Oil province Neuquén’s elections – a risk analyst’s overview

This year will be a busy one for Argentina in terms of elections. Along with a national general election in October, provinces will vote for local lawmakers and governors prior to then.

Hydrocarbons provinces Neuquén and Río Negro are due to kick things off on April 16. Neuquén will be particularly monitored closely by investors, given the province’s position as the country’s biggest producer of oil and gas and where much midstream and upstream investment is targeted. 

Voters in Neuquén will choose a replacement for governor Omar Gutiérrez, a member of Movimiento Popular Neuquino – from whose ranks governors have been elected for decades – along with members of the jurisdiction’s legislature. 

To get some more color on the Neuquén election and touch on the state of play in the race for the nation’s top job, BNamericas conducted an email interview with Mariano Machado, principal analyst for the Americas at Verisk Maplecroft, a global risk intelligence firm.

BNamericas: In April, voters in Neuquén province will elect provincial lawmakers and a governor. What key issues are the candidates discussing? Is oil and gas investment a central topic, given the industry’s importance to Neuquén?

Machado: The central role of the energy sector for the provincial economy is almost an undisputed issue. While the Vaca Muerta shale play extends across portions of four provinces (La Pampa, Mendoza, Neuquén, Río Negro), Neuquén is at the heart of operations. In 2022, it produced nearly half (48%) of Argentina’s petroleum and nearly two-thirds (64%) of its natural gas – 80% from unconventional sources. Indeed, 97 of the 100 most productive wells in 2022 were in Vaca Muerta, and most of them are in Neuquén.

But precisely that success has cast a long shadow over other issues for voters – paradoxically, affecting the industry’s social license to operate. Chief among them stands the quality of education and health, alongside critical urban infrastructure, all key issues being pushed by the candidates challenging the six-decade-long rule of the Movimiento Popular Neuquino (MPN).

BNamericas: Governors traditionally belonged to MPN, including incumbent Omar Gutiérrez. Surely, the risk of a radical shift in provincial policy is small?

Machado: With 10 straight gubernatorial victories over four decades, the MPN is undeniably the most successful example of democratic political dominance – and stability – in Argentina at the subnational level. 

Nonetheless, Argentina is undergoing a pronounced period of civic fatigue, creating a challenging electoral environment by reducing voter turnout, fueling extremism, and making it harder for candidates to connect with voters.

Ultimately, the election's wildcard factor will be the fact that a member of the status quo, Rolando Figueroa, is challenging status quo [candidate] Marcos Koopmann. The impact of this dynamic on a traditionally conservative electorate remains uncertain.

BNamericas: Are there any clear frontrunners for the governor’s job?

Machado: The consensus in the polls is that the ruling MPN is the frontrunner, with Marcos Koopmann having an ample lead over Rolando Figueroa’s Comunidad party – a rogue spin-off from the MPN itself. 

This is an extremely local election, which is confirmed by the candidates explicitly aligned with the national ruling Frente de Todos (FDT) and main opposition coalition Juntos por el Cambio (JXC) trailing behind. 

However, pollsters have faced several challenges in recent years when it comes to accurately anticipating electoral results, so surprises – especially on the legislative front – should not be ruled out. 

BNamericas: What about the provincial parliament, that is, does MPN have a majority and could this change?

Machado: The legislative landscape for 2023-27 will present challenges because there are more than 24 alliances vying for the 35 seats in the provincial legislature. The allocation through proportional representation means we do not expect the next governor to control the legislature without support from other groupings.

While we expect the two leading candidates to take the lion’s share of seats, the main question is how strong and cohesive the opposition will be.

If Figueroa were to build a substantive bloc – that is, larger than those of the FDT and JXC – the governance scenario will be very different in the term ahead. 

BNamericas: In general, are there any major risks for investors blinking on the radar in Neuquén, perhaps risks linked to October’s presidential elections? 

Machado: Regardless of the outcome of the general election in October, we do not expect a massive shift in provincial energy policy. The local government has worked closely with the private sector to attract investment and create a regulatory framework that established Neuquén as a dominant hub for the industry. 

National-level instability is the primary binding constraint for the industry. According to central bank data, FDI for 2022 was a mere US$570mn, and the number of oil rigs in Vaca Muerta remains less than half of the 2015 peak. Currency exchange controls and the private sector’s inability to repatriate all dividends are the culprits.

The inability to externalize profits hinders the anticipated investment upswing, putting a cap on Argentina’s ability to become a “swing” producer. Without a major surge in investment in transport capacity for Vaca Muerta’s output, productive growth will remain limited. 

BNamericas: Finally, what’s the state of play in the presidential elections? Is there a frontrunner, for example?

Machado: Amid a three-digit inflation rate, and strong anti-incumbency sentiment, Argentina’s electoral outlook remains wide open. 

The ruling FDT is stuck between President Alberto Fernández’s self-promoted re-election bid, and VP Cristina Kirchner’s self-imposed decision not to compete. With trust in government nearing the lowest level since 2003, not even a unity candidate (in the shape of economy minister Sergio Massa) would be able to solve this stand-off.

In the main opposition, JXC, the outlook is equally cloudy. The coalition has remained intact since leaving office in 2019, but has failed to agree on an internal mechanism to solve its leadership dispute. Buenos Aires mayor Horacio Rodríguez Larreta heads the pack, betting heavily on a centrist strategy. Nonetheless, we expect him to have to compete for the presidential nomination against several other contenders, most of whom are betting heavily on polarization against Kirchnerism. 

Amid the cracks in the two main coalitions, support for brash libertarian Javier Milei, of La Libertad Avanza, continues to grow. By attacking the country’s “political caste” – which he blames for perpetuating failed statist policies and privileges – Milei’s discourse resonates with fed-up, impoverished voters.

As things stand, Argentina’s 2023 elections could become the bellwether for wider regional trends. This includes whether there is a cultural shift towards democratic alternation, or if a whole new class of populist outsiders will further undermine traditional party politics.