Argentina vote headed for runoff between ruling Peronist and radical Milei

A stronger-than-expected showing by Argentina's ruling Peronist coalition at a general election on Sunday has set the stage for a run-off vote on November 19 between Economy Minister Sergio Massa and far-right radical Javier Milei.

Massa had 36.6% of the vote, ahead of Milei on just over 30%, while conservative Patricia Bullrich was behind on 23.8% with near 98% of the vote counted, a result that defied pre-election polls that had predicted a libertarian win.

The surprise strength of the Peronists, despite overseeing inflation hitting triple digits for the first time since 1991, sets up an intriguing second round on Nov. 19 between two polar opposite economic models for the embattled country.

The result eases concerns about a radical shift in policies in the event of a decisive win for Milei who has proposed dollarizing the economy and shutting the central bank, but it still leaves the country with few answers to its worst economic crisis in two decades.

Argentines had flocked to the polls on Sunday amid the economic woes and rising anger with the traditional elite.

"I know that many of those who voted for us are the ones who are suffering the most," Massa said after the results. "Our country is experiencing a complex, difficult situation, full of challenges to face... I am not going to fail them."

Many blamed the Peronists, but Massa - a moderate - had shot back that the government's social safety nets and subsidies were key for many hard-up Argentines, including a recent stunt showing how train and bus fares could rise sharply if he lost.

That message seems to have hit home.

"Peronism is the only space that offers the possibility that the poorest of us can have basic things at our fingertips," said bricklayer Carlos Gutierrez, 61, as he went to vote on Sunday.

Milei, meanwhile, is proposing radical moves such as dollarizing the economy and has criticized major trade partners China and Brazil. He also is in favor of slashing the size of government and is anti-abortion.

To win outright on Sunday, a candidate would have needed over 45% of the vote or 40% and a 10-point lead.

The result, leaving things delicately poised and pushing out of the race establishment candidate Bullrich, will likely give already wobbly markets the jitters on Monday, with little clarity about the country's route forward.

"We have never had so much polarization," said 72-year-old pensioner Silvia Monto as she voted in Buenos Aires on Sunday.

'SINKING US A LITTLE MORE'

Milei has pledged to "chainsaw" the economic and political status quo, luring some angry voters to his tear-it-all-down message, fed up with rising prices outstripping salaries.

"He is the only one who understands the situation in the country and understands how to save it," said Buenos Aires student Nicolas Mercado, 22.

Milei, in a defiant speech after the result, said he would fight on to win in the second round next month.

"We are faced with the most important election of the last 100 years," he said. "If we work together we can win, if we work together we can recover our country."

Election authorities said turnout was around 74%, up from the August primaries, but considerably lower than the 81% participation at the last election and the lowest general election turnout since the 1983 return to democracy.

Whoever emerges victorious will have to deal with an economy on life support: central bank reserves are empty, recession is expected after a major drought, and a $44 billion program with the International Monetary Fund (IMF) is wobbling.

Silvana Dezilio, 37, a housewife in Buenos Aires province, said it was hard to see a positive outcome whoever won.

"All governments promise things and end up sinking us a little more. It seems unbelievable, but we are getting worse and worse. We read that other countries have overcome the problems that for us are getting worse every day," she said.

Below are reactions from analysts to the results:

SERGIO ARMELLA, GOLDMAN SACHS, NEW YORK

"Investors' attention will turn its focus to two points. First, any announcements by the two candidates advancing to the second round. When it comes to Mr. Massa, given his capacity as Finance Minister and candidates, policy announcements will be key."

"Policy missteps are something that Argentina cannot afford at this juncture. Inflation is tracking at 138% and accelerating, currency and financial pressures are building up, economic activity is contracting, the fiscal deficit is widening, international reserves are at critically low levels, and net international reserves are negative. For Mr. Milei, any announcement of cabinet positions in an eventual government, for example the finance minister, will be key."

DIEGO W. PEREIRA, JPMORGAN, NEW YORK

"Despite wider macro-imbalances, the recent general election results have shown that neither the deteriorating macro nor corruption scandals appear as decisive drivers to gauge the performance of the incumbent. More relevant will be how the transference of votes will operate between the different forces, especially the migration of (Patricia) Bullrich's and (Juan) Schiaretti's support."

"Proving competitive going into the runoff, in the weeks through Sunday November 19th, the government is expected to continue to pull rabbits out of a hat in an attempt to muddle-through and avoid a disordered devaluation."

MARIANO MACHADO, PRINCIPAL AMERICAS ANALYST, VERISK MAPLECROFT, MALAGA

"It is true that in the first round, societal mood shied away from radical change; but in the second round, pro-change voters may shift to Milei to oust Kirchnerism from power."

"Economically, the next weeks will be crucial. The combination of a libertarian candidate pushing for dollarisation, with minister Massa hiking the money-printing machine to produce a political miracle for 'candidate' Massa could finally push macroeconomic variables off the cliff's edge."a