Milei's Reality Check in Buenos Aires
Shock therapy economics collides with democratic reality as Argentina's libertarian experiment faces voter backlash
Argentina's President Javier Milei acknowledged a "clear defeat" as his La Libertad Avanza party won just 34% of the vote in Buenos Aires province, trailing the Peronist coalition by 13 percentage points. The result represents a major setback for the libertarian economist who swept to power promising radical economic transformation through fiscal shock therapy.
Image: Javier Milei at his inauguration in the Salón Blanco in 2023 (photo: Cancillería Argentina / CC BY 2.0)
Markets reacted swiftly to the defeat, with Argentine assets plunging as investors questioned Milei's political sustainability. The peso fell nearly 5% against the dollar while the benchmark stock index dropped 10.5%, reflecting fears that reform momentum could stall before October's crucial midterm elections.
The electoral rebuke comes despite Milei's success in bringing down Argentina's triple-digit inflation, as voters have yet to see the economic revival promised to follow his harsh austerity measures. The government has been shadowed by a corruption scandal involving the president's sister and right-hand woman, Karina Milei, while unemployment figures are at their highest since the COVID pandemic.
Buenos Aires Governor Axel Kicillof, a fierce Milei critic, emerged strengthened by the victory and positioned as a potential future Peronist leader. Former President Cristina Fernández de Kirchner gloated over the results, telling Milei to "get out of your bubble, brother ... things are getting heavy."
The defeat exposes Argentina's recurring pattern: reformist presidents underestimate the thin social margins in a country battered by serial crises. Carlos Menem's 1990s liberalization ended in collapse; Mauricio Macri's 2016-19 adjustment unraveled amid recession. For Milei, maintaining market credibility while building legislative support represents the central challenge ahead.
Our Take: Argentina's credibility with markets is razor-thin. A sustained perception that Milei cannot convert votes into legislative support risks another downward spiral—with spillovers to neighbors tied to Argentina's trade and financial cycles. The pattern of reform failure suggests deeper structural issues beyond any single leader's policy choices.