Argentinian Midterm Elections Could Influence Milei's Presidency and US Relations
There's a stark contrast in Argentina, particularly along the Riachuelo River's north bank. Luxury car sales have skyrocketed since President Javier Milei lifted import restrictions. Bankers and oil executives in the bustling Puerto Madero financial district celebrate Milei's economic reforms, including lifting the ban on online dollar sales and attracting foreign investment.
But not far away, across the polluted waterway, the reality is dramatically different. In the neighborhood of Isla Maciel, Veronica Leguizamon, a 34-year-old mother of four, struggles to provide for her family. She depends on a local soup kitchen to feed her children after Milei's government cut subsidies for public services and removed price controls on basic foods.
These contrasting realities in Buenos Aires, a little over a kilometer apart, reflect the divide among the Argentine voters as they prepare for the upcoming nationwide congressional midterms. The outcome of these elections will likely shape the future of Milei's presidency and could influence whether the US continues its financial aid to Argentina.
Implications of the Midterm Elections on the US Aid Package
US President Donald Trump has threatened to cancel a $20 billion aid package for Argentina if Milei is defeated by a "socialist or communist" in the midterms. This statement stirred panic in the Argentine markets, triggering a sell-off.
Trump's warning likely refers to Argentina's Peronism movement, a populist ideology that has led to economic instability in the past. Previous Peronist governments, known for their reckless public spending, have left Argentina in a cycle of debt and inflation.
The possibility of a Peronist comeback has caused anxiety in the markets. When the Peronist coalition won last month's Buenos Aires provincial elections by a landslide, investors feared Milei's economic reforms were losing support and rushed to withdraw their investments from the country.
US Aid Package Boosts Argentina's Economy
In a rare move, the US Treasury stepped in to stabilize the situation by selling dollars to meet the soaring demand, signing a $20 billion credit line, and promising another $20 billion in aid from private banks. Milei's supporters celebrated this intervention, which helped avert a currency crisis in Argentina.
Argentinians Grapple with Economic Reforms
Milei's economic reforms, although initially welcomed, have resulted in decreased purchasing power for many Argentinians. Inflation remains high at over 30% annually, causing wages, pensions, and welfare payments to lose value.
Even in areas that once supported Milei, there's growing dissatisfaction. In Isla Maciel, a traditionally Peronist stronghold that gave Milei 42% of votes in 2023, residents are struggling. Demand at local soup kitchens has more than doubled in the past year, indicating increasing economic hardship in the area.
Despite the challenges his austerity measures have caused, Milei promises to continue with his economic reforms. However, his trademark chainsaw, a symbol of his aggressive cuts to government spending, hasn't been seen in months.
Uncertain Future for Argentina
Most polls suggest a close race between Milei's La Libertad Avanza (Liberty Advances) party and the Peronist coalition in the upcoming elections. Half of Argentina's lower house and a third of the Senate are up for grabs.
At stake is the future of Milei's economic reforms. A defeat could lead to a devaluation of the peso, which would increase inflation and undermine Milei's efforts to stabilize the economy. Argentinians, once again, are bracing for economic uncertainty.