What is at stake for Milei and Trump in Argentina’s legislative elections?

Does Trump’s aid to Milei test US influence in the Argentine elections? Getty Images via BBC How can a legislative election in South America become so relevant that the American government tries to influence its outcome? The answer is in Argentina. Sunday’s vote (10/26), which will renew part of the Argentine Congress, has gained unusual relevance in the political, economic and geopolitical spheres. In other words, the polls can define much more than half of the seats in the Chamber of Deputies and a third of the Senate in dispute. See the videos trending on g1: See the videos trending on g1 For Argentine President Javier Milei, a libertarian economist allied with United States President Donald Trump, the episode is the most delicate test of his almost two years in government. But this election could also be crucial for the Argentine opposition and for Buenos Aires’ new alliance with Washington, as Trump himself said. So, what is ultimately at stake for each side? For Milei: a delicate test Months ago, the legislative election seemed to Milei to be an opportunity to consolidate his political project and expand its support in a Congress where he does not have a majority (something crucial for the approval of changes to the law and presidential vetoes, for example). His drastic adjustment plan began to show results: monthly inflation fell from 25% when he took over the government, in December 2023, to around 2% currently; the poverty rate fell 10 percentage points until the first half of this year; In 2024, the country achieved a fiscal surplus unprecedented in more than a decade. These advances, however, were accompanied by great sacrifices for the population. For example: The average real income of many Argentines has fallen, from public servants to retirees; The poverty rate still reached 31.6% or 14.5 million people, in the middle of the year, according to official data. The fiscal adjustment promoted by Milei has a strong impact on the economy and the daily lives of Argentines. AFP/Getty Images via BBC “It’s an important election, because what is at stake is the continuity of this effort, which is hard, to stabilize the economy or for Argentina’s return to the period of high inflation,” Sergio Berensztein, an Argentine political analyst, told BBC News Mundo (BBC’s Spanish service). In parallel to the adjustment promoted by Milei, some scandals hit the president, who came to power with the promise of ending the corruption of the political “caste”. Milei himself starred in a dark case, now under investigation by the US Court, after promoting a cryptocurrency in February whose value plummeted in a matter of seconds. Karina Milei, the president’s sister, secretary general of the Presidency and one of the most influential people in the Argentine government, was mentioned in leaked audios in August, which suggested that she had received part of an alleged bribery scheme at the National Disability Agency (Andis, in its Spanish acronym). And the Milei government’s candidate for deputy for the province of Buenos Aires, José Luis Espert, resigned this month from his candidacy after his ties to a businessman accused of drug trafficking in the USA became public. Although everyone denies having acted irregularly, the polls will also measure the political cost of these cases and the popular support that Milei still has. In the final stretch of the legislative campaign, Milei tries to revive the government base. Getty Images via BBC His party, La Libertad Avanza, suffered its worst electoral defeat last month when it lost to the Peronist opposition in the legislative elections in the province of Buenos Aires, the most populous in the country. The result caused apprehension in the markets and led many investors to exchange pesos for dollars as protection against possible losses, which generated exchange rate instability. One of the key points of next Sunday’s vote will be whether Milei will obtain the support of a third of the Chamber of Deputies, the margin necessary to maintain his vetoes on approved laws that the president rejects. “If [Milei] If he doesn’t have this third alone, he will be able to achieve it by negotiating with allies in Congress”, says Berensztein. “The big question is whether he will be willing to moderate his always aggressive and very controversial positions in these first two years.” implement. Without the necessary support, whether due to a performance below expectations at the polls or due to political isolation, it is likely that the markets will react negatively again, and the remainder of the president’s term will be compromised. For the opposition: dispute over the agenda In the opposite camp, the Argentine opposition seeks to consolidate its influence on the national agenda through Congress on Sunday. In recent months, Milei has suffered significant legislative defeats due to of specific agreements between different blocs, after vetoing laws that he considered contrary to his austerity plan and clashing with both Congress and provincial governors. The governor of Buenos Aires, Axel Kicillof, is one of the main names in the Peronist opposition. Getty Images via BBC But the opposition is far from forming a single bloc. Even within Peronism, the main force opposing the government, there is groups that respond to different leaders: former president Cristina Fernández de Kirchner (under house arrest after being convicted of corruption), the governor of the province of Buenos Aires, Axel Kicillof (who has adopted a more moderate tone), and the former minister and former candidate Sergio Massa. On the other hand, in the political center, a new group called United Provinces emerged, which brings together governors of different parties. These regional leaders, notes Berensztein, “have the potential to build a distinct electoral alternative that breaks polarization a little.” Thus, Sunday’s elections could serve as a way for the opposition to begin to reorganize itself, with different profiles, with an eye on the 2027 presidential race. For Trump: the fate of the bailout Trump ordered unprecedented financial aid in the US to Argentina to alleviate the Milei’s growing political and economic problems, with whom he maintains ideological affinity. So far, this aid has resulted in the opening of a swap line (currency exchange agreement) for US$20 billion (around R$108 billion) between the two countries and the allocation of around US$1 billion (around R$5.4 billion) to buy Argentine pesos, in order to avoid an even greater devaluation of the currency. Trump also mentioned the possibility of importing Argentine meat, and the American Treasury Secretary, Scott Bessent, declared that he intends to create an additional fund of US$20 million (around R$108 billion) with private banks to invest in the South American country. The initiative, however, has not yet come to fruition. For Washington, financial support for Argentina serves the ‘strategic interests’ of the States United. Bloomberg/Getty Images via BBC “We don’t want another failed state in Latin America, and a strong and stable Argentina as a good neighbor is explicitly in the strategic interest of the US,” said Bessent on the social network X, on Tuesday (10/21). Monica de Bolle, a senior fellow at the Washington-based Peterson Institute for International Economics, says that with these measures the Trump administration is trying to reverse “China’s very strong presence” in South America. “Argentina has assets of economic, strategic and geopolitical interest for the USA,” De Boelle told BBC News Mundo, citing as an example natural gas, reserves of critical minerals such as lithium and rare earths. “This aid to Argentina allows the US to negotiate more aggressively to assert its interests in various areas,” he explained. Even so, the very Trump warned that aid to the country depends on Milei’s electoral performance. “If he doesn’t win, we’re leaving,” he declared when welcoming Milei to the White House this month. On Sunday (10/19), Trump defended the agreement with Argentina, saying that the country “is fighting for its life.” Despite the US Treasury’s action, the dollar returned to the limit of the exchange rate band before the legislative elections. Bloomberg/Getty Images via BBC As a result, pressure on the dollar’s price continued in Argentina, and the Treasury increased the purchase of pesos to contain it. It is still unknown how all this will influence the Argentines’ vote. Trump, however, has been receiving criticism from both Democratic opponents and nationalist sectors close to him, who consider it risky to bet American taxpayers’ money on this support. De Bolle, from the Peterson Institute for International Economics, states that the rescue promised by the American government does not solve the “fundamental problem” of the vulnerability of the Argentine monetary system and the country’s dependence on the dollar. “The risk for the US is that at some point they will have to decide between leaving Argentina or continuing to send money without knowing how they will be repaid,” said De Bolle.

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