Houston, We Don’t Have A Problem: Pro-Development Candidate Wins The Battle For The Vaca Muerta

On March 10 the Argentine province of Neuquén held gubernatorial and legislative elections. Neuquén is home to the Vaca Muerta, one of the largest shale deposits in the world, and under Argentina’s federal system of government, the Neuquén governor plays a major role in the development of the province’s hydrocarbon resources.  At stake was the future direction of energy policy in Neuquén (and hence in Argentina) with the leading gubernatorial candidates offering future scenarios ranging from a seamless continuation of the province’s current pro-development policies (Omar Gutiérrez) to a much more hostile environment for international oil companies (IOCs) (Ramón Rioseco).

Gutiérrez, of the Neuquén People’s Movement (MPN), which has governed Neuquén continuously since Argentina’s return to democracy in 1983, was victorious by a large margin, prompting a deep sigh of relief by international oil and oil service companies, many private Argentine companies, and by the government of Argentine President Mauricio Macri which did not want the inaugural contest of the 2019 election season to end in a victory for former president Cristina Fernández de Kirchner who was strongly supporting Rioseco.  Futhermore, Gutiérrez’s more than 13 point margin of victory over Rioseco threw a bucket of cold water on the latter’s nascent efforts to undermine the legitimacy of Gutiérrez’s victory by claiming it hinged on fraud.  Horacio «Pechi» Quiroga, who belongs to the Let’s Change alliance’s junior partner, the Radical Civic Union (UCR), finished a distant third, more than 24 points behind Gutiérrez.

During Gutiérrez’s first four-year term as governor (2015-19), the Neuquén provincial government was a strong advocate for policies promoting the development of the Vaca Muerta including federal subsidies for producers, respect for the rule of law and contracts, and infrastructure investment to aid in the transport of natural gas from the Vaca Muerta to external markets and to domestic petrochemical plants.  Gutiérrez and his fellow MPN leaders such as Senator Guillermo Pereyra (who has led the Private Sector Petroleum and Gas Union of Río Negro, Neuquén and La Pampa for more than 30 years) also have maintained a good working relationship with the Macri Administration.

However, the MPN has long-demonstrated its ability to get along with presidents of all political stripes. Therefore, in the event Cristina Fernández de Kirchner or another Peronist defeats Macri in the 2019 presidential election later this year, there is no reason to believe Gutiérrez would not be able to establish and maintain a good working relationship with them, although in the case of Fernández de Kircher the energy policies she would likely pursue would be contrary to the more pro-development policies favored by the MPN.

With 98.3% of all precincts reporting, Gutiérrez won 39.9% of the vote (0.7% less than he won in 2015), followed by Rioseco with 26.1% (5.1% less than he won in 2015), and Quiroga with 15.1% (5.8% less than he won in 2015).  The remaining six candidates were former MPN governor (1999-2007) Jorge Sobisch, who ran as the candidate of the small Christian Democrat Party (PDC), with 9.9%, Raúl Godoy of the far-left Workers’ Left Front (FIT) with 3.6%, Mercedes Lamarca of the Free of the South Movement (LIBRES) with 2.8%, Alejandro Vidal of Equals (Iguales) with 1.2%, Priscila Otton of the New Left (NI) with 0.8% and Sergio Rodríguez of the Social Front for Dignity (FSD) with 0.7%.

In the election for the 35-seat provincial legislature, Gutiérrez’s MPN won 9 seats while the four parties that fielded Gutiérrez as their gubernatorial candidate (with their votes added to those he won as the MPN’s candidate) won a total of 6 seats, providing Gutiérrez with a pro-government delegation of 15 legislators, 3 seats short of the majority (18) needed to pass legislation.  When the new legislature is seated in December, the principal opposition will be represented by Rioseco’s pro-Cristina Fernández de Kirchner Citizen’s Unity-Neuquén Front which won 9 seats.

Let’s Change (6 seats), the PDC (3 seats) and the FIT (2 seats) won the remaining seats. Gutiérrez should not have a great deal of difficulty obtaining the three votes needed to pass legislation, with the Let’s Change delegation a likely source of support; if Macri is re-elected he will for instance trade the support of Let’s Change’s legislators in the Neuquén provincial legislature for the support of the MPN legislators in the national congress.  And, if Cristina Fernández is elected president in November, several Let’s Change legislators would become natural supporters of Gutiérrez.  In addition, while the three PDC legislators are allied with Sobisch and have been quite critical of Gutiérrez lately, two have deep roots in the MPN, which could aid rapprochement efforts by Gutiérrez.  In sum, in spite of the fact that Gutiérrez did not win a legislative majority, he should not have too much difficulty obtaining the votes needed to pass priority legislation in the provincial legislature.

March 10 was a very good night for international oil and oil service companies, private Argentine energy companies, the Macri Administration and, broadly speaking, for Argentina. The election results mean the provincial administration in charge of the economically vital Vaca Muerta will remain under the control of Governor Omar Gutiérrez and the MPN.  Thus, for the next four years, at the least at the provincial government level, all efforts will be focused on fostering a political and policy environment conducive to the development of the Vaca Muerta, with the underlying goal of insuring that the Vaca Muerta reaches its full economic and societal potential.

Note: This is the third entry of the Baker Institute’s Center for Energy Studies series on the 2019 Argentine elections.  At the end of March the fourth entry will provide a preview of the April 8 provincial election in Río Negro and Chubut provincial primaries, followed on April 9 by the fifth entry, which will review the results of the Río Negro election and Chubut primaries, and the sixth entry in early June which will preview the June 9 provincial election in Chubut.