File photo of Daniel Scioli
Argentina's tightly contested run-off campaign kicked off on Monday with the ruling party's Daniel Scioli and opposition challenger Mauricio Macri racing to win over supporters of the candidates eliminated from the presidential election.
The first round on Sunday dealt a major blow to the ruling, leftist Front for Victory, with Scioli grabbing just 36.9 percent of the vote - well below forecasts and only slightly more than pro-business Buenos Aires Mayor Macri on 34.3 percent. Scioli had been expected to win by a wide margin.
Macri's surprisingly strong showing gave a turbo-boost to Argentine financial assets on Monday, sending one bond to a record high and some shares up more than 20 percent.
This election will shape how Argentina, Latin America's third largest economy, will tackle economic woes such as double-digit inflation, precariously low foreign reserves and a sovereign debt default.
"Today starts a new election campaign that will decide the future of Argentina," Scioli told a news conference.
The choice, he warned, was between his program for protecting industry, employment and social welfare and Macri's proposal "to liberalize the market and take on debt, policies that have only brought frustration to Argentina in the past."
He claimed the proposals of the candidates knocked out in the first round on Sunday were much closer to those of his party than those of Macri's "Let's Change" alliance, and called upon their supporters to back him.
Sergio Massa, who took third place on Sunday with 21.3 percent, said his alliance would decide this week whom to back in the second round on Nov. 22, Argentina's first-ever runoff.
A jubilant Macri also appealed on Monday to Massa's voters to back him in a run-off. "We are here to represent you," he said. "Argentina needs a change and we are ready to make that happen."
Scioli will take Macri on in a live televised debate on Nov. 15, according to organizers of the debate, after opting out of the first round debate.
RULING PARTY THWACKEDBanner Argentine newspaper headlines in Monday proclaimed, "Sea Change," "Macri's great election thwacked the ruling party," and "Surprise and a virtual tie between Macri and Scioli."
"The result provides a clear message to politicians that the population favors change following 12 years of Kirchner rule, and that the electorate is shifting to the right," JP Morgan analyst Iker Cabiedes wrote in a research note, referring to the governments of outgoing President Cristina Kirchner Fernandez and her late husband and predecessor Nestor Kirchner.
One major setback on Sunday for the ruling party was the loss of the gubernatorial election in Buenos Aires province, Argentina's most populous and a Peronist stronghold currently governed by Scioli, to Macri's alliance.
While Scioli, backed by Fernandez, is running on a platform of "gradual change", Macri has advocated moving quickly to open up the economy, vowing to start dismantling protectionist currency and trade controls on his first day in office. Fernandez will hand power over to her successor on Dec. 10.
Macri is favored by investors for promising to free up the economy and conduct more investor-friendly policies. He is also the candidate seen as most likely to reach a deal with a group of "holdout" creditors whose lawsuit over bonds defaulted on by Argentina in 2002 caused a new and continuing default last year.
Argentine assets soared on Monday, with the defaulted 2038 euro-denominated issue hitting a record high of 56.167 cents and banking stocks traded in New York rising more than 20 percent.
"If Macri wins, which is a very strong likelihood ... we have a very interesting growth cycle ahead in Argentina," said Roberto Lampl, Head of Latin American Investments at Alquity Investment Management.
Lampl said that even if Macri won, the road to growth would not be smooth because Argentina needed to devalue the currency, reach a deal with holdout creditors and address the fiscal deficit.
"Nevertheless, there are hundreds of billions of dollars of savings of wealthy Argentines outside of Argentina, ready to invest in their beloved country," he said.