• Opposition candidate favorite after surprise rally in support
  • Scioli has ruling party's apparatus to regain the momentum

Investors betting on Mauricio Macri to become Argentina’s next president following his surprise success in the first round of voting are getting ahead of themselves, according to Goldman Sachs.

Argentine bonds have risen 4 percent and the Buenos Aires stock exchange has surged 13 percent since Macri defied opinion polls to come within 3 percentage points of front runner Daniel Scioli last month and force a runoff on Nov. 22. Betvote, a website that allows people to vote using bitcoin, now has the opposition candidate as an odds-on favorite.

Macri has pledged to reverse President Cristina Fernandez de Kirchner’s economic policies, removing currency controls within his first week in office, negotiating with hold-out bondholders and easing import restrictions. Still, while Macri may have the momentum, investors shouldn’t underestimate Scioli’s ability to harness his alliance’s party structure, said Mauro Roca, an economist at Goldman Sachs & Co.

“I think it’s going to be tighter than people think,” Roca said by phone from New York. “Macri won momentum but the question is going to be how long he’s able to maintain it.”

The focus in the campaign has turned to the third-placed candidate, Sergio Massa, and where the 5.4 million votes he received might go. That’s not as easy to predict as it might initially seem, Roca said.

Massa is a former cabinet chief under President Cristina Fernandez de Kirchner who broke away to form his own movement. So while his voters are opposed to Fernandez’s government many of them are still part of Peronism, the political movement named after former President Juan Domingo Peron.

A poll by Elypsis, the only company to successfully predict the outcome of the first round, found Macri would get 47.8 percent against 37.2 percent for Scioli. While Scioli would get 41 percent of Massa’s votes against 30 percent for Macri, the opposition candidate would also take votes directly from his rival.

Macri’s Advantage

If both candidates maintain their votes from the first round and the votes from the remaining candidates are split evenly, Scioli would only require about 40 percent of Massa’s votes to win, said Andy Tow, a political analyst who writes a blog about polling data.

While Felipe Sola, a member of Massa’s alliance who ran for governor of Buenos Aires province, said about 65 percent of their votes will go to Macri, Tow said it’s difficult to predict exactly where they will go.

“No one can deny that right now Macri has the advantage but this isn’t decided and the difference in the end is going to be small,” Tow, who also works as an adviser for ruling party Senator Juan Manuel Irrazabal, said by phone from Buenos Aires.

Scioli is now trying to portray Macri as the harbinger of an economic adjustment that will result in devaluation, faster inflation and loss of jobs, Daniel Kerner, head of Latin America research at Eurasia Group. The success of that strategy may be decided by a debate on Nov. 15. After withdrawing from a debate before the first round, Scioli has agreed to go head-to-head with Macri.

“There’s still nearly two and a half weeks left - that’s a long time in Argentine politics,” Goldman Sachs’ Roca said. “The result isn’t yet decided.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE