Javier Milei is set to become president of Argentina after defeating Economy Minister Sergio Massa in Sunday’s runoff election. With over 90% of the ballots counted, Milei leads the vote count 56% to 44%, and Massa has conceded defeat.
Milei’s campaign promises: A self-described anarcho-capitalist, Milei has pledged to cut public spending by 15%, abolish Argentina’s central bank, ditch the peso, and make the US dollar the country’s legal currency.
Despite Milei’s extreme campaign pledges, it seems that voters just couldn’t stomach elevating an economy minister who had delivered inflation north of 140% to the presidency. Two in five Argentines are living in poverty on Massa’s watch.
Milei's party, however, only controls about a small fractions of seats in each house of Congress, which will make passing legislation a major challenge.
What's more, dollarizing the economy is no panacea. True, countries like Zimbabwe and Ecuador have used the tactic to remove the government’s ability to print money (and thereby drive inflation) — but Argentina ain’t Zimbabwe. Unilaterally handing the US Federal Reserve control of monetary policy in a $622 billion economy is absolutely unprecedented.
The dollarization of an economy this large and signaled this far in advance may actually drive up inflation. To fully dollarize, Milei would need to buy enough dollars to convert all the pesos in circulation and convert all contracts and assets into dollars. Buenos Aires is already having a hard time buying dollars because the peso is so weak, and the lack of foreign reserves to back its nominal value means a significant devaluation of the currency is expected before Milei takes office on Dec. 10.
Because the peso will soon be even weaker, Milei will probably need to print more pesos just to begin the dollarization process. But in doing so, he’s likely to trigger another round of hyperinflation, which could quickly eat away at his political popularity.
An Argentinian flag waves outside the Casa Rosada Presidential Palace ahead of the November 19 runoff election, in Buenos Aires, Argentina November 15, 2023.
It’s gonna be a nail-biter in Argentina
Would you promote an economy minister to be president if he’d delivered 140% inflation? You might if the other option was “shock therapy.” That’s the choice facing Argentines this Sunday as they vote in a runoff election between Sergio Massa, the economy minister of the ruling party, and libertarian wildcard candidate Javier Millei, who wants to “blow up” the country’s political lethargy.
Polls show that the word most often associated with Milei is “crazy,” but that hasn’t hurt him in the topsy-turvy world of Argentine politics.
Milei’s combative public persona and radical proposals to fix Argentina’s perpetually floundering economy – including dollarizing the economy, shutting the central bank, and slashing government spending by 15% of GDP – appealed to voters disaffected with politics as usual.
He has risen rapidly from a fringe outsider to taking second place in the first round of voting – Milei garnered 30% of votes to Massa’s 37%, and while Massa did better than expected, he fell short of winning outright.
Pre-election polls point to a close contest in the second round. One particularly effective tactic for Massa has been reminding Argentines accustomed to extensive subsidies how much more their bus commute or clinic visit would cost if Milei fires up his fiscal chainsaw. Both campaigns have dived headfirst into artificial intelligence, with an especially memorable deepfake showing Milei discussing how a free market for human organs would work.
If Milei does come out on top, he'll lack the majorities in Congress he needs to pass his boldest proposals. Policy paralysis is not a recipe for taming inflation. Massa would have a freer hand with the largest factions in both houses and has promised to re-engage with the International Monetary Fund, but he’s not likely to systematically reform the state to put the budget on a solid footing. For the 40% of Argentines who have slipped into poverty, that means money is likely to stay tight whoever wins.Argentine Economy Minister Sergio Massa leads in Sunday's first-round elections.
Peronists stage surprise comeback in Argentina
Argentina came closer to electing a new president on Sunday. In the first round of run-off elections, Peronist Economy Minister Sergio Massa defied expectations, clinching 36.7% of the vote to finish ahead of populist firebrand Javier Milei’s 30% and conservative candidate Patricia Bullrich’s 23.8%, with most ballots counted. The top two contenders will face off in a final round of voting on Nov. 19.
Pollsters had predicted the libertarian Milei would win on the first ballot, which required 45% of the vote or 40% with a 10% lead over the closest opponent. Massa’s Peronist party had taken much of the blame for the dismal state of Argentina's economy, where inflation has hit triple digits and two in five citizens live in poverty. Milei appealed to voters looking for change, preaching radical solutions like scrapping the peso, dollarizing the economy, abolishing the central bank, and cutting public spending by at least 15% of GDP.
But in the run-up to the vote, Massa rolled out some populist tactics of his own, granting welfare checks to workers, bonuses for retirees, and abolishing income taxes for 99% of the population. He also claimed that bus and train fares would rise sharply if he lost and emphasized the importance of Argentina's social safety net. Analysts say the institutional strength of the Peronist brand, as well as political polarization between left and right, helped explain Massa’s surprising comeback after his second-place finish to Milei in the August primary.
"It's amazing that the economy minister of an unpopular government with inflation accelerating to above 130% can be competitive," says Daniel Kerner, head of Eurasia Group's Latin America practice, noting that it "speaks to the strength of Peronism."
The eccentric Milei, meanwhile, cut a polarizing figure: The 53-year-old economist claims not to have brushed his hair since age 14, owns five cloned mastiffs, and wields a chainsaw at rallies. Massa and Bullrich criticized Milei for disparaging the country and advancing “bad and dangerous ideas,” perhaps influencing more voters to stick with the status quo than opt for the unknown.
After ballots were counted, Massa talked about “building a government of national unity,” “free education,” and promising “more order, and to build clear rules.”
Milei's Sunday night speech was described as “conciliatory.” “We can’t keep destroying ourselves with kircherismo," he says. "For everyone who wants change, we’ll need to work together.”
Financial analysts say Massa’s first-place showing rules out a sharp devaluation of the official exchange rate in the short term, though markets could still see turmoil. Between now and the Nov. 19 runoff, “we’re going to continue seeing high inflation and pressure on the exchange rate, but we’re not going to see a full-blown currency crisis and hyperinflation, that’s ruled out,” said Martin Rapetti, executive director of Buenos Aires-based consulting firm Equilibra.
But markets could still be in for a wild ride in November, should Milei pull off a win. The big question now is whether Milei can woo Bullrich's voters in the second round. "Most [of them] will vote for Milei," says Kerner, "but not all of them. Milei is too radical for some, and Massa will try to appeal to them," he adds, noting that he expects a very tight race to the finish.
Supporters of Argentina's presidential candidate Patricia Bullrich of Juntos por el Cambio party attend the closing event of her electoral campaign ahead of the October 22 general election, in Buenos Aires, Argentina October 19, 2023.
Argentina’s wild presidential election
Argentines will vote on Sunday in the country’s most unpredictable, topsy-turvy election in recent memory.
The leading candidate is shaggy-haired firebrand Javier Milei, a social-media-savvy political outsider who describes himself as an “anarcho-capitalist.” Milei wants to radically shrink the government, adopt the US dollar, and ban sex education.
His more colorful proposals include legalizing the sale of human organs and converting to Judaism. Milei came in first in a presidential primary in August and is currently polling above 35%.
Argentines are fed up. Milei’s popularity, especially with younger voters, arises from widespread frustration with the established parties – and it’s not hard to understand why. Argentina is suffering through its worst economic crisis in decades: Inflation has topped 120%, three out of five Argentines now live in poverty, and the peso is one of the worst-performing currencies in the world.
“Milei has been able to capture this disenchantment as he lashes out at all political parties,” says Luciano Sigalov, an Argentina expert at Eurasia Group.
Ironically, Milei’s pledge to dollarize the economy has contributed to an even greater selloff of the peso, adding to precisely the economic woes that have helped to make him the frontrunner.
“His dollarization proposals sound increasingly attractive to many who see the value of their pesos rapidly evaporating,” Sigalov points out.
But Milei isn’t the only show in town. There are two other formidable candidates:
Former Security Minister Patricia Bullrich. She has built her campaign around a promise to “restore order” and is polling at 29%. Although Argentina’s homicide rate is one of the lowest in Latin America, several high-profile instances of violence by drug gangs in the port city of Rosario — one of which included a threat to soccer legend Lionel Messi — have put public safety on the ballot.
Economy Minister Sergio Massa. The candidate of the currently governing Peronist coalition is polling at 26%. As a moderate and technocratic voice within typically left-wing Peronism, Massa is seen as a safe pair of hands who has credibility with the private sector and has strong support from his own coalition.
The election rules are complicated. To win outright, the top candidate must get at least 45% of the vote OR must surpass the runner-up by at least 10 points. So, for example, you can win with 42%, but only if the runner-up has 32% or less.
If no one is able to meet either of these conditions, then the top two finishers will head to a runoff on Nov. 19.