D’Hondt Cry For Me Argentina – politicalbetting.com

Sunday 26^th October has one of the more interesting elections of the year, the Argentinian Mid-term Chamber of Deputies and Senate Elections. This is significant for Non-Argentinians in that as well as President Trump several UK Politicians, most notably Badenoch and Farage, are open admirers of President Milei’s programme of massive spending cuts to revive the economy. This is the first national electoral test for Milei since his programme was implemented.

Argentina has a democratic system that in some ways resembles the US system, with a lower house and a Senate, and an executive President. Senators serve six year terms similar to the USA, a third  elected every 2 years, but the Chamber of Deputies serve a four year term, with half elected every two years. This means that the current seats were last contested before the election of President Javier Milei in 2023. At that time the President’s party La Libertad Avanza (LLA) was at a much earlier stage of development, so holds only 15% of the Chamber of Deputies and 11% of the Senate. He has to rely on support from other right wing parties in the legislature, particularly PRO.

One feature of such division of powers between President and Legislature is that the Legslators can pass financial bills, which the President may veto, but legislators can over-ride the veto with a 2/3 majority. This is something that the opposition has done recently over-riding vetos in order to spend additional money on Universities, Children’s Hospitals and Disability Benefits, threatening to unbalance the budget that is the foundation of Milei’s economic policy. Ms Reeves amongst others might find that sounds rather familiar.

There are 127 0f 257 Seats in the Chamber of Deputies up for election, these are elected not by the inferior First Past the Post system, but by the far superior D’Hondt system of Proportional Representation, with a 3% threshold. These districts up for election, with the numbers of deputies:

In the Senate, the districts are the same, but each division elects 3 Senators, with a system where the party with the highest vote share elects 2 Senators, with the runner up electing the third, so not by PR and allowing a degree of tactical voting. These are the 24 of 72 total Senators for this round:

Recently in the Buenos Aires Provincial elections LLA did poorly, and this is the seen to be a rebuff to President Milei, the strong economic growth earlier in the year falling off quite noticeably and unemployment rising. Polling shows LLA slightly ahead of the opposition Peronists, albeit with a lot of scatter, and some polls putting the Peronists ahead. I don’t have an understanding of the methodology or sampling areas of these polls, but I see that Polymarket has a 70% probability of LLA beating the Peronists on numbers of seats.

Primarily these elections will be decided by the domestic issues of economy and austerity, but there are also significant issues of corruption, both against the Opposition Leader and against President Milei. President Trump has strongly intervened in favour of President Milei with $20 billion of support for the Argentinian Peso, and a further $20 billion promised, if his chosen candidate wins. How this plays with Argentinian Nationalists suspicious of Yankee interference is one of the unknowns.

Currently the currency futures markets are predicting a 12% devaluation of the Peso next week, thereby drawing on these funds. It seems that Milei’s commitment to free markets doesn’t yet extend to a completely free-floating currency. Milei has commited to a slow depreciation of 2% per month against the US Dollar in order to control inflation and uses Foreign Exchange reserves to try to manage this. Argentinians want dollars to guard against depreciation and are responsible for much of the downward pressure.

Milei’s key target is to win enough seats in the legislature to prevent his veto being over-ridden, both on financial matters and also executive decrees. The Peronists want to prevent this and maintain their power of veto. It is very likely that LLA will gain seats, as the party is in a much stronger position than when these seats were last contested, and it is on a knife edge whether he will control enough to continue his austerity programme. If he fails to get enough with his LLA then he is very likely to need to depend on Legislators from the allied but unreliable PRO party, currently running at around 10% of the polling, compared to 35% or so for both LLA and Peronists. The remainder of the polling is for minor parties, mostly left wing and not supportive of Milei.

Apart from Polymarket there seem to be few betting opportunities on these elections, but my hunch from conversations with an Argentinian friend is that Milei will achieve his target. (Incidentally my source is quite sceptical of published Argentinian economic figures as there is so much illicit underground economic activity).

The Interest is mostly whether it is possible to deliver harsh economic medicine, much needed in Argentina with its long history of inflation, anaemic GDP and devaluation, and get elected again. Will voters spit out President Milei alongside that bitter pill? Badenoch, Farage and Reeves all need to pay attention.

Foxy