The consensus view is that President Javier Milei’s La Libertad Avanza will win this year’s midterm elections. Most Argentines voted for Milei to lower inflation, and inflation is slowing down – slowly but surely. The trick is based on two anchors: the fiscal policy of “chainsaw” austerity and the exchange rate policy of peso appreciation, which helps keep the FX rate down. But two other consensuses are building: that these two anchors are difficult to sustain.
Milei’s electoral plan for the year ahead is marching on as designed. The President is becoming the sole leader of the right-of-centre ground in Argentina, as his La Libertad Avanza party eats former president Mauricio Macri’s PRO party like Pac-Man. Their likely coalition in Buenos Aires Province for the September provincial and October national elections will be led by the colour violet – that of the ruling party – and is also likely to include some factions of the centrist Unión Cívica Radical (UCR).
This segment of the political establishment aligns with Milei because the President continues to be on the right side of public opinion. After five consecutive months of decline, public trust in the administration improved five percent in May, according to the index put together by Di Tella University. Since Milei became President, there has been a direct correlation between inflation falling and his approval staying up. May was no exception: the April figure posted by the INDEC national statistics bureau was 2.8 percent after March’s 3.7 percent – even though the government lifted most of the ‘cepo’ FX market restrictions.
With less than five months to the midterm vote, nothing seems to be standing in the way of a good result for the government. But Milei 2025 should already start thinking about Milei 2027 – the politician who needs to win re-election.
One consensus building against Milei is that peso appreciation – which hampers the accumulation of Central Bank reserves – is unsustainable. Ricardo Arriazu, an economist whom Milei admires and who admires Milei, said this week that the country should have US$100 billion in international reserves and that he did not understand the government’s insistence on not buying now that the exchange rate is around the middle of the floating band. Alfonso Prat-Gay, who was economy minister under Macri, also warned that “fiscal surplus is good, but external [FX] surplus is crucial,” given the debt payments the country faces in the coming years. Economist Martín Rapetti, whom Milei despises, showed how economies in the region with similar exchange regimes to Argentina – such as Peru and Uruguay – have reserves totalling between 20–30 percent of their GDP. Argentina’s reserves-to-GDP ratio is six percent.
Milei is ignoring this consensus and believes he will prove everybody wrong. Finance Secretary Pablo Quirno said this week that accumulating reserves “is not a daily concern” for the government.
The second consensus building contrary to Milei’s programme is criticism of the freeze on public works projects. This week the governor of Río Negro Province, Alberto Weretilneck, threatened to sue the federal government for failing to maintain two federal roads – RN22 and RN15 – that cross the province from east to west and from north to south, respectively. The federal government “does not know and does not care about the problems of the people who live in our provinces,” charged Weretilneck, who until now had a good relationship with the Milei administration.
Federal government investment in public works was 0.1 percent of GDP in the first four months of the year. Before Milei took office, it was four times higher. A decade ago, it was nine times higher.
All provinces are suffering, one way or another. Another group of governors were complaining last week at a massive mining event held in Buenos Aires, Arminera. Mining is one of the big hopes for Argentina’s economy and a potential source of the US dollars the country will desperately need to guarantee stability. In 2024, the country exported a record US$4.7 billion in mining products, but Mining Secretariat projections say that number could triple by 2030 and increase fivefold by 2035, driven mostly by lithium and copper.
But two weeks ago, a representative of mining giant Barrick Gold said at a business event that, given the lack of infrastructure on this side of the border, a foreign company looking for these minerals would likely pick Chile instead. This set an alarm off for the mining governors: “The federal government needs to understand that we have to work together on infrastructure because the roads will not be built only with private investment,” blasted Mendoza Province Governor Alfredo Cornejo, a member of the UCR who wants to get along well with Milei. Other governors echoed his words. Their voices might become louder over time.
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