JPM
Argentina: Primary elections deliver a stronger-than-expected showing for Macri's Cambiemos
Primary legislative elections were held yesterday in Argentina. The primary elections (so-called PASO) precede general elections to take place on October 22nd. They are compulsory and follow a format whereby all citizens vote (not just party members) and candidates from different parties simultaneously stand in order to define their respective candidacies.
The participation rate came in above expectations, which boded well for the government coalition, according to the preliminary results. Pollsters had expected a lower-than-average participation rate in the 2017 primary elections, given that there was no internal competition among candidates in most districts, combined with the fact that the government voiced its intention of eliminating the primaries in the near future. Still, the participation rate at a national level came in at 74% and in PBA reached 77%, both fairly aligned with the 75% and 77% levels, respectively, observed in 2015 primary elections.
As we highlighted in our recent note, the primary elections serve first and foremost as a nationwide electoral poll but also reset the campaign tone ahead of the October election and could trigger strategic voters to reassess their choices.
Cambiemos, the party of President Macri, outperformed our base case scenario and market/pollsters’ expectations. The most highly watched race was that of the Province of Buenos Aries (PBA), where former president Cristina Kirchner (CFK), running under the Union Ciudadana banner, is attempting to reinsert herself into the political landscape.
In our base-case expectations, we were expecting CFK to lead the primaries by 2%-pt margin over the Cambiemos candidate (Bullrich), while Cambiemos was seen with around 35% of the votes at a national level. Preliminary results have delivered better-than-expected results for Cambiemos both at a national and at PBA level.
In all, the primary PBA and national outcome reinforce our constructive base case scenario going into the October general election. Find below our main takeaways of the PASO election.
A better-than-expected performance nationwide could consolidate Cambiemos political capital, key to moving forward with the reform agenda.
At a national level, with 97.08% of votes counted, Cambiemos obtained 35.9% share of votes in Sunday’s primary elections, better than the 35-35.5% level we expected and also above the 34.3% level obtained in the first round of the 2015 presidential elections. Also worth noting, in most provinces Cambiemos obtained more votes than in the 2015 election, reinforcing its political support. As we flagged in our recent notes, political consolidation appears as a necessary condition for the government to move forward on paramount reforms to secure fiscal consolidation and convergence towards a more sustainable growth equilibrium.
Cambiemos led the total vote count in 11 out of the 24 districts in the primary elections where it was running candidates. Preliminary expectations were that Cambiemos would lead in 4-6 districts. Aside from the places where the party already governs, and where the victory was expected (City of Buenos Aires, Jujuy, Corrientes, and Mendoza), Cambiemos also took the lead in key districts such as Cordoba (representing in size the second largest electoral district) with a 15.9%-pt margin. Moreover, it also won in key symbolic districts by an ample margin, including the Province of Santa Cruz (16.8%-pt margin), governed by Kirchnerism since 1991, and in Province of San Luis with a 17.6%-pt difference, historically governed by the Peronist Rodriguez Saa family over the last 30 years. In Santa Fe, the preliminary results showed Cambiemos ahead but then the difference reverted and now Traditional Peronism (PJ) is ahead by a narrow 0.7%-pt margin (97.97% of votes counted).
The national result, if replicated in the general election, suggests Cambiemos will be able to attain at least one-third of the Congress, consolidating its political power nationwide. Indeed, with the preliminary primary results, Cambiemos would add 17 seats in the Lower House, reaching 104 total seats (40.5% share). Meanwhile, in the Upper House, Cambiemos will add 9 seats for a total 24 seats (33.33% share). While still distant from a simple majority, if the government did secure more than one-third of the Congress, it could impede the opposition from overriding presidential vetoes, strengthening the government's hand to use vetoes as a political tool.
A technical tie in the Province of Buenos Aires increases the likelihood of strategic voting going into October elections; CFK’s ceiling below the 35% 2015 level shows declining Kirchnerist support
In the Province of Buenos Aires, with 95.68% of votes counted, there is a technical tie in the senate election, with Cambiemos’ candidate Esteban Bullrich showing less than a 0.1%-pt margin over Cristina Kirchner, at 34.19% and 34.11%, respectively. Dissident Peronist Massa was relegated to a distant third place, obtaining 15.5% of votes, below the vote share estimated by pollsters (on average they had Massa around 19%). Traditional Peronism (PJ) candidate Randazzo came in line with expectations at 5.9%.
Also worth noting, in the deputies election, the margin in favor of Cambiemos was wider than expected, with official candidate Ocaña showing a 2.2%-pt margin over Unidad Ciudadana’s candidate Vallejos. The wider difference in the deputies primary election vis-à-vis the governor’s race suggests that ballot splitting was more relevant than expected.
As we highlighted in our recent note, the August primary elections serve as an important tool to gauge the likelihood of strategic vote reassessment and also give a good indication of CFK’s ceiling. Indeed, given the narrow difference between CFK and Cambiemos and the wide difference with Massa, we expect strategic voting to become relevant in October. Admittedly, from a qualitative standpoint, Massa’s voters are closer to Cambiemos and tend to show high rejection rates toward former President Kirchner. However, we will wait for first post-primary election polls to gauge Massa’s voters strategic voting as well as Randazzo’s.
Also very important, in our view, is the fact that the primary elections suggest CFK’s vote ceiling in PBA is below the 35.3% obtained by Anibal Fernandez in the 2015 PBA governor election, which could highlight that Kirchnerism’s support (in its different branches) has declined over time.
While the second place in the October ballots would secure Cristina one seat in the Senate, we see a very low probability through the lens of the PASO results that CFK consolidates a successful platform that could pave her way back to the first office. Indeed, CFK is one of the politicians with the highest negative image, standing at 56.8% in PBA, according to Management & Fit.
We now wait for the final results with 100% of votes counted to be released on Wednesday and first post-primary election polls to come the next week.
)
