Milei targets Peronist heartland in Argentina’s high-stakes vote

Among the makeshift brick homes and derelict warehouses of one of Argentina’s roughest districts, President Javier Milei is fighting to keep his libertarian revolution alive in the highest-stakes election since he took office.  

The scandal-hit leader kicked off his campaign for the Buenos Aires Province legislature in the heartland of his political enemies, in La Matanza, a working-class area that has voted for his rivals in every election since the 1980s. 

The September 7 vote is a bellwether for national midterms in October, in which Milei needs to win more seats in Congress to push through his pro-business reforms. Nervous investors dumped Argentine assets in recent days as a graft scandal surrounding the President’s sister raised questions over his ability to get voters to back him.  

A wide loss for Milei’s allies on Sunday is likely to accelerate the selloff, while a win, a tie or even a narrow defeat in the opposition-dominated province would probably trigger a rally and supercharge his mandate for tough austerity, analysts say.  

“Our view is that the market is pricing in a significant defeat,” for the government, said Thierry Larose, a portfolio manager at Vontobel Asset Management, in an interview.

A loss by a margin of more than five percentage points would be “serious” for the market, while more than ten percentage points would be “very concerning,” he said.

Since taking office in 2023, Milei, an ally of Donald Trump, has slashed public spending and privatised state companies in a bid to end decades of economic malaise.

La Matanza

La Matanza, home to about 1.8 million people, is one of 135 municipalities in Buenos Aires province which together account for nearly 40 percent of the country’s voters. Historically, the area has been controlled by Peronism, the nationalist and economic populist movement that Milei blames for most of Argentina’s ills. 

The president focused on La Matanza as a particularly bad example of Peronist mismanagement, according to Leila Gianni, one of Milei’s city hall candidates in that district. Areas like these, on the outskirts of the capital, have poverty rates that far exceed the national average. 

“The province has been kidnapped by an economic model that impoverishes, where workers can’t live in peace and job creators flee,” Gianni said. 

In social media videos attacking the local mayor, Gianni showed an urgent care facility without any signs, an open field where people burn their trash and a garbage-strewn stream where mosquitoes breed. 

Milei allies like Gianni suffered a heavy blow last month when local media published leaked audio messages in which the head of the ANDIS national disability agency, who has since been fired, described alleged kickbacks on pharmaceutical purchases benefiting Milei’s sister, Karina Milei. After the scandal broke, the President was pelted with stones by enraged voters while he was campaigning. His government has denied wrongdoing.

With the currency market in turmoil and political risks growing, Argentina’s dollar bonds have lagged all emerging-market peers in the past month, with the notes delivering losses of 4.1 percent, compared to an average gain of 1.5 percent for the rest of developing-world debt, according to a Bloomberg index. 

“Current bond prices still reflect some lingering scepticism about whether there will be sufficient political support to sustain the economic reforms,” said Pedro Quintanilla-Dieck, a strategist at UBS. 

Argentina's peso also slumped near record lows this week before stabilising after the government announced it was intervening in the exchange market. That marks a shift for an administration that has championed free-market economics and allowed the peso to float within established bands.

Investors fear that disappointment among Milei’s supporters over the scandal may depress turnout among his base. 

As Gianni campaigns in La Matanza’s unpaved trash-strewn streets, voters crowd around the petite mother of five, looking for solutions to the joblessness, poverty and crime that blight their lives.

Milei’s strongest card is his success in curbing consumer price rises. Annual inflation slowed to 37 percent in July, from a peak of nearly 300 percent last year.  

Miriam Castaño, 50, who lives near the putrid stream, approached the candidate to thank her for slowing inflation, which she sees as Milei’s greatest achievement, even though the drop in sales she suffered under his austerity drive led her to shut down her clothing stall. 

She said she managed to earn US$515 in July by selling her merchandise through TikTok and by renting out two rooms in her house. But she said she didn’t expect Milei to be able to reverse the damage done by years of Peronist rule in a single term.  

Castaño said she didn’t know whether the allegations about Milei’s sister were true, but said they wouldn’t affect her vote. 

“I backed Milei with a lot of faith,” she said. “It’s harder to make ends meet and I had to close my shop, but I’ll keep voting for him.”