Javier Milei enjoys the ardent support of poor, informal workers.
President Javier Milei was the big winner of last week’s midterm elections in Argentina. He blew past the opposition Peronists, the party that has dominated Argentine politics since Juan and Eva Perón founded it 80 years ago. By winning 41 percent of the vote, versus the 32 percent won by left-wing parties combined, Milei’s party, La Libertad Avanza, guaranteed that Milei’s vetoes can’t be overridden. He now also has an excellent chance of convincing smaller parties to join him in passing legislation.
There was another big winner. Treasury Secretary Scott Bessent saw his department’s policy vindicated. The Treasury — which invested in peso-denominated instruments just before the election — will likely make a profit as the appreciation of the peso since Milei’s win increases the value of those assets. After the election, Bessent slammed Democratic Senator Elizabeth Warren as an “American Peronist” for her urging U.S. banks to not fund Treasury’s financial support package for Argentina. In another X post, Bessent noted that Milei “won in a landslide with the poorest members of society voting for economic freedom — a notion anathema” to Senator Warren. He concluded: “The message from the ballot box is clear: Argentines support a president who aims to move toward a modern capitalist economy, with the goal of placing the country among those with the highest levels of economic freedom in the world.”
Argentina’s election could indeed represent a nail in the coffin of Peronism. The party’s decades of misrule and corruption have finally convinced many poor Argentines to abandon it. We’ve come a long way from the 1940s, when Eva Perón was considered saintlike by those whom she called “descamisados” (shirtless ones) and proclaimed herself their voice in government. Peronism was a disaster for the poor. Once one of the ten-richest countries in the world (the phrase “rich like an Argentine” was popular until the 1930s), Argentina became a basket case under Peronist rule with rampant inflation that reached nearly 300 percent in 2023. The country has defaulted six times on its foreign loans since the 1980s.
“Imagine someone born 25 years ago in Argentina,” Franco Leonel, who works in the informal economy, told me during my trip to Argentina in 2023. “For your entire life you have seen nothing but misery and little chance to get ahead unless you emigrate. We simply want to be a normal country again.”
Milei, an economist who brandished a chainsaw during his campaign to show his desire to change the status quo, can sound like Donald Trump when he blames a corrupt “caste” system of politicians, media figures, union leaders, and academics for ruining the country. But his disruption has, ironically, already done a lot to restore normalcy. He slashed subsidies, fired a tenth of the federal government workforce, turned Argentina’s chronic budget deficits into the first surplus since 2006, and reduced the country’s borrowing costs. He has cut the monthly inflation rate to 1.9 percent — down from 25.5 percent in December 2023, the month he took office. He has reduced the number of government ministries from 18 to eight. He has deregulated key markets, including labor, property rentals, commercial airlines, and freight transport. Despite a worrisome run on the peso after a local election setback in September, Milei retained the support of his political base in last month’s elections. He and his party “defy political gravity,” says historian Niall Ferguson of Stanford’s Hoover Institution. “The true miracle is that Milei’s shock therapy is working politically.”
Ferguson notes also that Milei, the son of a bus driver, is “authentically a man of the people.” Many Argentines are under severe economic pressure, but they have seen Milei bring the nationwide poverty rate down to 31 percent from the 42 percent it was when he took office. The Economist reports that “many on the left are unnerved by how popular Milei’s ideas are with working-class voters.” Even the socialist magazine Jacobin ran a story in 2023 headlined, “Even in Argentina’s Poorest Neighborhoods, Far-Right Javier Milei Is Gaining Ground.”
During my trip to Argentina that year, I visited a slum called Villa 31 near the Retiro railway station in Buenos Aires. There, one of Milei’s most ardent supporters, Hector Abel Espinoza, had established an informal headquarters for Milei’s party. At Espinoza’s Liberty 31 bar and liquor store, a yellow flag from the American Revolution, featuring a coiled snake over the motto “Don’t tread on me,” was prominently displayed. Espinoza, who came from a poor rural province in Argentina, moved to Buenos Aires for college. He attended lectures by then-professor Milei on the “need to build a country where people had the freedom to produce wealth on their own.” In 2021, Milei left his teaching position and won a surprise victory in a race for a seat in the National Congress of Argentina. “His message resonated with people in this barrio who were tired with traditional politicians,” Espinoza told me. “Now it is a stronghold for his support.”
Even supporters of the status quo in Villa 31 acknowledge Milei’s appeal. Nationwide, nearly half of Argentina’s workers work in the informal sector. The percentage in Villa 31 is much higher. “They open a small business in the back of their houses, a kiosk, an ice-cream shop, maybe a cyber café,” Sergio Delgado, a social worker and local resident, told Jacobin. “Milei won in the neighborhood because the kids are tired of not being able to get ahead and also because they are sweet-talked about the dollar.”
Milei’s campaign pledge to dollarize the Argentine economy has been soft-pedaled since he took office, no doubt in part because the International Monetary Fund linked its new $20 billion loan package for the country to his not making radical moves in monetary policy. But Milei’s hesitancy to step away from the discredited Argentine peso is alienating many of his supporters. They note that they have long used dollars for any large purchase. In fact, the U.S. Federal Reserve reports that 10 percent of all U.S. currency in circulation is held in Argentina. Dollarization is “Milei’s best option to rescue his government and his legacy,” wrote columnist Mary Anastasia O’Grady of the Wall Street Journal last month. “He need only let the market discover the real price of the peso and seize the moment to dollarize at that rate.”
The political moment may never be better. In last month’s elections, Milei’s party retained or even strengthened its support in Argentina’s rural “flyover country” that has been hard-hit by his government’s withdrawal of subsidies and some welfare benefits. Take Tierra del Fuego, the nation’s sparsely settled province in the far south from which most Antarctic cruises depart. For over 50 years, the province has directly benefited from Argentina’s sky-high tariffs on electronic goods. A government program effectively guaranteed that everything, from cellphones to AC units and TV sets, was assembled in the province using local labor, thus avoiding the tariffs. In May, Milei announced that he would eliminate tariffs on all those products, jeopardizing 7,000 jobs in a workforce of only 96,000. Tierra del Fuego’s official unemployment rate spiked to 8.3 percent, from 6.5 percent when Milei was elected in 2023. Governor Gustavo Melella, whose party is aligned with the Peronists, sued the national government over the change. “These decisions not only hit jobs and our industries, but also put the economic and social fabric of the province at risk,” he protested. And yet, voters last month disagreed, giving Milei’s party two out of the province’s three deputies.
“People remain suspicious of the discredited Peronists and are willing to bear some pain and give Milei breathing room for his reforms,” Ian Vásquez of the Cato Institute told me.
Milei plans to use his new breathing room to push “second-generation reforms” in the second half of his presidential term. These might include protecting individual pension contributions and making it easier for companies to hire informal workers, granting them access to benefits, and enabling them to take out loans. “We have a plan to eliminate 20 taxes, reduce rates and broaden the tax base so that evasion no longer makes sense,” Milei said the day after the election.
No one believes that Milei or Argentina is out of the economic woods. Last month’s elections, however, showed that voters are more patient with and confident in Milei’s reforms than almost anyone expected. A similar trend might be developing this year in Ecuador and Bolivia, where conservative parties won landslide victories. Just maybe, South America is waking up to the fact that socialism offers at best a short-term sugar high — and then a painful hangover.