Observatorio argentino 47: Esto PASO de castaño oscuro

And the results are in! Or were in, since the voting took place on Sunday.

On one hand, the result is a massacre for the government. Juntos won 42% of the votes for the lower house, against 32% for the government. Considering as Frente took 45% of the congressional vote in 2019, this is pretty bad. Frente lost badly in Buenos Aires province, its stronghold. It also got slammed in Cristina’s home province of Santa Cruz, along with Chaco, La Pampa, and Chubut. This was not expected either.

Markets were happy … ish. The blue market rate for the dollar dropped a bit right before the election, because reasons, but recovered once the results came in.

The stock market jumped 17% the day after the PASO, but that also doesn’t look so great in context. If you look at the Merval index in dollars, you get a little bump coming at the end of a months-long rally.

If the Frente de Todos is so bad, why were the markets so meh? Well, one possibility is that Frente de Todos isn’t really that bad for the economy. Which is not to say that Covid hasn’t hammered the Argentine economy. President Fernández managed to get into the worst of all possible worlds: an economy wrecked by lockdowns and a virus running unchecked. It is to say that maybe the markets don’t think giving the keys to the conservatives will make all that much difference.

A better possibility is that the markets realize that the voters haven’t really handed over the keys! First, this was just a dry run for the real election, unless you’re particularly vested in the Santilli-Manes pissing contest in B.A. You think the Frente isn’t going to respond by going all out to win votes? They’re first reaction was to roll out massive street paving programs with crazy speed. Watch this space for what is going to follow.

Second, even if these results hold in November, the change will be muted. Argentine elections are staggered, so only half of the lower house and a third of the Senate was up for grabs. In addition, while the lower house is elected by proportional representation, each province is a district, which in practice further mutes national vote swings.

If the PASO results hold in November, a big if, Frente de Todos will lose its Senate majority, going from 41-29 (out of 72 seats) to 35-34, with smaller parties holding the balance. In the Chamber, the Frente de Todos will go from 120 seats (out of 257) to 111. Its allies, with 8 seats, will be unchanged, more or less. Juntos and allies will go from 115 to 120. Basically, it will go from no governing majority (but tilting towards the Frente) to no governing majority (but tilting towards Juntos).

Since smaller parties can be bought, the Frente could cobble together a governing majority. In addition, the Argentine president is incredibly powerful.

Plus, well, the Frente can do a lot in the next few months. Watch this space.