Argentine markets cheer Milei’s mid-terms triumph

The benchmark Merval index gained a whopping 21.78% on the surprisingly strong performance of Milei’s party.

The peso, which investors had fled before the vote, climbed over 6% against the dollar before falling back slightly to close up 3.6%.

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, signalling increased demand for the country’s debt.

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, continuing strong resistance to the long-serving, centre-left Peronist movement that Milei defeated for the presidency in 2023.

LLA took 40.7% of the vote to claim half of the lower Chamber of Deputies and one-third of the Senate, according to results from the National Election Commission based on 99% of polling stations.

The Peronists polled 31.7%.

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 one-third of the seats he requires to prevent MPs overturning his reforms but will likely need to form alliances with the centre-right in the Senate.

Trump’s ‘very strong endorsement’ 

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.

Ahead of the election, Washington promised an unprecedented US$40 billion aid package to end market turmoil in Argentina.

“I gave him (Milei) an endorsement, (a) very strong endorsement,” Trump noted aboard Air Force One.

Analysts said Milei’s election win had eliminated the risk of a disorderly depreciation of the troubled peso, seen as being artificially kept too strong.

It “buys Milei time to adjust in an orderly way and on his own terms”, British firm Capital Economics wrote in a note, adding that he could expand a dollar-peso trading band to allow for more fluctuation.

Milei, in an interview Monday with A24 television channel, however, appeared to rule out any change to the current exchange rate regime.

Turnout at four-decade low 

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 were initially blamed for 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 for LLA “not because I believe it’s the best option, but because I’m clear about who I want to be gone” – referring to the left-wing Peronists.

At 68%, turnout was the lowest in a national election in four decades.