Unfortunately, there was an early test yesterday in the province of Buenos Aires and it did not go well.
As shown in this tweet, the left (Fuerza Patria) maintained their control of the provincial legislature.
Yes, Milei’s party (La Libertad Avanza) did gain seven new seats, as shown in this tweet.
But that increase was offset by losses for another right-of-center party (Somos/UCR), so the left definitely can claim victory.
To be sure, Buenos Aires province is very left-wing by Argentinian standards. It was one of only four voting regions (out of 24) that didn’t support Milei when he won his landslide in 2023.
So almost nobody expected Milei’s party to win a plurality of votes, much less a majority. But local libertarians were hoping for maybe 40 percent of the vote.
This is not good political news. And it may lead to bad economic news. Here are some excerpts from a Reuters report by Karin Strohecker and Rodrigo Campos.
Argentina’s markets tumbled on Monday after a…defeat for President Javier Milei’s party at the hands of the Peronist opposition at local elections stoked worries about the government’s ability to implement its economic reform agenda. The peso slumped almost 6% against the dollar as local markets opened while the benchmark stock index…fell 13%, and an index of Argentine stocks traded on US exchanges…lost nearly 18%. Some of the country’s international bonds also saw their biggest falls since they began trading in 2020 after a $65 billion restructuring deal under former President Alberto Fernandez. …The 13-point gap in the Buenos Aires Province (PBA) election in favor of the opposition Peronists was much wider than polls anticipated and what the market had priced in. …The bond market selloff saw the country’s 2035 issue fall 6.1 cents, on track for its largest daily drop since their post restructuring issuance in 2020.
The obvious takeaway is that Argentina will fall back in the economic toilet if yesterday’s bad election results are followed by bad election results in the national mid-term contests in October.
Which has me baffled. Milei’s reforms have led to such good results, so why would voters opt for economic suicide?
I’ll close by repeating something I said last week when speaking at a conference in Mexico City.
I shared my Fourth Theorem of Government to explain why voters have many reasons to reward Milei and his party (which they did in some other regional elections back in May).
However, I also noted that I have another Theorem with a contrary message.
My Seventeenth Theorem of Government basically says there if very little hope for a society that has created a dependency culture and entitlement mindset.
The question that will be answered next month in the mid-term elections is whether Argentinian voters have learned from the failure of post-World War II Peronism?
If Milei’s party loses those elections, the reform agenda will be dead and the only mystery is how quickly the nation’s economy returns to crisis.
P.S. There was some good Argentinian polling data I shared in July, so I’m obviously keeping my fingers crossed that yesterday’s elections were just a temporary setback.
