Milei triumphs and secures free-market mandate: Ivo Vegter
Key topics
Milei suffers Buenos Aires loss amid family scandals and austerity.
Peso crashes spark $20bn US swap; markets fear reform collapse.
Midterms deliver Milei victory, securing reform mandate and stability.
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By Ivo Vegter*
Critics were eagerly anticipating the fall of Javier Milei, but a timely intervention by Donald Trump means he lives to fight another day.
When the party of Argentina’s libertarian president Javier Milei lost a key regional election in early September, critics, and the left-wing media in general, stood ready to eulogise him.
Milei himself had cast the election, taking place in the province of Buenos Aires, but not in the capital city itself, which Milei’s party handily won in May, as a “life and death” plebiscite on his reform programme.
In the wake of a new corruption scandal involving his family, and the ongoing hardship of austerity, Melei’s party lost, by 47% to 34%, to the left-wing Peronist opposition.
The Guardian quoted Argentinian sociologist Juan Gabriel Tokatlian: “This is not yet the worst moment of the Milei government, but the beginning of its worst moment.”
Tokatlian noted that Milei would face make-or-break midterm elections for half the seats in the lower house and a third of seats in the senate on 26 October.
“The economy has not advanced sufficiently, inflation has not been brought down in any significant way, and wages have been practically frozen,” Tokatlian told The Guardian.
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Milei slashed government expenditure and restored the budget deficit. He eliminated 10 government departments, retaining only nine. He laid off thousands of government employees.
He eliminated import tariffs, and managed to smuggle many other pro-market reforms through a parliament where his party didn’t enjoy anything near a majority.
Inflation has, in fact, been brought down from a peak of 292% in early 2024, not long after Milei took power, to 31.8% in September 2025, and it is still on a downward trajectory. One wonders what Tokatlian would consider a “significant” decline.
GDP, which was shrinking when Milei took over, grew at a rapid clip of 6.2% at last count in the second quarter of 2025. One wonders what Tokatlian would consider a sufficiently advancing economy.
Wages have been growing at over 2% per month, but of course, inflation is still much higher than that, so let’s give Tokatlian his wage complaint.
Market panic
Investors had a lot of tentative faith in Milei’s aggressive free-market reforms, but were anxious about his fragile grip on power. They were of the same view I expressed in March in a detailed paper on lessons to be learnt from Argentina’s radical reforms: “Argentina is not out of the woods. Milei has a long way to go, his reforms remain controversial and fragile, and he may not survive politically to bring his reform project to conclusion.”
The election loss in the country’s most populous province looked like a harbinger of worse to come, as The Guardian and other papers eagerly pointed out.
Milei’s government, in cooperation with the International Monetary Fund, to which Argentina owes a large debt, had been steadily devaluing the Argentine peso. Prior to his election, it had been protected by strict exchange control rules, and the official exchange rate was greatly overvalued by comparison with the black-market (i.e. real market) rate.
Lifting exchange controls while trying to manage the devaluation of the peso had been a risky move for a country without a large stock of dollar reserves. It was one of many huge risks that Milei, a trained economist with extensive experience both in academia and in the real world, took to try to turn Argentina’s collapsing socialist economy around.
Now he seemed to be failing. Between a series of corruption scandals and this electoral defeat, markets feared that Milei would lose both power and credibility in the crucial mid-term elections. This would bring the reform process to a halt, and return Argentina to the quagmire from which Milei was trying to drag it.
They sold the peso, and Argentina simply didn’t have enough dollars to buy them all.
In the two weeks after Milei’s electoral defeat in Buenos Aires province, the peso lost more than 8% of its value, which was much faster than the measured 2% per month the government had tried to maintain.
Trump to the rescue
In a highly unusual step, US president Donald Trump offered Argentina a $20 billion currency swap, despite vocal opposition from both sides of the aisle in the US. This would give the country dollars for its pesos, which would strengthen its ability to manage an orderly currency devaluation.
The lifeline was conditional on Milei’s party prevailing in the mid-term elections.
Critics saw this as a risky bet on a country that has long struggled to pay its debts, and could not be relied upon to repay it this time, either. This put American taxpayer dollars on the line, when the prevailing winds in American politics were an “America First” type of isolationism.
Trump’s camp, however, saw Milei as an important ally, and were keen to prop him up to continue his attempts to turn Argentina’s economy around.
(The relationship between Trump and Milei is not entirely simple. As I’ve explained before, they are not of one mind, economically speaking. They cannot simply be stuck in the same pigeonhole labelled “right-wing populist”. Trump is a conservative protectionist. Milei is an Austrian School free-marketeer. Milei has read and internalised Hayek, Rothbard and Mises. Trump doesn’t read, and is more likely to use Mises’s The Theory of Money and Credit as a door stop. Of course, Milei knows where his bread is buttered. Argentina used to maintain good relationships with socialist basket cases like Venezuela. Milei publicly fawns over Trump, but that is likely because he calculates that the US is far more important to Argentina’s economy, and that a little flattery will go a long way towards earning US support for his reforms.)
In the wake of Trump’s offer of currency support, the peso regained all of its lost value and more.
Left-wing media hacks were already writing Milei’s obituaries, however. Richard Poplak, a journalist with no apparent grasp of economics, taunted on X: “A week now since Milei went with his begging bowl to DC, and still no apology from white right fanboys, who were so wrong on this issue that I’m still laughing. C’mon. Be a big man. Apologise.”
Like most leftists, he did not understand the dynamics. The peso crashed because Milei appeared set to lose the mid-term elections. The markets were not punishing Milei for his reforms. They were punishing Argentina for resisting them.
Obituaries
By October, everyone was writing obituaries for Milei.
The Guardian matched Poplak’s taunt: Farage, Trump, Musk: your boy Javier Milei just took one hell of a beating. Why so quiet?
“Yet over the past few weeks, Argentina has gone into freefall,” wrote Aditya Chakrabortty with barely restrained schadenfreude.
“Investors have yanked billions out of the country, and the peso has dropped like a stone. A few days ago Trump was forced to pledge $20bn (£15bn) to prop up his friend, in addition to a rescue loan from the IMF. Later this month, Milei faces midterm elections that will serve as a referendum on his presidency and the results are expected to be bad. ‘We are seeing in real time how a government can melt in front of our eyes,’ Alejandro Bercovich, a leading Argentine TV and radio journalist told me this week. ‘I never thought they would collapse this quickly.’”
He continues: “It’s not only Milei’s administration melting away; so too are his once-packed international throng of cheerleaders and wolf-whistlers. Farage, Badenoch, Musk and all the rest are maintaining a red-faced silence. Curious, that. But the rest of us should find out a bit more about how the great ‘libertarian success story’ of this decade, to use Ferguson’s term, is now also its biggest libertarian flop.”
In mid-October, the Argentinian parliament adopted a bill to limit Milei’s executive power. Instead of requiring a majority in both houses to veto a presidential decree, it would now require a majority in either one.
This time, the peso fell by 10%, to its weakest level yet.
The Daily Maverick published a piece by Natale Labia, in which he calls Milei’s “fall from grace” “predictable”.
“Hubris precedes nemesis, but in Milei’s case, Trump is now the one trying to catch his fall,” he wrote. “The irony is clear for everyone; the libertarian nationalist who formerly railed against foreign intervention is now dependent on the goodwill of the US to keep his government solvent.”
He reduced the American currency swap offer to a crude attempt to buy “influence” in South America.
October surprise
The US offer to support Argentina’s currency, which was matched by an additional $20 billion commitment in private investment to shore up its debt market, had the desired result. (Don’t say I never give Trump credit when it’s due.)
Contrary to the gleeful predictions of socialist sociologists and left-wing media commentators, La Libertad Avanza, Milei’s party, “cruised to victory” in the mid-term elections held last Sunday, 26 October.
The victory handed Milei enough seats in parliament to avoid having his vetoes overturned, and gave him a resounding mandate to continue his free-market reforms in spite of the pain of austerity measures.
Reuters explained, “Foreign investors have been impressed by the government’s ability to significantly reduce monthly inflation from 12.8% before Milei’s inauguration to 2.1% last month, while achieving a fiscal surplus and enacting sweeping deregulation measures.”
It quoted Gustavo Cordoba, the director of a local polling firm, who said the results surprised him, and thought it reflected worry that the economic crisis of past governments might be repeated if Milei was ousted.
Reuters quoted Milei as saying: “Argentines showed that they don’t want to return to the model of failure.”
Glee
Argentines clearly differ from the left-wing commentariat who anticipated Milei’s fall with such unabashed glee.
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The extent to which the left celebrated the likelihood of a return to the basket-case economic policies of the Peronistas is simply astonishing.
These are the sort of people who hailed the election of Hugo Chávez as a great victory for the Venezuelan people, and wear Che Guevara T-shirts as if he represented an ideology of peace, freedom and prosperity.
How many times are they going to foist socialist economics upon the world, pretending that this time, it will work?
I, for one, am delighted to see the Milei experiment in Argentina continue. He is the only truly libertarian president in the world, and he is trying to turn around an economy that was even deeper in the socialist quagmire than that of South Africa.
I am rooting for him. I want him to succeed. I cannot promise that he will, because there is a huge mountain to climb, built by a century of authoritarian and socialist misgovernment. Milei still faces powerful political opposition and vested interests, but despite his flaws, it seems downright cruel to cheer at the prospect of his failure.
*Ivo Vegter is a freelance journalist, columnist and speaker who loves debunking myths and misconceptions, and addresses topics from the perspective of individual liberty and free markets.
This article was first published by Daily Friend and is republished with permission