First: One of the prodigal sons of the global extreme right becomes the black sheep of the family. Even with Sunday’s election result favorable to Milei, the economic model does not yield convincing results. Inflation fell, but it does not give way to a single-digit interannual rate and instead rebound in monthly comparison. The manufacturing close plants and ballast loose capacity. unemployment reached the highest level in four years and the capital match of the country. Second quarter GDP fell 0.1 percent on a quarterly basis and there are clues that there could be another contractionary period. Despite a partial recovery of financial assets after the election, the real economy is not picking up. By subtracting the noise of the lifeline that Trump threatened to puncture, a coercion for the voter, the king is left naked to the outside.
Second: Trump trips up his story of austerity and nationalism, but saves his skin. The US Treasury rescued the Argentine peso through the sale of dollars and an exchange line for up to 20 billion, in addition to an equivalent loan with Wall Street, subject to a agreement on the collateral. As if that were not enough, Trump irritated American ranchers with the promise of importing Argentine meat. In exchange for the rescue, Bessent demanded cutting ties with China and preferential access to uranium and telecommunications. Without modesty, Trump declared that “Argentina is dying” to quell protests. In addition, the White House conditioned the continuity of the oxygen to an electoral victory for La Libertad Avanza. With Milei’s victory and the appreciation of the peso, Trump saves face.
Third: Foreign banks rub their hands together. Milei has become a genuine “Wall Street fool”, a milking subject. Days before the election, in a stimulating event for surrealists, the Casa Rosada received the shark Jamie Dimon, CEO of JP Morgan, at the Museum of Decorative Art in Buenos Aires. Morgan Stanley bank ventilated his skepticism that the exchange rate “will lead to a current account balance,” and believes that floating the peso is inevitable. Meanwhile, the editorial advisor of the Financial Times Gillian Tett warned that “what is happening [con el salvataje] It is a blatant form of financial imperialism.” Although the systemic risk decreases with the favorable result, the fundamentals are not up for celebration.
Quarter: The International Monetary Fund suffers a new blow to its legitimacy. Argentina has to almost 57 billion dollars to the IMF. With 35 percent of the portfolio, street is the number one client, followed by Ukraine with just 8.7 percent of the total. In April, Milei agreed to a new loan of 20 billion to stabilize the economy. Months later, international reserves fell to levels inadvisable due to the elections and the overvaluation of the peso. With the election result adverse In the Province of Buenos Aires, chainsaw breakdowns gained scrutiny. Certainly, with the gains in Congress, Milei buys time to implement reforms dictated or supported by the IMF. But if foreign support does not stabilize the economy and reforms instead overpromise, the erosion of confidence will grow.
Quinta: José Antonio Kast and Johannes Kaiser gain and lose external validity. The most xenophobic of the new far-right generation in Latin America are fighting a fierce battle with the leftist candidate Jeanette Jara ahead of the first electoral round on November 16 in Chile. They both praised Milei before, but today they put things in the way. In an attempt to uncheck after the corruption scandals and the defeat in the Province of Buenos Aires, Kast marked distance: “We have a big difference with Argentina, we have an independent Central Bank, we have certain institutions that are much healthier […] We have a good relationship with the mass media,” he stated in an interview with The Nation. Before, after the LIBRA cryptocurrency scandal, Kaiser declared: “I am not Milei nor am I Bukele.” Certainly, Chile and Argentina diverge in many aspects. No zebra stripe is identical. But the roots of the ultras’ family tree will be more questioned. In Chile and other countries in the region, the fear of interference from Washington will be a deterrent to the nationalist vote. However, as a cross of the coin, the pro-Yankee vote salivates for “connected” ultras.
Friday: Countries with political stability gain investment attractiveness. Argentina will be seductive in the short term for speculators who are betting on a post-election rebound after huge discounts on financial assets, but social and economic tensions persist. In a turbulent electoral environment in South America and street protests in Ecuador and Peru, plus an additional 10 percent increase in import tariffs from the United States to Canada, Mexico’s fundamentals look solid. If Claudia Sheinbaum manages to increase public investment and generate benefits and synergies for private investment, the stars misaligned by Trump could be rearranged.
In short, the midterm elections were a test of oil in the jargon of motorsports, both for Milei and for the regional far-right. Due to the Argentine legislative design, the net profits of La Libertad Avanza were foreseeable, as stated here in However a week ago. And so it was: Milei added and MAGA’s distant relatives popped the champagne. However, Macri and Milei together accounted for more than 13 points of the total vote for deputies in just two years, barely adding up to 41 percent of the support. Only the lifeline of the United States, which turned a potential financial crisis into a plebiscite, kept Milei afloat. Towards the outside, there remain more doubts than certainties. The projected weakness will weigh as the days go by. After the storm, the damage is done.
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