Has Argentina turned a corner after Milei’s midterm success?

Political consolidation strengthens the outlook for Argentina’s investment framework

Javier Milei’s La Libertad Avanza (LLA) and its key political ally Propuesta Republicana (PRO) delivered a decisive performance in Argentina’s midterm elections. The coalition outperformed expectations, capturing enough seats to surpass the critical one-third threshold in both chambers of Congress — a position that secures Milei’s veto power and grants him greater control over the legislative agenda. LLA-PRO gained 14 seats in the Senate and 64 in the Chamber of Deputies, lifting their totals to 19 out of 72 and 92 out of 257, respectively.

Yet this is far from a sweeping mandate. The result reflects the consolidation of the anti-Peronist vote rather than a dramatic expansion of Milei’s support base. Support for centrist parties such as the Radical Civic Union (UCR) collapsed, squeezed by the d’Hondt system and tactical voting that favoured LLA-PRO. Within the Peronist camp, divisions between local mayors, national figures and factions aligned with Juan Grabois weakened mobilisation, particularly in Buenos Aires Province. Turnout for this election, Argentina’s second lowest since the restoration of democracy in 1983, highlighted the electorate’s fatigue rather than enthusiasm for a new political era.

From consolidation to governance

With Congress more navigable, Milei can advance previously stalled labour market and tax reforms. His strengthened position has also likely unlocked financial support from Washington, a critical development as Argentina faces acute currency pressures and a challenging debt-repayment schedule over the next six months. The combination of legislative leverage and US backing offers a promising opportunity to recalibrate Argentina’s economic policy.

That opportunity will demand careful coalition management. To pass structural reforms, Milei must build issue-based alliances with smaller blocs and provincial representatives to secure a majority. Expect intense negotiations with governors, many of whom will trade local infrastructure or fiscal concessions for congressional support. Similarly, the integration of former PRO members expands Milei’s technical capacity, but also introduces new political frictions and competing priorities within the governing coalition.

On the other side of the aisle, Milei may enjoy some extra breathing room due to opposition infighting. In a widely circulated open letter, Cristina Fernández de Kirchner criticised Buenos Aires Province Governor Axel Kicillof for running a separate provincial campaign and “helping regroup the anti-Peronist vote”, a move she argued deepened the opposition’s defeat. These rifts within the Peronist movement show that the opposition remains fragmented and politically adrift.

A familiar cycle — can Milei succeed where his predecessors have failed?

It’s important to remember here that Milei “doesn’t have any special sauce” to fix Argentina’s entrenched macroeconomic problems, as one Buenos Aires-based investor told us. He has followed a similar playbook to previous right-of-centre governments, cutting inflation by maintaining a strong peso. While his administration has been very effective in rapidly eliminating the fiscal deficit, he has been able to pursue aggressive spending cuts because of widespread rejection of Kirchnerism after more than a decade of economic misery. His reform agenda has ridden a wave of political momentum; it could just as easily be unravelled by a shift in popular sentiment.

As Javier Romero, former policy director at PRO’s think tank Fundación Pensar, told us: “It’s worth remembering that Mauricio Macri also won decisively in 2017, taking 40 per cent of the vote and defeating Cristina Fernández de Kirchner in Buenos Aires, but his economic programme later collapsed. To be fair, Macri was still running a deficit and lacked the US support that Milei now enjoys. But the success of this new phase will still depend on the president’s political skill.”

The immediate macroeconomic challenges facing Milei have the potential to rapidly undermine his political momentum. The Argentine peso, widely believed to be overvalued, is coming under significant pressure due to domestic dollar demand. Major outflows will continue during Argentina’s peak southern hemisphere summer tourism season at least until the agricultural exports resume in March, continuing to erode the central bank’s dwindling reserves. At the same time, Argentina has to make $1 billion disbursement to bondholders by the end of November, with more debt repayments to come in January. The risks associated with further devaluation and even a potential free float of the peso loom on the horizon.

The outlook for investors

Despite lingering uncertainties, the midterm results undoubtedly offer investors a measure of predictability. Crucially, the Régimen de Incentivo a Grandes Inversiones (RIGI) appears secure and may even be expanded, supporting energy, mining and infrastructure projects. Investors who had been wary of regulatory uncertainty now face a more predictable environment, with fewer immediate threats of policy fragmentation or repeal.

The stability afforded by Milei’s expanded bloc should also enable more consistent application of RIGI’s provisions across provinces, which has been a key challenge for implementation. In parallel, renewed financial backing from the United States could reinforce Argentina’s credibility with international lenders and multinationals, particularly if the administration leverages this support to rebuild reserves and normalise the exchange-rate regime.

Over the longer horizon, however, Argentina’s cyclical volatility remains a structural risk. As the former head of a major oil and gas company’s operations in Argentina told us: “Expectations are high — but Congress will continue to limit what Milei can deliver. If he falls short, the political mood could change, and Argentina could quickly revert to Kirchnerism. And RIGI could easily come under attack from a Kirchnerist administration”.

As one Buenos Aires-based investment executive explained: “Investors have already experienced the hype of the Macri administration and the alleged changes in Argentina, only to be disappointed by the return of Kirchnerism. Everybody is more cautious this time.” His remark reflects a broader mood in financial circles: optimism tempered by hard-earned scepticism.

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