Argentine Leader Loses Buenos Aires While Keeping Congress

Argentine President Cristina Fernandez de Kirchner’s ruling coalition lost Buenos Aires province, the country’s largest, while keeping a majority in both houses of Congress in midterm elections today.

Sergio Massa, the former cabinet chief who now heads a group of dissident Peronist Party members, took 43 percent of the vote in Buenos Aires province, an 11 percentage point lead, over ruling alliance candidate Martin Insaurralde, with 51 percent of the votes counted. Fernandez’s ruling alliance received 33 percent of votes nationwide, according to the preliminary results. The government increased its majority in the lower house, Cabinet Chief Juan Manuel Abal Medina said.

The congressional election results ends any hope Fernandez may have harbored of pushing through constitutional changes to seek a third term in 2015 after failing to obtain a two-thirds majority in Congress, according to Mariel Fornoni, director of polling company M&F. Fernandez has used her majority in Congress since winning re-election in 2011 with 54 percent of the votes to nationalize the country’s largest energy company YPF SA last year and re-open an offer to restructure bonds left over from the country’s $95 billion default in 2001.

“It’s an important difference in votes,” Daniel Scioli, governor of Buenos Aires province who is an ally of Fernandez, said. “We have to respect the will of the people.”

Fernandez, 60, has been notably absent during the campaign as she follows doctor orders to rest for a month after Oct. 8 surgery to drain blood near her brain. Her popularity recovered to 44.4 percent in October from 34 percent the previous month, according to the M&F poll.

Absent Fernandez

Argentines went to the polls today to choose 127 lawmakers for the 257-seat lower house and 24 for the 72-member Senate. Turnout was about 77 percent of 31 million registered voters, Interior Minister Florencio Randazzo said on CN23.

Buenos Aires is Argentina’s most populous province, accounting for 39 percent of the country’s population and 36 percent of its gross domestic product. The ruling coalition also lost in the populous provinces of Cordoba, Mendoza and Santa Fe.

The race for the 2015 elections also kicked off after Buenos Aires Mayor Mauricio Macri announced his intention to run for president.

Massa and other opposition candidates have attacked Fernandez’s record on inflation, which private economists estimate at 25 percent, and failure to combat crime, which figure as the biggest concerns for voters.

‘Policy Reaction’

Argentine dollar-bonds have rallied 14 percent since the primaries on expectations that Fernandez will be replaced by a more market-friendly president when she ends her mandate in 2015.

Still, with foreign reserves at a six-year low of $34 billion and a widening gap between the official exchange rate and a black market rate, the government will have to make important economic decisions to ride out the last two years in office, according to Jefferies Group LLC.

“The actual results are perhaps less important than the subsequent policy reaction,” Siobhan Morden, head of Latin America strategy at Jefferies in New York, wrote in an Oct. 25 note. “The more important question is whether surviving the latest election cycle the administration will finally correct macro imbalances or whether the status quo continues of just muddling through.”

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