Political and economic turbulence after Argentina's presidential election will lead to higher inflation regardless of the winner, but the risk of hyperinflation, widespread social unrest and policy uncertainty will be particularly high if the libertarian candidate wins. Argentina will hold the first round of its presidential election on Oct. 22. If no candidate wins 45% of the vote or 40% and a 10-point lead over the second most popular candidate, a runoff election between the top two candidates will take place on Nov. 19. The new president will be inaugurated on Dec. 10 for a four-year term. The leading candidates are libertarian Javier Milei, who is campaigning on a strong anti-establishment platform that includes a promise to close down Argentina's Central Bank and dollarize the economy; center-left Economy Minister Sergio Massa, who is promising to reduce Argentina's very high inflation rate while also preserving the country's generous welfare payments and subsidies; and center-right Patricia Bullrich, who is campaigning on a law and order and fiscal responsibility agenda. The election will take place against the backdrop of a serious economic crisis, as inflation reached roughly 140% year on year in September and the Argentine peso is devaluing quickly against the U.S. dollar. The Argentine economy is currently in a recession after contracting in the second and third quarters, and the International Monetary Fund has predicted that the country's gross domestic product will shrink by 2.5% this year.

• Argentina held a country-wide mandatory primary election in August to elect the main candidates from each party. Defying most opinion polls, Milei's party, Liberty Advances, received 30% of the vote; followed by Bullrich's party, Juntos por el Cambio with 28%; and Massa's party, the ruling Union for the Homeland, with 27%.
• Virtually all polls for the Oct. 22 election have Milei in the first position, but not with enough votes to win in the first round. Opinion polls also show a close race between Bullrich and Massa to join Milei in the Nov. 19 runoff election. 

Scenario 1: Milei becomes president

If Milei wins the presidency, there will be a high risk of hyperinflation, a run on Argentina's banks and severe social unrest between late 2023 and early 2024 amid severe policy uncertainty. Milei's proposal to abandon the peso and replace it with the U.S. dollar means that if he becomes president — or even before then, either after the first round or before he takes office — many Argentines will get rid of their pesos as fast as they can out of fear that the upcoming dollarization will happen at a higher exchange rate. This would further devalue the peso, which would increase the probability of Buenos Aires imposing a bank holiday to contain a run on local banks. The collapse of trust in the peso could turn Argentina's already high inflation rate into hyperinflation. Hyperinflation would produce shortages ranging from food to manufactured goods, as the Argentine economy relies on imported goods that would become considerably more expensive. Shortages of goods are also likely, as companies and shops would be uncertain about how highly to price their products amid spiraling inflation and severe economic uncertainty. Hyperinflation would have a severe impact on the economy, as businesses would struggle to set prices, plan for the future and conduct normal economic transactions. In the meantime, most Argentines would experience a dramatic drop in their purchasing power as the value of their salaries and savings erodes rapidly. The combination of severe economic uncertainty, food shortages and eroding living standards would likely produce widespread protests across the country, many of which would turn violent. Looting and other attacks on private property are also possible. Milei's campaign pledge to heavily crack down on social unrest could result in violent clashes with security forces.

• This scenario may materialize even before Milei formally wins the presidency. If he performs strongly in the first round of the election, many of the economic impacts described in this scenario could materialize before the runoff election in November and the start of the new government in December. With most social, economic and political actors convinced of an upcoming Milei victory, the outgoing government led by President Alberto Fernandez will have virtually no tools to contain the crisis.
• There are also long-term concerns about the severe political and institutional constraints facing an eventual Milei administration. Even in the case of a very strong performance in the elections, Milei's party would control only a handful of seats in Argentina's Chamber of Deputies and Senate, which would make it impossible for the party to pass legislation without support from other parties. Moreover, Liberty Advance does not govern any of Argentina's provinces. These factors could heavily constrain the new administration's room to maneuver. 
• In Argentina, legal access to U.S. dollars is severely restricted, which has triggered an active black market as Argentines look for informal ways to purchase dollars to protect themselves from inflation. As a result, the informal exchange rate has become a barometer of the social mood and the health of the economy. As Argentina's economic volatility increased, the informal exchange rate went from roughly 290 pesos per U.S. dollar in early October 2022 to roughly 1,000 pesos per U.S. dollar in early October 2023. Milei has promised that if he becomes president, dollarization will happen at an exchange rate close to the informal rate, though his critics argue that Argentina does not have enough U.S. dollar reserves to convert pesos at such a rate.

Scenario 2: Bullrich becomes president

A victory by Bullrich is also likely to trigger higher inflation and sporadic episodes of social unrest, but probably not as drastic as those produced by a Milei victory. Bullrich will also have fewer constraints than Milei in implementing policy. Unlike Milei, Bullrich has not promised to dollarize the Argentine economy, and has instead proposed to severely reduce Argentina's fiscal deficit to fight inflation. Still, uncertainty about Bullrich's ability to successfully govern Argentina in a context of high inflation, combative unions and social organizations, and a fragmented Congress means her victory in the presidential election would still likely produce jumps in Argentina's inflation rate and the devaluation of the peso. This means inflation would remain very high (though probably not as high as in the previous scenario) and living standards would continue to deteriorate, at least initially. This would open the door to sporadic episodes of social unrest and shortages of food and other goods. Bullrich's tough approach to law and order issues also means that police are likely to crack down on unrest, creating a persistent risk of deadly clashes between protesters and security forces. The duration of Argentina's economic and financial crisis under Bullrich will depend on her ability to present a credible stabilization plan that convinces social and economic actors that Buenos Aires has the ability to get the economy under control in the medium to long term.

• During the electoral campaign, Bullrich said that under her government Argentina would progressively evolve into a two-currency system in which the peso coexists with the U.S. dollar. While this would likely eventually result in the dollar becoming Argentina's dominant currency, as Argentines will see it as more reliable than the peso, the proposal is meant to dissipate fears of an immediate, compulsory dollarization at a high exchange rate.
• Juntos por el Cambio already has a robust presence in Argentina's Congress, and members of the party govern in several Argentine provinces. This means Bullrich stands a better chance than Milei at passing legislation and enforcing policy. 

Scenario 3: Massa becomes president

Finally, a victory by Massa is also likely to trigger high inflation but only limited social unrest because of the government's connections with trade unions and organizations representing low-income social groups, resulting in general policy continuity. Massa is the continuity candidate, so his victory would signal that Argentina will not introduce any drastic reforms to deregulate the economy, lower taxes or make it cheaper for companies to dismiss workers. A victory by Massa would also suggest that Argentina will maintain its vast network of welfare payments and subsidies, upon which almost half of the population depends. United for the Homeland also has close connections with the country's main trade unions and the largest organizations representing low-income families and the unemployed. This means the risk of widespread social unrest would be lower in the scenario of a Massa victory than if any of the opposition candidates win. But it also means that households and companies would not perceive the possibility of a credible government plan to reduce inflation, which would likely to lead to further depreciations of the peso and new spikes in inflation. This would likely force the government to tighten capital controls even further as Buenos Aires seeks to prevent the gap between the official and the unofficial exchange rates from widening. While this scenario is potentially the least turbulent in the short term, it would leave Argentina's long-standing economic issues largely unaddressed, meaning that high inflation, an unfriendly business climate and constant economic volatility would persist.

• When Massa became economy minister in August 2022, month-on-month inflation was 7%. A year later, in August 2023, month-on-month inflation was 12.4%. Massa's critics accuse him of pumping billions of pesos into the Argentine economy in the shape of welfare payments and subsidies to support his presidential campaign, contributing to inflation.