Is lowering inflation enough for Javier Milei to be reelected?

Although there is still a long way to go—more than a year—until the next elections, expectations are growing in various business circles to unravel what the direction of economic policy will be beyond 2027.

The unfavorable results of the first half of the year—rising inflation, economic stagnation, falling real wages, among others—along with some political episodes—particularly the scandal regarding the alleged illicit enrichment of former Chief of Staff, Manuel Adorni—have raised questions about the reelection possibilities of Javier Milei.

Strategy

The strategy of the ruling party to achieve continuity focuses on centering attacks on Kirchnerism based on the premise that "most people do not want to return to the past." This was particularly evident days ago when the president directed his darts at Cristina Fernández de Kirchner via national broadcast during the presentation of the project to reform the Central Bank's organic charter.

This is not an original move. It was already used at the time by Mauricio Macri during his presidency, in a game that Kirchner's widow won in 2019 by choosing Alberto Fernández as a candidate, who was presented to society as "a moderate Peronist."

After all, various measurements show that the two candidates who currently present the greatest chances of competing for the presidency, namely Milei and Axel Kicillof, do not differ much in approval and rejection levels and account for a voting intention that does not exhibit a significant disparity.

Moreover, different polls show that no less than 40% of voters do not feel represented either by the center/right options embodied by Milei or by the Peronism/Kirchnerism led by Kicillof. And the concerning fact for politics in general and for the ruling party in particular is that this mass has been growing.

Diagnosis

There are analysts who believe that there is a misreading of society's demand. Thus, they interpret that Mauricio Macri was wrong to believe that most people supported his policies when in reality he was voted for, to a large extent, due to the frustration produced in a significant part of society by the Kirchnerist model.

It was not only the poor economic results, they argue, but also the "authoritarian" attitudes of the government led by Cristina Fernández and a state that was present but not to help, rather to hinder.

In the same way, they believe that Milei should take into account that a good part of his support was achieved because he generated the illusion of a profound change, at a time of frustration not only with politicians but also with the existence of institutions that do not function and a country with fewer and fewer opportunities.

In any case, they argue, the true anti-K vote was the one Macri received; in Milei's case, it is interpreted that the demand for change was deeper. So much so that, in 2023, when the libertarian was elected, it was not uncommon to hear that "if we did poorly with the agreements, let's try with the crazy one."

Unfortunately for the ruling party, polls show that La Libertad Avanza has lost part of the vote share that allowed it to win in the runoff almost three years ago.

And simultaneously, the existence of disenchanted voters explains why the leader of the Left Front, Myriam Bregman, is currently experiencing a marked increase in voting intention - ranging between 9% and 15% nationally for presidential projections - in what has been termed the "Bregman phenomenon," referring to the notable growth of this political space that channels the dissatisfaction of a segment of society. "Bregman is not seen as a model for the country (a communist regime) but rather represents the anger of certain sectors with traditional politics," noted an experienced leader.

Growth

Analysts interpret that Milei has managed to fulfill campaign promises such as, for example -- and not insignificantly -- reducing inflation from nearly 200% annually at the beginning of his term to just over 30% currently. However, they believe that it would be a mistake to think that slowing down price indices is an objective in itself.

What ultimately matters to the general public, they indicate, is that purchasing power increases. In this regard, disposable income, that is, the money that families have left after covering their fixed expenses, fell again last May and is now 16.5% below the average from January to September 2023, that is, before the change in management, according to calculations from Equilibra.

The libertarian government restored order in public spaces, but this situation also has its drawbacks. According to a merchant in Congreso, "before it was difficult for me to sell because the blockades prevented customers from entering my store; now they do not block access, but still no one comes in because there is no money."

In this regard, the polling firm Zentric, when asked "What is your main concern today? Corruption leads with 48.8%, followed by income and salaries at 46.9%, while inflation has dropped to ninth place in concerns with 18.2% out of a total of 10 responses.

In parallel, various public opinion analyses show the damage caused to the government's image by the "Adorni case" to the point that some believe it has led the libertarians to lose the banner of the fight against the political elite.

This assessment may be exaggerated, and the government may still be in a position to reverse the decline in trust. However, it does not seem to be showing sufficient signs of empathy, but rather the opposite.

From this perspective, recent statements by the Minister of Economy, Luis Caputo, are interpreted, who categorically ruled out any type of state assistance for indebted families, asserting that delinquency is a "private problem" in which the state has no margin for action.

Critics counter that many of these problems were the result of the monetary tightening applied by the Central Bank in mid-last year, which drove interest rates through the roof.

It is paradoxical that the head of the IMF, Kristalina Georgieva, was more empathetic and, on more than one occasion, expressed her concern about family indebtedness and the level of delinquency. Moreover, she pointed out that this situation affects growth.

Consensus

The issue of the political sustainability of the program undertaken by Milei's administration is one of the main concerns of the International Monetary Fund, as reported in Washington. This is not surprising: Argentina is the main debtor of the organization - more than a third of the total credits -- and nowhere in the world have its recommendations been applied with as much emphasis as they were by the libertarian administration.{#p-1785718604402-34610}

It is said that this was the reason why Kristalina Georgieva came to the country and urged, both in statements to the press and in publications, the Argentine people to "be perseverant" and "have patience" to consolidate the economic changes.{#p-1785718604402-10076}

This was not the first time that the organization warmly supported an economic program in Argentina. It is worth remembering that during the 90s, during Carlos Menem's government, the head of the Fund, Michael Camdessus, described the Argentine economy as the "best economic model in the world." Later, they did not hesitate to authorize a loan of U$S57 billion to Mauricio Macri's government when Christine Lagarde was presiding over the multilateral organization.{#p-1785718604402-49474}

To Milei's government, the Fund granted U$S 20,000, and the U.S. Treasury, overnight, agreed to a currency swap for a maximum of 20 billion dollars.{#p-1785718604402-28140}

What do these three governments have in common: lowering inflation, fiscal discipline, deregulation of the economy, opening markets, among other measures recommended by the IMF.{#p-1785718604402-8923}

Unfortunately, some negative aspects of these programs were: increased unemployment, decline in activity, and closure of establishments that generated social unrest.{#p-1785718604402-77490}

It remains to be seen if this time will be different.{#p-1785718604402-46057}