By Horacio Soria and Juan Bustamante

BUENOS AIRES (Reuters) – Argentina’s center-left President Alberto Fernandez is set for a political test on Sunday that could split the ruling Peronist party, trigger a cabinet exodus and throw into disarray the left’s campaign two years from a 2023 presidential vote.

The South American country is going to the polls for a midterm legislative ballot, with a dry run primary and polling numbers suggesting voters will punish the government, potentially erasing its decades-old majority in the Senate.

The fallout could be painful. Analysts are divided about what defeat would mean, but a bruising loss in a primary vote in September sparked a major cabinet reshuffle and a rift between the Peronists’ moderate and militant factions.

“We have a ruling party with a serious chance of losing its quorum in the Senate. This would be a historic state of affairs for Peronism and frankly it hints at what’s to come,” said Shila Vilker, director of consultancy Trespuntozero.

Investors and traders are watching closely.

The major grains producer is locked in crunch talks with the International Monetary Fund over a new deal to roll over some $45 billion in debt it cannot pay, a test for the IMF as well as Argentina’s credentials in global markets.

Those talks have been led so far by more moderate voices within the government, including Economy Minister Martin Guzman and Fernandez himself.

Nikhil Sanghani, analyst at Capital Economics, said in a note the likely outcome of the vote would be the government taking a moderate turn as it was forced to negotiate with the opposition to get a deal done.

But a “heavy defeat” could tilt things the other way.

“There could be a period of Peronist infighting or policy paralysis for a few months but something will have to give by the middle of next year, when Argentina approaches a potential crunch point on its IMF debt repayments,” he said.


The ruling party could lose its Senate majority and an important lower-house race in the province of Buenos Aires, long a stronghold of the Peronists, Argentina’s most influential political party over the last 70 years.

María Gagliani, 56, a gatekeeper at a provincial school, lamented the issues facing the Peronists, long seen by voters as the party of big government and social support, but less loved by investors and markets due to a history of interventionism.

“We must help the government’s project to prosper,” she said, adding it was better than the alternative neo-liberal model offered under previous President Mauricio Macri.

“The pandemic made things very difficult, but even so, the economy is beginning to show encouraging signs.”

However, many voters are fed up with rampant inflation running at above 50%, currency controls that have hit business and trade, weak growth, poverty and controversial policies including caps on meat exports earlier this year.

Melina Prato, 29, a lawyer, said she wasn’t truly convinced by any political party but that she would vote for the opposition, which she felt would more likely improve things in the country.

“I would like things to change for the better, and not for the worse,” she said.

Political analyst Raul Timmerman said a silver lining was an emboldened opposition may be inclined to work with the government, imagining that if it were able to win the presidency in 2023 it would have to deal with the economic fallout.

“They will not want to seize a country in default,” he said.

(Reporting by Horacio Soria and Juan Bustamante; Additional reporting by Jorge Otaola and Agustin Geist; Editing by Adam Jourdan and Steve Orlofsky)