In late October Argentina’s president, Javier Milei, won a decisive victory in the country’s midterm elections. The scale of the result caught most political commentators off-guard. It now gives the president the legislative capacity to push through his much touted programme of labour and tax reforms.
Author Matt Barlow
Lecturer International Political Economy, University of Glasgow
While voter turnout hit a historic low, those who did vote overwhelmingly supported Milei’s Liberty Advances party, strengthening his chances of consolidating his radical economic agenda of austerity and free-market capitalism.
Milei’s defeat in local legislative elections in Buenos Aires province only a month earlier had led me to ask whether his economic agenda was at risk of being derailed . But this time around, in the same province – a traditional stronghold of the opposition Peronist party – Milei’s party took most of the seats.
Even in his historic presidential election victory in 2023, this was a province that Milei had been unable to win. So victory now could be seen as a validation of his wider austerity policies – and a mark of his popularity.
It is a popularity that seemingly transcends borders – all the way to the White House. In the run-up to the election, much was written on US intervention into Argentine politics. US president Donald Trump offered a US$40 billion (£30 billion) bailout while simultaneously warning the country’s electorate that the offer was conditional on strong voter support for Milei in the midterms .
Immediately after his electoral victory, members of the Trump administration heaped praise on Milei, calling him a patriot and freedom fighter who would make Argentina great again .
Such is the deepening of relations between the US and Argentina that even during the fanfare of President Trump’s east Asia trip, US Treasury Secretary Scott Bessent talked with Milei and posted support for his political and economic agenda on social media. Meanwhile, Milei thanked the US for its “unwavering” support .
Bessent’s post also alluded to the fact that the market should easily meet the “republic’s financing needs for 2026”. This is a bold statement when the market has long been sceptical about Argentina, even when its governments have pursued market-friendly policies.
Investors reacted enthusiastically to the election result, however, pushing the value of the Argentine peso up by 10% (at one point) against the US dollar on the Monday after the vote.
Uncertainty about future government policies towards the peso, which floats in an exchange rate band that prevents it from moving beyond upper and lower levels, meant that all the currency gains had been virtually wiped out by the Tuesday .
Yet there remains an optimism in Argentina that Milei’s electoral victory opens up opportunities for debt sales that could provide a pathway for much needed US dollars to make their way into the economy.
Argentinian oil companies YPF and Tecpetrol have sparked an early bond rush by issuing fresh debt into the markets, while provincial governments are reportedly negotiating with banks to package and sell debt to investors abroad . All of this signals growing investor confidence and could bolster the value of the peso.
A bumpy road ahead
It is of course not all plain sailing. While Milei’s policies have so far tamed inflation – and delivered a surplus for the government finances – they come with risks and high social costs.
Many Argentinians do not, as yet, feel better off. A fall in purchasing power thanks to things like rising supermarket prices and transport costs has meant that many citizens are not feeling the benefit of the lower overall rate of inflation. Some 250,000 jobs have been lost across public and private sectors and 18,000 business have closed , leading to high unemployment and underemployment. Many people must now borrow money to make it to the end of the month .
Milei has previously employed vetoes to stall funding increases in higher education, disability allowances and pensions. These are all emotive policy areas and are likely to generate public backlash as well as placing some of the most vulnerable at risk.
The national budget could also come under renewed pressure. Debt repayments including US$3.3 billion to the IMF are due next year and investment is badly needed into Argentine infrastructure.
Milei has sought investment into extractive industries such as lithium and shale gas and oil as part of his growth strategy. But the infrastructure projects that allow for the transportation of these commodities – and which attract investment – fell under his chainsaw as part of major austerity cuts in 2024.
Half of the 2,700 public work projects unfinished from former president Alberto Fernández’s administration have seen no progress during Milei’s presidency .
Meanwhile, the US bailout is not free money, and voters have voiced worries around the potential costs of Trump’s support . This is not just about economic costs but also autonomy, with some commentators describing Argentina as a new US colony .
It is easy to see why. The Argentine government removed export taxes on grain to increase sales and boost dollar reserves in September, only to re-impose them 72 hours later.
This occurred at the same time as leaked messages show there was concern in the US government that Argentina had an unfair advantage through not paying export taxes. This led Bessent to reassure American farmers that the tax advantage enjoyed by farmers in Argentina would end soon , which it did.
The midterms were both an incredible result for Milei and a moment of reflection for the opposition and political analysts. The vote ended a volatile period of Argentine politics, which was recently described to me as being like a Netflix series.
But as with all good series, there are often sequels. Milei has weathered his first electoral challenge, but many others remain that could hinder the economic growth and prosperity that he has promised.
Matt Barlow does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
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