As the October midterm elections approach in just two months, the administration of President Javier Milei is focusing primarily on demonstrating to Argentines its commitment to continuing the fight against inflation. For two consecutive months, May and June, it has achieved robust figures below two percent per month, recording 1.5 and 1.6 percent, respectively. This should be sufficient to secure a win in the midterms, but the magnitude of the victory is significant. The brief response, undoubtedly, is affirmative. Foreign investors are keenly observing whether the Argentine populace backs the fiscal austerity measures implemented by the Milei administration. They argue that this would indicate a change in Argentina, suggesting that the “evil populists” are unlikely to return anytime soon.
Short-simple answers, however, often prove to be misleading — or overly simplistic at best. The economic consensus suggests that three key factors are driving the slowdown in inflation: reduced government spending, stagnant wages and pensions, and an overvalued peso. A significant electoral victory would lead the administration to believe it has received a blank cheque from the public to accelerate its agenda. However, once the public casts their votes to validate a leader, new demands inevitably arise. As Milei enters the second half of his first term, employment is poised to become a significant issue. Since taking office in December 2023, Milei has seen unemployment rise nearly 40 percent, increasing from 5.7 percent in the last quarter of 2023 to 7.9 percent in the first quarter of 2025. In densely populated areas such as Buenos Aires Province, the figures are approaching two digits. In nearly all of the country’s 24 districts, including Buenos Aires City, jobs have been lost. The exceptions are the energy & mining-rich provinces of Neuquén (Vaca Muerta), Río Negro, Chubut, and Mendoza.
A significant win could further solidify Milei’s independent political approach. His “fight-everybody-all-the-time” game plan serves as a solid defensive strategy; however, it is hard to envision that it could leave a lasting impact on Argentine reality unless it stems from persuasion rather than imposition. The reforms that Milei is pledging to implement next include labour, pension, and tax legislation. These issues are often cherished by the business establishment, yet they remain sensitive topics for the public. In the initial nearly two years, Milei capitalized on a public and political establishment that remained in astonishment at the dismal outcomes of the previous two presidential administrations, those of Mauricio Macri and Alberto Fernández, as well as at Milei’s own electoral triumph. However, the initial shock is fading, and Milei will soon find it increasingly difficult to attribute the challenging current circumstances solely to past actions.
In a significant development, a major victory—referred to as “La Libertad Arrasa” or “Liberty Sweeps” by the President—could motivate Milei and his team to maintain the peso appreciation. This strategy is not only helping to curb inflation but also appealing to Argentina’s upper and high-middle classes, who are eager to save in US dollars for purchasing homes, cars, or traveling abroad. Recent history indicates that winning big serves as a detrimental incentive for governments. The inaugural season of the television series focusing on former president Carlos Menem concludes in 1995, the year he secured re-election with half the vote. Despite numerous indications of fatigue, Menem remained committed to his one-peso-one-dollar Convertibility peg, a policy that maintained the peso’s strength, even as its architect, Domingo Cavallo, expressed support for modifications. Neither Menem nor the Peronists secured another election victory until the scheme tragically collapsed in December 2001.
In 2011, a decade later, then-president Cristina Fernández de Kirchner secured her re-election, garnering 54 percent of the votes, amidst an ongoing appreciation of the peso. Rather than implementing corrections, she introduced stringent capital controls referred to as the “cepo” or clamp. After that, Fernández de Kirchner’s Peronists faced defeat in three consecutive elections. In a significant comparison to the current situation, the midterm elections of 2017 saw then-president Mauricio Macri’s Cambiemos coalition securing victory with 40 percent of the votes, largely supported by an overvalued peso. Macri aimed to persist with the scheme, looking towards his re-election in 2019, but encountered a currency crisis just a few months later. Macri has not secured victory in another election and is now largely seen as a political retiree. A solid yet unremarkable victory could serve as a gentle reminder for Milei that his work is far from complete, and that some strategies that have served him well thus far may not be effective moving forward. It would be his responsibility to interpret the numbers accurately.