NEW YORK — With Argentina’s ruling party enduring a second electoral defeat this year, the country may see an increase risk in the ongoing negotiations with the International Monetary Fund and face additional populist measures in the near-term, according to Goldman Sachs.

In reaction to Sunday’s midterm elections in the South American nation, the investment bank says divisions within the government may deepen and “internal dissent over policy direction could grow further.”

According to official results reported by Clarín the ruling coalition Frente de Todos lost control of the Senate to Juntos por el Cambio, passing to hold only 35 slots from a 41-seat majority.

Losing its majority in Congress for the first time in almost 40 years may present immediate and short-term challenges for the government. “This backdrop raises the risk of a (even) more heterodox/interventionist policy mix that could further complicate the already difficult negotiation of an IMF program to re-profile heavy amortizations in coming years,” economist Alberto Ramos wrote in a note to investors today commenting the elections results.

“Losing control of Congress implies that the government would have to negotiate with a stronger and reenergized opposition that could lead to a noisy and volatile policy making process. Overall, macro and financial volatility is likely to remain high and given the current large imbalances, a large near-term devaluation seems inevitable,” Goldman said in the report.

IMF Program

In a pre-taped message unveiled Sunday night, Argentina’s president, Alberto Fernández , said the government will submit to the Congress a new economic program on the first week of December. Clarin reported that the program could be the same plan already discussed with the IMF, which content and macroeconomic goals are still unknown. Without offering details, the portal LaPoliticaOnline.com also reported about the plan, adding Fernández wants to seal a deal with the multilateral lender in December.

The so-called dollar blue trades higher mid-morning, reaching ARS201 per dollar, according to La Nacion, boosting the spread the official exchange rate over a 100%. The local stock market is losing 3% intraday.

As a whole the market is “likely to take a net positive view” of the election results, Goldman Sachs said. “A more market-friendly composition of Congress could lead to more effective checks and balances and ultimately a policy regime shift in 2023, but there is also the risk of more populist near-term policies.”