Argentina’s midterm vote explained: A key test for Trump ally president Milei

A rapid change in fortunes

At the start of the year, pollsters and pundits were predicting a smashing success for Milei in the midterms.

His huge cuts to state spending delivered Argentina's first fiscal surplus in nearly 15 years and pulled down monthly inflation from 25.5% to 2%. Argentines celebrated relief from ever-rising prices and took comfort in a strong peso that made it cheaper for them to snap up imported goods and vacation abroad.

With his approval ratings high, Milei took victory laps through Europe, Latin America and, most frequently, Trump's Mar-a-Lago club, railing against the evils of socialism and the corruption of the political elite. He pushed key deregulation laws through an opposition-dominated Congress, allying with the right-wing PRO party of former President Mauricio Macri and striking deals with moderate governors.

How quickly the mood turned

Milei's aura of infallibility first began to crack in February, when he promoted a dodgy memecoin on his social media account that quickly collapsed, leading to $250 million in losses for investors. Then in August, Milei's powerful sister was accused of taking bribes from a government medicine supplier. She denies wrongdoing.

The latest blow came earlier this month, when Milei’s leading candidate in Buenos Aires province, José Luis Espert, dropped out of the midterm race after admitting he received $200,000 from a businessman indicted in the U.S. for drug trafficking. He says it was for consulting services.

The controversies have hurt Milei's reputation as a straight-talking outsider determined to tear down the corrupt establishment, experts say, particularly at this time of harsh austerity.

“It was the first wake-up call when people started to ask, maybe (Milei and Karina) are asking us to make sacrifices that they're not making themselves," said Eugenia Mitchelstein, the chair of the social sciences department at Buenos Aires’ San Andrés University.

Strange campaigns

Tactical errors compounded matters. Milei ran an aggressive campaign strategy in some two dozen provincial elections in recent months that pitted a slew of unknowns from his scrappy libertarian party against more established rivals.

His decision to forgo any attempt at coalition-building alienated potential political allies, who punished Milei by passing spending measures in Congress and overturning his vetoes.

The run-up to the midterms — in which half the seats in the lower house of Congress and a third of the Senate are up for grabs — has also been rough. Although veteran politician Diego Santilli is now at the top of the party's Buenos Aires list after Espert stood down over the scandal, voters will still see Espert on the ballot Sunday after electoral authorities ruled it was too late to print new ones.

The other Buenos Aires candidate, Karen Reichardt, is a former model and actress who has recently come under fire for old social media posts attacking national soccer hero Lionel Messi and insulting her political enemies with racially insensitive language. She did not respond to a request for comment.

Markets on tenterhooks

Milei’s first major electoral defeat — in which his party lost Buenos Aires province, home to 40% of the population, to the incumbent populist Peronists by a landslide — revealed waning public support as Argentines reeling from two years of cutbacks grow impatient with a contracting economy and falling wages.

The loss tipped already jittery markets over the edge. Investors dumped Argentine bonds and sold off the peso, prompting the central bank to burn through its foreign currency reserves to prop up the currency.

That's when Trump and U.S. Treasury Secretary Scott Bessent stepped in to save their closest political ally in the region.

The Treasury bought up pesos — the currency that even Argentines distrust — and confirmed a $20 billion swap line to Argentina's central bank on what Bessent called a “bridge” to the midterms. Bessent said he was working on another $20 billion loan from private banks, and Trump said the U.S. would even boost beef imports from Argentina to bring down U.S. meat prices.

But it seems that not even such dramatic moves from the world's biggest economy could restore faith in the famously volatile peso. Argentine investors — who can more easily take money out of Argentina since Milei's government scrapped capital controls this year — continued ditching pesos. The currency slid to a new record low of 1,476 per dollar Monday.

“It's the managerial class changing their pesos furiously into dollars who are sabotaging Milei,” said Christopher Ecclestone, a strategist with investment bank Hallgarten & Company.

Trump's rescue raises stakes, and questions

Washington’s multibillion-dollar rescue of Argentina has unleashed backlash across the political spectrum — and the Western Hemisphere.

In the U.S., Democratic and Republican lawmakers, farmers, ranchers and Trump supporters have increasingly questioned the merits of showering money on a serial defaulter and rival agricultural exporter.

In Argentina, Trump's warning that U.S. assistance was contingent on Milei’s victory in the vote breathed new life into the opposition Peronist party, which urged Argentines long wary of U.S. interventionism to punish Milei on Sunday.

“Compatriots, Argentina is a country too great and dignified to depend on the whims of a foreign leader,” said former Peronist President Cristina Fernández de Kirchner in a video message Thursday from her Buenos Aires apartment, where she’s serving out a six-year sentence for corruption.

Markets reeled as investors fretted that the U.S. aid might not come at all. Consultants tried to parse Trump's cryptic demand that Milei clinch a congressional victory. Does it mean Milei increasing his party’s tiny congressional minority? Does it mean securing enough seats to defend his vetoes?

With only some congressional seats up for renewal, a landslide win for Milei’s party wouldn’t give it a majority in Congress.

Even Milei’s supporters took to social media to express unease, with many attacking then-Foreign Minister Gerardo Werthein for mishandling the situation. Werthein tendered his resignation without explanation late Tuesday.

Protesters rallied in front of the U.S. Embassy in Buenos Aires on Wednesday, banging pots and setting American flags alight.