Argentines head to polls in high-stakes presidential primary race
Juan Mabromata, AFP | A woman walks past political advertising signs of "Frente de Todos" party (R) and "Frente Patriota" party in Buenos Aires on August 7, 2019, ahead of Argentina's primary elections to be held on August 11.

Argentines have their first chance on Sunday to head to the ballot boxes in a high-stakes presidential primary race in which they must choose between staying the course of painful austerity measures or a return to interventionist economics.

The country's main political parties have already chosen their nominees, so the primary election, known locally as the PASO, serves as the first concrete measure of voter sentiment.

Party primaries are closely watched in Argentina because they are held simultaneously and voting is obligatory, so they are seen as referendum on candidates' popularity - effectively an early poll involving the entire electorate , since the country’s main political parties have already chosen their nominees.

The coming presidential race might be the tightest since the seven-year military dictatorship ended in 1983, according to Luis Tonelli, a political science professor at the University of Buenos Aires.

This year's primaries will be "a great orchestra rehearsal (for the Oct 27 election) in which we are going to see which instruments will play, which will play loudly and which will be silenced," he said, adding he hasn’t seen an electoral process “this close and with this much uncertainty”.

The primary election comes after a slew of opinion polls showed a narrow margin between conservative President Mauricio Macri and main challenger Alberto Fernandez.

Six other presidential formulas are registered in Sunday's elections, with 33.8 million people entitled to vote. Parties that achieve less than 1.5% of the overall votes cast in the primary won't appear on the October ballot.

Tough economic crisis

Macri, the son of one of Argentina's most powerful businessmen, assumed the presidency in 2015, promising to revive a moribund economy with free-market policies, greater transparency and an opening to international markets. He said he would improve relations with the United States, which had soured under Fernández.

But the South American country is struggling through an economic crisis involving high inflation, a plunging peso currency and 10% unemployment, which has hurt his popularity. Protests erupted after his government reduced subsidies, sharply increasing utility bills.

Business-friendly Macri is hoping some recent glimmers of economic revival are enough to encourage voters to stick with him despite the current recession and biting inflation.

For voters, sticking with him would mean seeing through painful cuts in public spending as part of the $57 billion standby agreement he negotiated with the International Monetary Fund last year.

Ex-president Kirchner, Fernandez’s running mate

Peronist candidate Fernandez, who has firebrand former president Cristina Fernandez de Kirchner as his running mate, has promised access to free medicine for retirees and better wages for workers while hammering Macri for the uptick in poverty and unemployment as the country grapples with recession and 55% inflation.

"I don't think that in the face of another Macri triumph, things will improve. On the contrary, they will get worse," said Pablo Vazquez, 48, adding that he is worried about losing his job and has noticed more homeless people on the streets.

Investors, though, see the Fernandez and Kirchner’s Peronist bill as a riskier prospect than sticking with free-market advocate Macri.

As recent polls show the pair with a narrow lead, markets are bracing for the Fernandez ticket to come out ahead of Macri in Sunday's primary, said Credit Suisse analyst Casey Reckman.

The severity of market reaction could depend on the margin of victory between Fernandez and Macri, and whether or not the winner netted enough votes to indicate a potential win in the first round of the presidential election in October, Reckman said.

In order to win the presidency outright in October, a candidate needs at least 45% of the vote or 40% and a difference of 10 percentage points over the second-place runner.

If there's no clear winner, voters will return for a run-off on November 24.

Spooked markets

A widened gap between Fernandez and Macri on Sunday could spook markets, prompting a new wave of volatility that sends the peso spiralling, further dimming Macri's chances of re-election.

"It's a question of whether Macri can continue to build support. The backdrop for his momentum has been the absence of financial volatility, the decline in inflation, improving confidence and some signs of economic recovery. This event could influence sentiment around that question," Reckman said.