By Hugh Bronstein and Nicolás Misculin

BUENOS AIRES, Nov 14 (Reuters) - Argentines head to the polls on Sunday for midterm elections that will establish the power balance in Congress, with the ruling Peronist party battling to avoid damaging losses that could erase its majority in the Senate held for almost 40 years.

The vote sees half the seats in the lower Chamber of Deputies up for grabs and a third in the Senate, with voters focused on rampant inflation running above 50% and high poverty levels arising from the COVID-19 pandemic.

The Peronist coalition of left-leaning President Alberto Fernandez faces a trial by fire as it looks to reverse a crushing defeat in a September primary ballot, that if repeated could hobble the ruling party in the next two years.

"Fernandez would have to conduct the second half of his term with little political power, as a part of coalition full of internal grievances and with a pile of economic problems to fix, starting with inflation," said Ignacio Labaqui, Argentina analyst at New York-based consultancy Medley Global Advisors.

Most pollsters expect a damaging defeat after the government took a popularity hit from COVID-19 lockdowns, spiraling inflation and a currency that is hitting record lows against the U.S. dollar despite strict capital controls.

"I am supporting any other party that has a chance to bolster the opposition," said Nicolás Corzo, a 40-year-old financial sector worker in Buenos Aires.

'PERONIST FAMILY'

The governing coalition holds 41 of the 72 seats in the Senate and makes up the largest bloc in the lower house. If Sunday goes badly, it risks losing its Senate majority and could be pegged back in the lower chamber.

Focus will be on the lower-house result in densely populated Buenos Aires province, a Peronist stronghold where a defeat for Fernandez's coalition would sting. There are key Senate races in provinces such as La Pampa, Chubut and Santa Fe.

The vote starts at 8 a.m. with 127 seats in the Chamber of Deputies in play out of a total 257, and 24 Senate seats in eight provinces at stake.

A major defeat would weaken Fernandez as pressure builds to strike a new deal with the International Monetary Fund to roll over $45 billion in debt payments the grains-producing country cannot make. It could spark a cabinet reshuffle as the primary defeat did and split the government between moderates and radicals.

Yanina Cabral, 34, who runs a pastry business in the city of Santa Rosa, told Reuters she would stick with the Peronists. "My vote is for the ruling party. I come from a Peronist family and I see that the ruling party is doing things well," she said.

(Reporting by Hugh Bronstein and Nicolas Misculin; Additional reporting by Agustín Geist and Jorge Otaola; Editing by Adam Jourdan and Steve Orlofsky)