Peronists in Argentina promise policy reset after midterm poll failure

The center-left coalition of Argentine President Alberto Fernández has pledged to seek cooperation with the opposition and launch a new economic program in the hope of striking a deal with the IMF, after his Peronist party suffered a crushing defeat. in the midterm elections.

Voters punished ruling Peronist party in the face of spiraling inflation and increasing poverty in the midterm polls on Sunday, where half of the House of Representatives and a third of the Senate participated in the elections.

Together for Change, the conservative opposition coalition, which has narrowly led in six of eight key senate races, leaves the Peronists losing their Senate majority for the first time since the country’s independence. returned to democracy in 1983. This included a clear victory in an important lower house election in the province of Buenos Aires, home to nearly 40% of the electorate and a stronghold of Peronists.

Following the results, Fernández vowed to “seek dialogue” with the opposition, the clearest sign yet of how the president plans to respond to his party’s defeat. In a televised address, he said he planned to present an economic plan to the congress in the first week of December and achieve a “sustainable” one. agreement with the IMF on $44 billion in debt relief, most of which is due next year and in 2023.

“In this new phase, we will work even harder to reach a lasting agreement with the IMF. We have to erase the uncertainties that come with this type of unsustainable debt,” said Fernández.

Markets view favorably on the prospect of the opposition having a larger role in curbing the coalition’s strength. Dollar bonds maturing in 2035 rose 0.7 cents to about 31 cents against the dollar on Monday, the biggest gain since the September 12 primaries.

Sergio Berensztein, a political consultant, told the Financial Times from Buenos Aires: “Peronism is faced with something completely new: it has lost its membership in the chamber and in the parliament. With a poor performance mid-term, internal divisions are set to deepen within the Peronist party, between the mix of presidential-aligned moderates and the radical wing led by Cristina Fernández de Kirchner, Vice President, Leader.

Tensions within the ruling Peronist bloc flared after the primary vote in September, when the opposition defeated the government by 9 percentage points. In response, the government appointed a new cabinet indicating that Fernández had ceded more land to his powerful deputy.

Fernández de Kirchner later published an open letter blaming the president’s economic policies for the “political disaster” of the primaries and demanding change.

Fernández de Kirchner, a towering Peronist figure who served as president from 2007 to 2015, was notably absent on Sunday night. She announced she would not appear for health reasons after early exit polls showed signs of defeat for the center-left, including in Santa Cruz province, her family’s political stronghold.

The government is currently facing a dilemma over whether to work with the opposition to pass legislation and make key appointments, including to the judiciary, or go further.

Alberto Ramos, head of Latin American economics at Goldman Sachs, said that “internal disagreements over policy direction could develop”, and that the weakening mandate increased the risk of “having more populist policies”. more in the short term”, such as increasing government control over the economy and demanding concessions from the IMF in negotiations to repay debt. billions of dollars from its record-breaking bailout.

“A more market-friendly component of Congress could lead to more effective checks and balances and ultimately a change of policy regime by 2023,” added Ramos. However, “fiscal and macro volatility is likely to remain high,” he said, given the deep imbalances facing Argentina’s economy such as high state subsidies and fiscal deficits. mainly by printing money.

The midterm elections are seen as an early sign of the strength of the opposition as it prepares for the 2023 presidential race.

The dire state of the economy has also weakened the two-party system and led to a surge in support for more extreme candidates. According to the latest official figures, inflation in Argentina is at 52.1% annually and 40.6% of people live in poverty in the first half of 2021, up from 35% when Fernández took office.

A standout in Buenos Aires is Javier Milei, a 51-year-old pagan who won the congressional seat with 17% of the vote. It was one of two congressional seats his Freedom Moves Forward coalition won in Sunday’s election.

Milei chose a popular music venue on Sunday to greet thousands of her supporters when the results were announced. Milei’s libertarian underpinnings include the abolition of central banks, the love of freedom, and the breakdown of the “caste system” in Argentine politics.

“Help me change this country,” he called from the main stage to a standing ovation at the Luna Park stadium. An ally of Horacio Rodríguez Larreta, the famous Buenos Aires mayor, has won races in the capital and surrounding Buenos Aires province that he hopes will make him his favorite to lead the opposition next year. 2023.

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