NEW YORK — Reverberations of the defeat endured by Argentina’s government coalition on Sunday’s primaries will most likely extend into November 14 midterm elections, J.P. Morgan says. The possible outcome: another political upset.

In a research note to investors, analyst Diego W. Pereira says that if the results of the primaries are maintained in November elections the government coalition Frente de Todos “would lose the Senate quorum”, retaining 35 senators and falling two short of a simple majority. “Moreover, in our early estimates the government would also lose the first minority the Deputies Chamber to the Juntos bloc,” the analyst wrote in a report dated September 13.

Updated results of Argentina’s primaries, known as PASO, show a sizable advantage for the opposition coalition Juntos por el Cambio, according to data compiled by Buenos Aires-based newspaper La Nacion. With 98% of the votes counted at a national level the centre-right Juntos por el Cambio received 40% of the valid votes vs 31% of the ruling coalition Frente de Todos.

La Nacion projects that if the results of September 12 elections are repeated on November 14 ballot, Frente por Todos would indeed retain 35 senators vs 31 of Juntos por el Cambio. Argentina’s Senate is comprised of 72 seats. At the same time, in the Deputies Chamber Frente de Todos would stay with 117 seats while Juntos por el Cambio would get 116. The quorum’s threshold is 129 out of 257 seats.

“The political momentum is clearly favoring the opposition, which could even benefit further if participation increases in November,” Pereira wrote in the report in his role as chief economist for the Southern Cone & Peru at the New York-based bank.

The results show a “strong punishment to the government” as well as a demand for change. “The median voter is demanding lower inflation (the old recipe of raising inflation tax collection starts to prove politically costly) and related FX stability, an investment-friendly environment and thus quality jobs creation,” the report said.

Going forward, J.P. Morgan says the public discussion surrounding the South American nation is how the government led by President Alberto Fernandez will react to the recent electoral shock: “If upping the ante on the current policy framework or starting a frontloaded quick amendment. In other words, if the government is to turn for pragmatism or strengthen its heterodox derivative.”

Citing that any credible amendment to the policy framework entails political costs, the investment bank sees a low probability of “effective and positive policy changes” before the November 14 elections.” Leading to that vote “the government will continue fueling consumption via fiscal expenditure,” as a way to deal with social demands.

Argentina’s economy contracted 9.9% last year and the International Monetary Fund projects a 6.4% recovery this year followed by a 2.4% expansion in 2022.

Related Reading:

* Goldman says Argentina election results may increase odds of 2023 regime change: Zignox
* Argentina primary defeat puts Peronists in tough spot on policy: Reuters
* El gobierno, en shock, no encuentra salida del laberinto: La Nacion