Background on Javier Milei and His Relevance
Javier Milei, an ultraliberal president, faces the challenge of restructuring his political alliances following a significant electoral defeat. This loss has cast doubts over the future of his fiscal austerity economic program, especially with a revitalized peronist opposition.
Election Results and Their Implications
In the recent elections held in Buenos Aires, Argentina’s largest province with nearly 40% of the total electoral population, the centrist-left peronist movement secured 47% of the votes. Meanwhile, Milei’s La Libertad Avanza only managed 33%, which is considered a preview of the upcoming mid-term national elections in October.
Historically, Buenos Aires has been a stronghold for peronism. However, the landslide victory raises new questions about a government that currently holds a minority in Congress and has experienced a decline in popularity due to corruption accusations and stringent economic measures.
Market Reactions
On Monday, following the election results, Argentine stocks plummeted by 11.7%, the wholesale peso dropped by 5%, and bonds lost 4% as investors reacted to the peronist victory, which they generally view with skepticism.
Milei’s Path Forward
Political analyst Andrés Malamud suggests that Milei should focus on stabilizing the economy and rebuilding his legislative coalition, much like he did during his first year in office. This approach could help him regain equilibrium and push through his program.
The government, which has managed to drastically reduce inflation, aims for a victory in the upcoming mid-term elections to increase its national parliamentary representation. This could serve as a safety net amidst current low popularity ratings.
However, even with a potential win in the national mid-term elections, the ruling party will remain in the minority. Analyst Mariel Fornoni from Management & Fit explains, “These elections completely change expectations for October.”
The risk is that the predominantly center-left peronist opposition will continue imposing its agenda, as seen recently with a series of laws challenging the strict fiscal balance that Milei deems essential.
Despite popular support for regulations that increase budgets for pensioners, healthcare, and people with disabilities, Milei has clashed with Parliament to veto these laws. This conflict could escalate in the coming months, further fueling public discontent with Milei, exacerbated by corruption accusations.
Federico Aurelio, head of consultancy Aresco, emphasizes that “gobernability will depend on the willingness and ability to reach agreements with other political spaces outside of Libertad Avanza and PRO (a center-right party with which Milei has already formed an alliance), especially with governors, many of whom are peronists.”
Without these agreements with governors, Milei’s government will face a challenging two years, unable to pass the laws and reforms it intends to implement nationally.
Government Reflection and Changes
Amidst a series of meetings and rumors of government changes, Chief of Staff Guillermo Francos stated on local radio that “it’s time for self-criticism, analysis, and understanding where we erred. Why aren’t macroeconomic results reaching the people?”
Francos hinted at changes in the cabinet starting December, when some officials will transition to their new congressional seats following the elections.
Peronism’s Resurgence
Buenos Aires Governor Axel Kicillof, a distinguished economist specializing in John Keynes, emerged as the big winner of the recent elections. By ensuring separate provincial elections from national ones, Kicillof defied his peronist coalition allies and gained substantial support for his presidential aspirations in 2027.
However, Kicillof faces internal challenges within his own party, as the peronist movement from inside the country does not favor him. Analyst Sergio Berensztein warns, “Kicillof’s victory is significant but could be temporary for the peronists.”
Berensztein adds, “Kicillof’s challenge lies in the fact that the interior peronists do not support him, and he is much further to the left than an average peronist governor. His victory does not guarantee a united peronist candidacy in 2027.”
Amidst political tensions, Morgan Stanley reported on Monday that “uncertainty will remain high until the national mid-term elections on October 26.”
Key Questions and Answers
- What is the significance of Javier Milei’s electoral defeat? Milei must now reconfigure his political alliances and adjust his economic plan, particularly in light of a revitalized peronist opposition.
- How did the election results impact Argentina’s economy? The peronist victory led to a decline in Argentine stocks, the peso, and bonds due to investor skepticism.
- What are Milei’s next steps following the election loss? Analysts suggest that Milei should focus on economic stability and rebuilding his legislative coalition.
- What challenges does Axel Kicillof, the big winner of the elections, face? Despite his victory, Kicillof faces internal opposition within the peronist movement and must navigate tensions with Milei’s government.
- What does the future hold for Argentina’s political landscape? Uncertainty remains high as Argentina approaches the national mid-term elections in October, with peronists and Milei’s government facing ongoing challenges.
