Big win in midterm vote for Argentina’s President Milei boosts markets

Markets in Argentina rallied, the peso surged, and government bonds jumped on Monday as President Javier Milei hailed his party’s resounding victory in midterm congressional elections as a mandate to press ahead with radical free-market reforms of Argentina’s long-troubled economy.

Investors regained confidence in the chronically depreciating peso they had been dumping in droves just last week to hedge against a Milei defeat. The currency surged more than 10 per cent on Monday after markets opened, closing three per cent higher at 1,460 pesos per dollar.

Argentina’s local Merval stock index finished with a 21 per cent gain at closing, and the country’s dollar-denominated bonds set to expire in 2035 rose as much as 14 cents during trading hours.

The price movements following Milei’s party more than doubling its representation appeared to validate the Trump administration’s bet on its close ideological ally in South America.

“He had a lot of help from us,” President of the United States Donald Trump told reporters Monday on Air Force One, referring to his administration’s US$40 billion in pledged support for Milei and threats to rescind the money if Milei lost the vote to Argentina’s left-leaning populists.

“He’s working against 100 years of bad policies, and he’s going to break them, thanks to support from the United States.”

Perhaps never in history has a limited Argentine legislative election generated so much interest abroad, both in Washington and on Wall Street. Congratulations poured in from Milei’s right-wing allies further afield, too, from Italian Prime Minister Giorgia Meloni to Israeli Prime Minister Benjamin Netanyahu.

“We have a saying in our brave military: Who dares — wins,” Netanyahu said, addressing Milei. “You dared, you won.”

Since coming to power on a pledge to take a chain saw to state spending two years ago, Milei has cut government red tape, slashed the public payroll, and deregulated the economy.

His brutal cost-cutting measures have inflicted painful job losses and eroded purchasing power for millions of Argentines. But the programme has also tamed runaway inflation.

Before Sunday, Milei found himself on uncertain ground as Argentine markets floundered and the country headed toward a cash crunch after a landslide local election win for the opposition raised fears that Argentines were losing patience with Milei’s harsh austerity.

Alarmed that Argentina could return to the budget-busting populism of its long-dominant Peronist opposition, investors rushed to pull their money as analysts predicted a tough path for Milei in the midterms. The Argentine peso plunged to a record low of over 1,500 against the dollar last week.

But in the end, Milei’s La Libertad Avanza party emerged with nearly 41 per cent of Sunday’s national vote for the Lower House, triumphing over the Peronist coalition that won 32 per cent.

Even Milei admitted on Monday that the outcome exceeded his expectations. “I’m surprised by the result, honestly,” he told a local TV channel.

Yet political analysts cautioned that with turnout in Sunday’s election among the lowest since Argentina’s 1983 transition to democracy, Milei’s thumping win revealed voters’ hostility toward Peronism more than it did their support for government cutbacks.

“What we saw was a rejection of Peronism by a significant portion of the electorate,” said former Economy Minister Martín Guzmán. “This doesn’t mean that Argentine society is enchanted with the economic policy of the government.”

Domestic political backlash against Trump’s huge US rescue package for Argentina has been mounting for weeks.

Democrats on Capitol Hill have seized on the assistance to attack Trump, accusing the president of showering money on a political ally at a time when federal workers aren’t getting paid amid the government shutdown.

American cattle ranchers have chafed at Trump’s promises to buy Argentine beef to bring down US prices. Farmers squeezed by the Trump administration’s trade war with China have voiced anger over the US backing a rival agricultural exporter. Even core Trump supporters have expressed concern over the aid being at odds with the president’s “America first” doctrine.

Experts say that the Trump administration has created a worrying precedent by tapping the US Treasury’s Exchange Stabilization Fund to bail out a friendly foreign government.

“The fund is not supposed to be a slush fund for influencing elections or for foreign policy purposes,” said Rohit Chopra, the former head of the Consumer Financial Protection Bureau. “US involvement will continue to put American taxpayers at risk without authorisation.”

Trump and US Treasury Secretary Scott Bessent have brushed off criticism, insisting that the US has a strategic stake in Argentina’s economic stability.

Although the brief burst of market optimism had no direct effect on ordinary Americans or Argentines, Trump suggested that it offered a windfall to US investors and fund managers.

AP