Javier Milei superstar

In May, the Javier Milei administration exuded joy at its unexpected victory in Buenos Aires City’s local elections. In September, it exuded desperation after an unexpectedly big defeat in local elections in Buenos Aires Province. Now, it seems the Milei world is back on top of the world after scoring a commanding victory in the nationwide midterms.

The moral is that politics is increasingly unpredictable, that nothing lasts forever and that change happens overnight. All political players should keep that in mind. But for now Argentines have given Milei a new, more powerful life, which he will have to use wisely to mature his young government into adult life.

As discussed here last week, when Argentines woke up the morning after the election, the country’s virtues and woes are still around. The size of those problems, however, is relative to the capacity to fix them and the result of the elections, given the negative expectations that had built up in the run-up to the vote, gives the government more tools to find its solutions.

On the government’s roadmap, October was from the start meant to be an inflection point toward a virtuous political and economic cycle. That notion came into question because of a series of unforced errors that came from within the Casa Rosada: fighting potential allies, overspending Central Bank reserves to keep an overvalued peso and at least three major corruption scandals. The Milei government painted itself into a corner – Argentines decided to pull it out of it.

Now that he has better cards, Milei needs to play them well, which means not overplay them. His government has been sprinting since December 2023; now that it has crossed the midterms finish line, it should pace down into marathon mode.

Winning the election saved the administration from making immediate and desperate corrections from a position of weakness, but it does not save them from making changes altogether. Milei initially seemed to understand this. His victory speech was moderate and opened the door to dialogue with the moderate members of the opposition he will need to pass the reforms he has promised and investors are expecting. His team – slightly disorganised given the internal power struggles and jockeying for positions in a coming Cabinet reshuffle – is summoning governors to begin the talks.

Still, Milei faces two risks. The first is overconfidence, which could lead to the second risk, procrastination. From the many interpretations of why over 40 percent of Argentines voted for his candidates (many of them little known) one very plausible one is that Milei was still the least bad option. This puts more pressure on the government to deliver in the second half of Milei’s term. Delivery means getting better economic results.

While most polls showed that inflation this year moved off from the top of the public’s list of concerns, some enduring problems like rising unemployment or incipient economic stagnation were not enough to make voters switch back to the other side of the electoral offering, as the latter still triggers memories of super-high inflation. This means that Milei, even as his government reached the election with the lowest approval ratings since he became President, has not yet got to the tipping-point at which the public will vote against him, regardless of who he is facing. 

Paradoxically, given that he is an economist, the one area where he faces the larger risk is the economy. A certain stubbornness that he believes might get him a Nobel Prize has put him on the brink of collapse on a couple of occasions already. Avoiding the temptation to stick to a path that has proven to be unsustainable will be difficult for a president who can argue that he has won the first half of a game many told him he would lose. Solving the foreign exchange riddle so that the country starts accumulating rather than wasting reserves is a counterintuitive move the President and his economic team will have to make – if not tomorrow, sometime in the coming months.

Guidance from former president Mauricio Macri, who in his 2017 midterm election got a sweeping victory like Milei’s this year, might serve the current head of state and help avert these fears. Macri moved from feast to gloom within only a few months, and a poor economy blocked his re-election. Milei now has a clear path to re-election in 2027, as the opposition is not only divided but imploding, scratching its head about what happened. It remains leaderless. The future, more than ever, is exclusively for Milei to win or lose.