Argentina’s Economy Minister Sergio Massa is seeking a broad coalition after winning the first round of elections

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Argentina’s Peronist Economy Minister Sergio Massa declared himself a national unity candidate to woo centrist voters after scoring a surprise victory over libertarian challenger Javier Millay in the first round of a presidential election held amid growing economic turmoil.

With 98.5 percent of the vote counted, Massa of the country’s center-left ruling coalition won 36.7 percent to 30 percent for Millay and his new party, La Libertad Avanza (LLA). Massa and Miley will fight in a runoff on November 19.

Few believed that after managing triple-digit inflation and rising poverty, Massa could pull off an electoral victory, with the Peronists coming third in August’s nationwide primaries. But the political veteran ran an effective campaign, projecting moderation and stoking fear among voters about Millay’s radical plans to shrink the state.

Sunday night’s result defied nearly all opinion polls that had shown a steady lead for Miley, a hairy economist and television personality who finished first in the August primary.

Sheila Wilker, director of Trespuntozero, one of the few pollsters to have predicted Massa’s victory, said the Peronist now has a better chance of the presidency than Milei, who faces “serious problems to seduce those who two minutes ago were his enemies while Massa has been talking about national unity for some time.

Markets reacted badly to Massa’s victory, with investors worried that the economy minister would continue to increase public spending regardless of the poor state of the economy to secure a run-off victory, and that Millais’ mandate for sweeping austerity if won will be restricted. Argentina’s benchmark 2035 dollar bond fell 12.5% ​​on Monday to 22.87 cents on the dollar.

“Massa’s victory robbed creditors of their bull case: the belief that Mr. Milei’s program may be extremely aggressive, but voters have become receptive to it,” said Juan Passos of Argentine financial services company TGPC.

Patricia Bullrich, the candidate of the main center-right opposition bloc Juntos por el Cambio (JxC), favored by many investors and business leaders, was eliminated after receiving just 23.8 percent of the vote. Once the favorite, JxC was hurt by a divisive primary and a campaign focused more on law and order than the economy.

In his victory speech, Massa repeated a campaign promise to form a unity government with different political parties, promising to end the division between Peronists and non-Peronists that has dominated Argentine politics for 40 years. “I’m a person who believes in dialogue and consensus,” he said.

Millay acknowledged the election results and called on “everyone who wants change” in Argentina to defeat Peronism. “I’m ready to have a clean slate. . . beyond all our differences, we must understand that we have a criminal enemy against us.

A pragmatic trader on the right of the Peronist movement, Massa has watched the economic climate rapidly deteriorate under outgoing president Alberto Fernandez over the past 14 months. Inflation hit 138 percent a year in September as Argentina’s foreign exchange reserves were depleted to prop up the falling peso.

Despite the worsening economy, Massa increased social spending and announced tax cuts during the campaign, contrasting his determination to maintain social safety nets with Millay’s pledge to reduce the number of government ministries.

“In the weeks leading up to Sunday, November 19, the government is expected to continue to pull rabbits out of the hat in an attempt to get confused and avoid a disorderly devaluation,” Diego Pereira and colleagues at JPMorgan said in a note. “Continuing weak fiscal policy until the runoff would only exacerbate the size of the imbalances that need to be corrected after the presidential election.”

Millay’s insurgent bid for the presidency was fueled by widespread disillusionment in Argentina after several decades of economic trouble.

He has waged a fierce campaign against mismanagement and corruption by Argentina’s political elite, while promising to cut spending by up to 15 percent of gross domestic product and adopt the US currency. He also opposed abortion, denied climate change and attacked Argentine-born Pope Francis, a former archbishop of Buenos Aires, as a “dirty leftist” and an “imbecile.”

None of the contenders in next month’s runoff will have a majority in Argentina’s Congress. Projections from the congressional vote showed that the Peronists would have 108 seats in the lower house, 21 short of a majority, with the JxC on 93, Millay’s party on 37, and the rest in small blocs. In the Senate, where a third of the 72 seats were up for grabs, the Peronists will have 34 seats, the JxC 24 and the LLA eight.

Massa’s national victory owed much to the Peronists’ strong showing in Buenos Aires province, where more than a third of Argentines live. Incumbent Axel Kissiloff, an ally of former Peronist president and current Vice President Cristina Fernández de Kirchner, triumphed in the gubernatorial race there with 44.9 percent, far ahead of JxC’s 26.6 percent.

While markets were worried about Milei’s plans to overhaul the economy, Massa’s strong performance would also not please investors, said Martin Rapetti, chief executive of economic consultancy Equilibria.

“Masa promises much better governance than Millay, but the market consensus has doubts about whether Massa really wants or is able to make the reforms Argentina needs,” he said.

Additional reporting by Mary McDougall in London

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