Milei at a crossroads: between isolation and the art of the deal

Two important dates in this year’s electoral calendar are less than two weeks away. August 7 is the deadline for political parties to seal their alliances, province by province, for the October midterm elections. A week later, on August 14, is the due date for candidacies. These will be character tests for President Javier Milei’s party, La Libertad Avanza, which is for the first time since its surprise win in 2023 fielding a complete electoral offer on its own and has some important choices to make.

The first decision is whether to seek alliances with provincial governors, who in broad terms agree with his economic programme, or fly solo. This week, La Libertad Avanza (LLA), led by presidential sister Karina Milei, struck a deal with the governor of Mendoza, Alfredo Cornejo of the UCR Radical Party, to field a joint list of candidates in the midterms in the western, Malbec-famous province. Mendoza is electing five national deputies this year.

A handful of other provinces will follow suit in this final week of negotiations. One obvious candidate is Chaco, where LLA had already reached an agreement during the local elections in May. As discussed here, Chaco was the first case of what could become a norm or an exception, depending on the Milei siblings’ end game.

The governor of Entre Ríos, Rogelio Frigerio, is also one step away from siding with Milei’s candidates in his province. A decent relationship with the governors of San Luis, Claudio Poggi, and San Juan, Marcelo Orrego, also forecasts a possible understanding.

Scoring deals with only five of the country’s 24 governors could be seen as a strength or a weakness for Milei. The President’s popularity has improved in the last month, as inflation stabilised even after the government partially lifted the cepo (capital controls). Milei believes that achievement will be enough to transfer his popularity to his own candidates around the country.

But the balance he is trying to strike is delicate, both politically and economically. The country’s financial front is far from stable. In August, as in these last days of July, there will be more pressure on the foreign exchange market, as the lion’s share of the farming sector’s exports are over. The economic team’s massive increase in interest rates – up to 65 percent in this week’s peso debt auction – shows that Milei’s top, and almost sole, priority is to keep the economy stable through to the elections. Three months is a long stretch.

The pressure is also building politically, from the governors’ side. This week, 10 Northern provinces met in Catamarca to demand that the federal government not veto two bills passed by the Senate at the governors’ request which will increase the federal funds flowing to provincial capitals. The amount of cash that Buenos Aires distributes among provinces has dropped 11 percent in real terms in 2024 and is shrinking by 10 percent so far this year. Milei has said he would veto anything that impacts his beloved fiscal surplus — a brownie point which is his only safeguard against market concerns about the sustainability of the programme.

Casa Rosada’s calculations are as follows: five or six provincial governors behind electoral alliances will be enough to get the votes needed in both chambers to uphold presidential vetoes. Until December, Milei only wants to avoid a Congressional defeat. The proactive agenda will come after December 10, when the new Congress elected in October takes charge.

His plan, however, depends on a resounding victory in October. Not only because this will give him more votes in Congress – although never a majority, and not even his own quorum – but because everybody likes, and fears challenging, a winner. For that, La Libertad Avanza should not only come in first in the national count – something very likely given the fragmentation or lack altogether of organised national opposition parties – but also win around 40 percent of the vote, a symbolic figure which, if projected to 2027, could leave Milei on the verge of a first-round re-election victory.

All easier said than done, it might even sound like science fiction. Shunning or (even worse) defying governors has the side effect of pushing five of them, including those from the large and influential provinces of Córdoba and Santa Fe, to announce their own electoral move, a first step toward a centrist option for 2027. For now, given the extreme polarisation, it seems earmarked for failure — but it could eventually strike a chord in voters if the political winds change.

* Marcelo J. García is an Argentina political analyst and Director for the Americas for the Horizon Engage political risk consultancy firm.