October 13, 2021

Latam

ARGENTINA: Gridlock likely and governability crisis possible after mid-terms

BY Nicholas Watson

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  • The governing Front for All (FdT) coalition will struggle to avoid a damaging defeat in November’s partial mid-term elections.
  • The government is hoping to limit its losses with unabashed clientelism, but FdT power struggles and highly problematic economic conditions militate against a poll recovery.
  • The government is likely to limp to 2023 amid congressional gridlock and will remain hostage to the unpredictable Vice-President Cristina Fernandez (CFK).

Election scenarios

There are two main scenarios – and one much more remote potential outcome – that could arise from the 14 November mid-term elections. In the vote, half the lower house (127 seats out of 257) and one third of the Senate (24 seats out of 72) are in contention. These are as follows:

1) November’s results are roughly unchanged from the September primaries, OR the FdT coalition still loses but manages to reduce the nine-point lead that the Together for Change (JxC) opposition coalition won in September.

2) the FdT suffers an even worse defeat than in the primaries.

3) the FdT manages a spectacular turnaround by overturning its September results.

1) Cutting losses

Scenario 1) is probably the most likely to materialize. The government has embarked on a blitz of announcements designed to win back its 2019 vote tally. A series of tax and pension giveaways, alongside a minimum wage hike and soft credits for SMEs, have been unveiled – with cost implications overlooked for now. Handouts and freebies (from food parcels to refrigerators) have also been offered to low-income sectors. Unpopular Covid-19 restrictions have been loosened.

At the same time, the campaign strategy has changed. President Alberto Fernandez has put himself in an ostentatious “listening mode” and is trying to build bridges with unions. Old-school Peronist operators and district mayors who operate the Peronist get-out-the-vote machine have been brought on board the campaign, notably in the electorally pivotal Buenos Aires province. There is another, unspoken stratagem that could help claw back some support: electoral fraud. It is difficult to gauge whether a systematic fraud plan exists and the risk should not be exaggerated. However, it is thought that fraud could add two or three percentage points to the FdT tally.

2) Worse than September

The specter of scenario 2) – an even worse defeat – remains very feasible. First and foremost, the in-fighting that engulfed the FdT in the days after the primary defeat did far more damage than the result itself because it exposed the inconsistencies and dysfunction at the heart of this curiously structured, asymmetrical administration. For diehard Kirchneristas , Fernandez has failed to deliver on CFK’s program and damaged their brand, while for moderates, the president has not stood up to the powerful VP or provided the political balance that was supposed to flow from their pairing. Nor does the public appear to view the cabinet reshuffle that has (temporarily) settled the bitter FdT power struggles with any great enthusiasm; the return to the cabinet of the veteran political bruiser Anibal Fernandez seems especially misjudged.

Furthermore, the economic backdrop remains highly challenging. Poverty affects 40.6% of the population (18.5mn people), up from 35.5% when former president Mauricio Macri left office in 2019. Unemployment is at 9.6%. Inflation hit 51.4% in the 12 months to the end of August; September’s rate, which will be confirmed tomorrow, 14 October, is expected to show a slight rise after five consecutive months on a downward path. New price controls will not have much of an effect before the vote. According to a recent M&F poll, 57.4% of the public think that the economic situation will deteriorate in the coming months. That pessimism is borne out by the latest International Monetary Fund (IMF) projection that the economy will still not have recovered to pre- pandemic levels by the end of 2022.

3) The comeback

Scenario 3) – snatching victory from defeat – is not impossible but is the least likely outcome. There was a remarkable Peronist revival between the primary and elections in 2017 in San Luis province. However, the Rodriguez Saa clan’s political grip in San Luis does not really make this case applicable at national level. The reality is that the FdT has only a tiny chance of staging a comeback of this magnitude.

Post-election outlook

If an FdT defeat is close to inevitable, the corollary question is what this means for governability and a weakened Fernandez’s direction of travel in the second half of his presidency. If the JxC becomes the major minority in the lower house and/or the FdT loses its Senate majority (both plausible outcomes), congressional gridlock is very likely. Note that the IMF wants cross-party agreement for any program reset.

Ultimately, the big unknown is how CFK herself reacts to defeat. This is where the difference between scenarios 1) and 2) could be significant. In the event of an even worse defeat, CFK could opt for a more radical path, for example with increased state intervention in the economy. This could involve opting for go-it-alone nationalism over an agreement with the IMF, or at least pushing time-sensitive talks with the Fund close to breaking point. While government collapse is the less likely scenario, the patch that was put in place on the shaky Fernandez-CFK alliance in September is clearly fragile and will come under renewed pressure as Fernandez limps to 2023.

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