Argentina Presidential Race Upended by Primary Surprise

Right-wing libertarian economist Javier Milei, who surged to frontrunner status in Argentina's presidential race after scoring a surprise win in Sunday's primary contest, has big changes in mind for the nation's energy sector should he manage another win in October's general election.

Milei, who is currently a federal deputy and the head of the right-wing Freedom Advances coalition, captured just over 30% of the vote in Sunday's primary election, narrowly beating out the center-right Together for Change coalition (28%) and center-left Union for the Homeland coalition (27%).

Those results set up a general election contest between Milei, mainline conservative candidate Patricia Bullrich and left-leaning Economy Minister Sergio Massa, set to take place on Oct. 22, with a possible runoff scheduled for Nov. 19.

The winner of that election could mean significant changes for Argentina's energy sector, including operations in the prolific Vaca Muerta shale play, the nation's efforts to boost gas and LNG exports and the exploitation of its sizable lithium reserves.

Establishment Down

Many observers of Argentinian politics see Milei’s strong showing as evidence of growing public disillusionment with both with the country’s long-dominant left-wing Peronist lawmakers that currently hold power as well as the more establishment-friendly center-right candidates that have promised alternatives.

Milei's policies have struck a chord with that anti-establishment sentiment. He supports eliminating the Argentine currency and replacing it with the US dollar, abolishing the country's central bank, massively cutting public spending and privatizing state-owned enterprises — including national oil company YPF.

Milei has also been a vocal supporter of restricting women's access to abortion, expanding private gun ownership and denying the existence of climate change, which has drawn comparisons to the right-wing populism espoused by former US President Donald Trump and former Brazilian President Jair Bolsonaro.

Milei is anything but an economic nationalist, however — his platform is instead centered around a deep belief in the kind of free market capitalism that has been controversial in Latin America for decades.

Energy Implications  

Should he win the presidency, Milei aims to bring those free market precepts to Argentina's energy sector.

According to local reports of a presentation he and his campaign team made this summer to the Argentine Council on International Relations, Milei would look to phase out the country's highly controlled and convoluted system of prices and subsidies for its energy and electricity sector while respecting existing contracts — albeit with few details on how such a move would avoid consumer price spikes.

He has also proposed scrapping Argentina's import and export taxes, streamlining customs delays for imported equipment and providing a framework for firm long-term contracting — including, on the oil side, removing the right of domestic refiners to block crude exports.

In Argentina’s LNG sector, Milei has taken a dim view of the proposed legislation that would incentivize LNG export projects, which is seen as a key ingredient for a potential LNG project being considered by YPF and Malaysian state firm Petronas.

Implementation Odds

Whether Milei will be able to win the upcoming general election — or achieve his policy goals if he does — remains far from clear.

Brian Winter, editor of Americas Quarterly, said in a recent opinion piece that Milei's narrow margin of victory in the primary as well as Argentina's volatile economic environment — the country's inflation has soared by more than 100% so far this year — means the race is still very much up for grabs.

And even if Milei does manage to win the presidency, his Freedom Advances coalition will likely struggle to secure the numbers needed to push some of his controversial policy proposals through Argentina's congress, according to Winter — current projections indicate that the coalition could capture only 40 seats in the 257-seat lower house.

Political risk consultancy Eurasia Group described a prospective Milei presidency as “very disruptive” with “significant governability challenges” that could add new complications to Argentina’s economic recovery. His current electoral strength and his promise to dollarize the country's currency could also risk a run on the peso — indeed, the value of the Argentina peso has fallen by more than 17% since Milei's primary win on Sunday.

However, those warnings of disruption may only add to his appeal amid the current anti-establishment fervor in Argentina, according to the consultancy. “Elevated economic and social risks associated with a probable Milei presidency will benefit him electorally as he blames the political class for the ongoing crisis," Eurasia Group said in a note.