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Argentine President Javier Milei’s surprise midterm election triumph has earned the libertarian a rare opportunity to deliver lasting reform to the country’s troubled economy. But to grasp it, he will need to show a new ability to build political alliances.
While Milei’s insurgent La Libertad Avanza party triumphed in large swaths of the South American nation — taking more than 40 per cent of the vote — it was from a very small congressional base. The president will still need support from smaller centrist parties to pass labour and tax reforms that he says will revive the economy.
Milei “got a fresh endowment of legitimacy and political capital”, said Alberto Ramos, chief Latin America economist at Goldman Sachs. “Let’s hope that he now is able to show political skill and the capacity to compromise to approve some of these bills. But it’s not like an all-clear signal.”
Argentina’s notoriously fickle voters surprised pollsters, investors and even Milei, who admitted in a television interview on Monday that he had not expected such a good result.
A sluggish economy and three corruption scandals had dented the government’s popularity. Opinion polls suggested a much closer result, after the main leftwing Peronist opposition triumphed in the bellwether province of Buenos Aires last month. But, in the event, LLA narrowly won the province with a 14-point swing.
Cristián Buttié, director of CB Consultora, one of the few pollsters to predict a clear Milei win, said the Peronists’ earlier victory backfired by reviving strong latent voter rejection of the leftist movement and the economic chaos it bequeathed to Milei.
“It pushed a large part of the electorate to define its least worst option, because the memory of the previous government is fresh,” he said. “Not because it is satisfied with this government’s performance.”
Milei described Peronist economic policies as a “four-lane motorway” to “Venezuela or Cuba”, saying Argentines had instead opted for his brand of freedom and prosperity.
The US backing gave the Argentine president vital breathing space to reach Sunday’s election without a politically damaging devaluation © Jonathan Ernst/Reuters
Support from Washington was crucial to Milei’s survival. As President Donald Trump hailed him as a key strategic ally against China, US Treasury Secretary Scott Bessent promised a bailout of up to $40bn when the peso came under attack after the Buenos Aires election.
The US backing gave the Argentine president vital breathing space to reach Sunday’s election without a politically damaging devaluation.
Milei had fought to support the peso as part of his drive to tame inflation. He successfully slashed prices increases from 118 per cent a year when he took office to 32 per cent now, albeit at the cost of inflicting economic pain on the less well-off.
But Alejandro Werner, who oversaw the IMF’s record-breaking $57bn bailout of Argentina in 2018, said Milei now needed to float the peso freely — as well as pass a budget and secure fresh help from the IMF and the private sector to refinance $17bn of foreign debt coming due next year.
The electoral support means “it’s the right time to move to a fully floating exchange rate”, he said. “If they don’t want to change it just to prove that they are right, this would be infantile.”
Meanwhile, the left failed in its attempts to stoke Argentine nationalism by portraying Milei as a US poodle.
Though Peronism has dominated Argentine government for the past three decades, its two best-known faces — former president Cristina Fernández de Kirchner and Buenos Aires provincial governor Axel Kicillof — are both tarnished.
Fernández de Kirchner was convicted of corruption offences, and Argentina is fighting a $16bn compensation award in a US court over the 2012 expropriation of the oil company YPF, which was overseen by Kicillof.
Peronism is going through “a very serious crisis”, said Ignacio Labaqui, senior consultant at Medley Global Advisors. “Clearly, the party brand has been hit.”
The initiative now lies with the eccentric Milei, who waved a chainsaw in election rallies to signal his pledge to slash the state and has previously insulted potential allies.
Milei said in a television interview on Monday that he was “absolutely” convinced he needed to negotiate support from provincial governors to pass flagship tax cuts and labour market reforms.
But he also strongly endorsed his sister and chief of staff Karina, and his social media guru Santiago Caputo, who have both been associated with a more partisan style of politics. Asked whether his reliance on them would change, Milei responded: “No, that will not change. They are the architects of all this.”
Milei is now at a crossroads, said Carlos Malamud, a Latin America specialist at Madrid’s Real Instituto Elcano.
“He has everything he needs, if he gets it right, to be re-elected in 2027, and to lead a deep transformation of Argentina. But if arrogance gets the better of him again . . . then the result will be another failure of Argentine politics.”
