AS/COA Insider: Juan Cruz Díaz on Twists and Turns in Argentina's Presidential Elections

AS/COA Online: This election has drawn international attention, given that it features a headline-grabbing libertarian populist in Milei, and because the outcome will have an impact on international financial markets. As someone based in Buenos Aires, what is the mood on the ground the morning after the result? 

Díaz: There is a little bit of surprise, not because there is going to be a second round, but everybody expected Javier Milei to win the first round.

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There was a lot of hype about Milei in the media, not only nationally but internationally. He is a very colorful character; he is new and every single proposal that he makes is quite disruptive. And his proposals themselves make headlines: dollarizing the economy, privatizing schools, legalizing the sale of human organs, and cutting ties with the Vatican. He got most of the airtime in TV and radio and most of the space in newspapers, so there was an expectation that he was going to come in first place.  

On the other hand, you have the minister of economy of a government that is struggling, that hasn't been able to stop inflation, and the economic situation is quite complicated, so everybody expected that Sergio Massa would have a lot of trouble getting traction in the election. Massa winning by 7 percentage points is quite surprising in that context.  

I would say that there is some disappointment from Milei supporters because their candidate couldn’t grow his support compared to the primary. He actually lost a couple of percentage points. There was a lot of expectation because they thought he could win by capturing votes from conservative candidate Patricia Bullrich.  

In the end, many people voted for Massa not because they support this government or they support Massa per se, but because they were really concerned about some of these new and disruptive ideas of Milei. 

AS/COA Online: The country is going through its worst economic crisis in two decades. Still, Massa not only made it to the runoff but came in first. What explains this outcome?

Díaz: I think the short answer is Javier Milei.  

Even though Massa ended up first in this general election, it has probably been one of the worst elections in Peronist party history. The reason why Massa got first place is basically because the non-Peronist sector has been divided here. Juntos por el Cambio, Argentina’s conservative main opposition alliance represented by Bullrich, really had a clear path to winning this election. They had the attitude, the team, the energy. But the emergence of Milei—who captured the more radical, anti-government, anti-Peronist, and anti-establishment sector of voters—really weakened the Juntos por el Cambio coalition. Even before the primary and this general election, Juntos had a poor campaign. They didn't capture the imagination of the voters. And they were basically caught by Javier Milei’s rhetoric. So, you had more than 50 percent of the votes in that part of the spectrum divided in two, allowing Massa to come in first.

But it's important to see this in historical terms. In the late 1980s, Argentina suffered hyperinflation and the economic crisis was terrible. And even though the government lost in the presidential election, the candidate from that party got 38 percent of the votes. So I would say that the economy is very important, but in elections like these, there are a lot of other factors.

Another thing I would mention is that Massa has a lot of self-esteem and optimism as a as a candidate, and he really worked hard in rallying the Peronist party. 

AS/COA Online: What kind of policy shifts can we expect from Massa moving into the second round? And what could we expect may or may not change should he be the next president?

Díaz: In the second round, Massa will try to balance the ideas of continuity and change. He's trying to help save this government from the collapse, basically. But he is also trying to detach himself from it a little bit, which is hard to do because he's been a minister for a year.

He believes that the conditions next year will be better, in terms of the savings that Argentina will have in energy imports, thanks to production in Vaca Muerta and the existence of a new gas pipeline, in addition to other works that aren't going to be done in the next few months. Apparently, they were will be a better crop season so there will be money coming from agriculture exports and some dollars coming from other exports. With Massa believing that the financial conditions for Argentina will be a little bit better, he will be able to ease or gradually start to eliminate some of the restrictions on the dollar. But he's not proposing any radical reform whatsoever.  

And that's the contrast with Javier Milei, who will certainly go for a more radical agenda in terms of spending caps, elimination of subsidies, privatizations, reducing the size of the state, and so on. It is going to be really competitive and it's really an open outcome, which is good for Massa because a few weeks ago no one would have bet that he had a chance to be president.

AS/COA Online: The runoff is only a month away. What should people be watching for in the next few weeks?

Díaz: Well, that's the question. Javier Milei will need to moderate his tone in order to appeal to those that are afraid of voting for him. Over the last couple of weeks, he and his team have been quite outspoken, talking about issues that are quite disruptive and creating some discomfort among many voters, and he will need to soften that language. And I think dollarization is less popular than he thinks. But the question is: if he softens his stance, will he lose some credibility? In the case of Milei, the thing to watch for is how he balances moderation and his appeal to the center without losing what made him what he is right now.

In the case of Massa, I think he will be a solid candidate, but he has a huge problem. He's the minister of economy over an economy in distress. So, I would start looking at how he manages to keep the economy relatively stable and the dollar stable while trying to get more votes from the center.

This interview has been edited for length and clarity.