Merval surge, peso rebound against dollar as markets cheer Milei's midterms triumph

Argentine stocks and the peso surged Monday after a stunning victory for President Javier Milei in midterm elections seen as an endorsement of his radical free-market agenda.

The benchmark Merval index was up over 20 percent at the start of trading and the peso appreciated by a whopping 9.5 percent against the dollar in early trading in Buenos Aires amid a climate of general investor euphoria.

US President Donald Trump, who twice came to the financial and political rescue of his close ally in recent weeks, congratulated Milei on his "landslide victory."

"Our confidence in him was justified by the people of Argentina," Trump, who had threatened to withhold aid if Milei lost the vote, wrote on his Truth Social platform while on an Asian tour.

Argentina's 10-year government bond yields also tumbled on the results, falling 3.83 points to 14.34 percent over Friday's close and signalling increased demand for the country's debt.

In New York, Argentine stocks posted strong gains of up to 50 percent midday, a marked rebound after days of losses.

All eyes had been on the peso particularly after a turbulent few weeks for the Argentine currency, which Milei has spent over US$1 billion trying to prop up.

Investors had fled the currency over fears that an election rout for Milei's La Libertad Avanza (LLA) party would wreck his programme of cost-cutting and deregulation.

But in the end LLA cruised to an easy victory on continuing strong resistance to the long-serving Peronist movement which Milei defeated for the Presidency in 2023.

LLA took 40.7 percent of the vote to renew half of the lower house Chamber of Deputies and one-third of the Senate, according to results from the National Election Commission based on 98.9 percent of polling stations. 

The Peronists and its allied parties polled 31.7 percent.

It was not yet clear how many seats each party had won. Milei claimed LLA had more than tripled its representation.

He appeared on course to win the one-third of seats he requires to prevent deputies overturning his reforms but will likely need to form alliances in the Senate.

An ebullient Milei predicted the new-look Congress would be "the most reformist... in Argentina's history."

"Yesterday, a new Argentina began," said the President in an interview Monday with local news channel A24.

"Congress has constantly torpedoed the government's programme," he said, expressing confidence that a new era would begin once new lawmakers are sworn into office on December 10. 

"We need to sit down with a new Congress and seek agreements to implement reforms. I committed to that in 2023 and they voted for me to do just that," said the President.

A Cabinet reshuffle, which started last week with the resignation of foreign minister Gerardo Werthein, is expected this week.

Blow for opposition

The election dealt a blow to the opposition Fuerza Patria coalition, which had been on a high after defeating Milei's party in Buenos Aires Province local elections last month.

Buenos Aires Province Governor Axel Kicillof, Milei's rival, took heart in the fact that "six out of 10 Argentines have said that they don't agree with the model he's proposing."

The elections were the first national test of Milei's support since he won office as a "chainsaw" reformer, promising to slash one of the world's highest inflation rates and downsize a bloated state.

At an election party in Buenos Aires, hundreds of his supporters celebrated with cheers, hugs, chants and even tears.

"I'm very happy and excited. I didn't expect such a large number," said Facundo Campos, a 38-year-old marketing consultant.

Ahead of the election, Washington promised an unprecedented US$40-billion aid package to end market turmoil in Argentina, in the form of a US$20-billion currency swap line and a further potential US$20 billion from private banks and sovereign wealth funds.

Milei has cut tens of thousands of public sector jobs, frozen public works, cut spending on health, education and pensions and led a major deregulation drive in his first two years in office.

His reforms have been blamed for initially plunging Argentines deeper into poverty. They did however, slow inflation by two-thirds and erase a 14-year budget deficit.

Ahead of the election, Milei had appeared weakened by corruption scandals involving two members of his inner circle.

Adriana Cotoneo, a 69-year-old pensioner voting in Buenos Aires, said she voted LLA, "not because I believe it's the best option, but because I'm clear about who I want to be gone," meaning the Peronists.

– TIMES/AFP