Argentina’s legislative elections threaten the stability of the Government and negotiations with the IMF

Life in Argentina takes many turns. After two resounding defeats in the midterm legislative elections – one in the Government and the other in the opposition – Cristina Fernández de Kirchner seemed to be defeated in 2013 and 2017, to rise again and again. This time, however, the polls arrive this Sunday with the current Argentine vice president in the hospital, recovering from an operation, and after adding another defeat in the first round. A situation, if endorsed in this final vote, that would leave the future of the legislature hanging by a thread and threatens to torpedo the negotiations with the IMF on the country’s bulky debt.

Far is the incontestable victory of Alberto Fernández, with Kirchner on his side, in 2019. The meager parliamentary majority obtained then – which depends on the support of a handful of independents in Congress – would collapse if the results of the first are repeated. back, as the polls predict. And the Senate, a stronghold of Peronism for decades, could fall into the hands of the opposition. A defeat would paralyze the already weakened Fernández government, whose internal battle has not ceased since the ballots were counted in the first round.

In addition, this key date is reached with the resignation of Kirchner, the figure necessary to mobilize the two million voters who abstained in the metropolitan crown of Buenos Aires, a historical Peronist stronghold where they cement their victories or, as happened in September, they mourn their defeats. The vice president last week underwent a complete hysterectomy to remove a benign polyp from her uterus, and has been unable to attend rallies in the past week. He did attend the closing of the campaign, on Thursday night, but the fact that the Government did not have its main electoral asset during the decisive phase has been a drag on its options. The last time she had surgery before the elections – in 2013, for a cranial hematoma – her party suffered a strong defeat at the polls, so the auspices are not good.

Added to this is an unexpected crisis in the last days of the campaign. The murder last Sunday of a kiosk in Ramos Mejía, one of the municipalities of the Buenos Aires suburbs, has placed insecurity at the forefront of the campaign and has caught the Government off balance. The opposition canceled several of its rallies and let the spotlight focus solely on Fernández for several days. And the president, already very worn out by managing the pandemic, is not particularly known for his charisma.

The IMF does not trust

In principle, a defeat of the Government in these elections would do little more than paralyze its agenda for the two years remaining in the legislature. The problem is that, while all this is happening, the Minister of Economy, Martín Guzmán, is negotiating with the IMF the restructuring of the enormous debt that the country has with the international institution, of 57,000 million dollars. And the loss of control of the two houses would weaken their hand at the negotiating table and, at the same time, increase the doubts that the IMF has about the country’s ability to fulfill its commitments.

As revealed by the Financial Times This Wednesday, Guzmán would have hardened his position, accusing former President Mauricio Macri and the IMF itself of being responsible for the difficult situation in which the country finds itself for having accessed the loan. And the IMF doubts that Argentina will be able to fulfill the commitments that are signed in the event that there is an agreement.

Two extremes in Congress

All this only reinforces the danger to political stability posed by these elections. If the results of the first round were repeated, the majority in Congress could be in the hands of a Trotskyist-Leninist party, which considers that Peronism is too conservative and is sold to capital, or of an anarcho-capitalist organization whose leader is considered aligned with Donald Trump or Jair Bolsonaro. A combination of extremes that hardly helps the stability of the current government.

If anyone smells these things, it’s the markets. And the data is clear: the peso has sunk to historic lows in the parallel market, surpassing the 200 per dollar barrier. More than double that of a year ago, when it was changed to 85 pesos per dollar. Meanwhile, inflation exceeds 50% annually and the risk premium, at 1,753 basis points over that of the US, is at its highest since the debt swap with private investors agreed last year. And it is already known that in Argentina, the markets do not put governments, but they do remove them.