Argentina's Milei Election Victory: Market Rally and Economic Reform Analysis

This analysis is based on the YouTube video report [1] published on November 1, 2025, covering Argentine President Javier Milei’s election victory and its economic implications.

President Javier Milei’s libertarian party La Libertad Avanza (LLA) achieved a decisive victory in Argentina’s October 26, 2025 midterm elections, securing approximately 41% of the national vote and significantly strengthening his mandate for economic reforms [2][3]. The electoral outcome has triggered substantial market rallies while highlighting ongoing social challenges from austerity measures.

The market response was immediate and dramatic:

• Stock Market Surge
  : Argentina’s Merval index jumped 21.77% on October 27, 2025, reaching 2,529,084 points [4]. Individual Argentine stocks, particularly banks, led the rally [5].
• Bond Market Rally
  : International sovereign bonds surged between 9-13 cents each, with the country’s 2030 bond rising 11 percentage points (15% gain) and 2035 bond climbing 12 points (22% gain) [2][6].
• Currency Strengthening
  : The Argentine peso initially surged more than 10% against the US dollar, though it pulled back to close approximately 3-4% higher at around 1,460 pesos per dollar [2][7].

Investor enthusiasm reflects reduced political risk, as LLA more than doubled its congressional representation, winning 64 seats in the Chamber of Deputies (+42 from previous) and strengthening Milei’s ability to pass reforms [3][8]. The victory also coincides with reported US financial support, including a $20 billion currency swap agreement [4].

Argentina has made significant progress in taming inflation under Milei’s shock therapy approach. Annual inflation has declined to approximately 41.3% in 2025, down from peak monthly rates of 25.5% in December 2023 [9][10]. Monthly inflation fell to 2.1% by September 2025 and 1.9% by July 2025, representing a dramatic improvement from the crisis period [9][10]. IMF data projects inflation will continue declining to 18% in 2026, 12% in 2027, and reach 8% by 2028 [9].

The economic picture shows mixed results:

• GDP Growth
  : Argentina is projected to achieve 4.5% real GDP growth in 2025, moderating to 3.5% in 2026 [9][10].
• Poverty Trends
  : Poverty rates peaked at 52.9% in early 2024 but have declined to 31.6% by mid-2025, though this remains historically high [9][10].
• Unemployment
  : Current unemployment stands at 7.5% for 2025 [9].

Milei’s austerity measures have produced notable fiscal achievements, including Argentina’s first primary fiscal surplus since 2010, positive balances in virtually every month, and a fiscal balance now standing at +0.9% of GDP [9][10].

The analysis reveals several critical connections between political developments and economic outcomes:

1. Political Leverage ↔ Market Confidence
   : The strengthening of Milei’s congressional position directly correlates with market enthusiasm, demonstrating how political stability translates to financial market performance in emerging economies.

2. Fiscal Discipline ↔ Inflation Control
   : The achievement of fiscal surplus has been instrumental in breaking Argentina’s inflationary spiral, showing the effectiveness of orthodox economic policies in hyperinflationary environments.

3. Social Costs ↔ Political Sustainability
   : Despite economic improvements, veteran investors like Hans Humes warn that austerity continues to squeeze Argentina’s middle class and businesses, highlighting the tension between economic stabilization and social welfare [1].

1. Reform Sustainability
   : While Milei currently maintains approximately 50% approval ratings [10], the durability of support for painful reforms remains uncertain, particularly given the ongoing social impact of austerity measures.

2. External Dependency
   : Argentina’s recovery remains heavily dependent on continued IMF support and international financing arrangements, creating vulnerability to external policy changes.

3. Structural Transformation
   : The data suggests Argentina may be undergoing a fundamental economic restructuring, moving from chronic fiscal deficits and hyperinflation toward macroeconomic stability, though at significant social cost.

Several factors could significantly impact Argentina’s economic trajectory:

1. Social Unrest Risk
   : Despite declining poverty rates, the absolute number of people affected remains high, creating potential for social backlash against continued austerity [9][10]. As noted by Hans Humes [1], austerity measures continue to squeeze Argentina’s middle class and businesses.

2. Policy Implementation Risk
   : Milei’s strengthened legislative position still requires negotiation with centrist and provincial blocs to advance sweeping reforms [3].

3. External Shock Vulnerability
   : Argentina remains exposed to global financial conditions, commodity price fluctuations, and changes in investor sentiment.

4. Inflation Expectations
   : While inflation has declined significantly, the risk of inflationary expectations re-anchoring remains present.

1. Investment Opportunities
   : The market rally suggests potential investment opportunities in Argentine assets, particularly in sectors benefiting from economic reforms.

2. Economic Stabilization
   : The decline in inflation and achievement of fiscal surplus create conditions for sustainable economic growth.

3. International Integration
   : Improved economic fundamentals could enhance Argentina’s access to international capital markets.

The analysis indicates that Argentina under Milei’s leadership is experiencing a complex economic transformation characterized by significant market optimism and macroeconomic improvements, alongside persistent social challenges. The election victory has provided Milei with strengthened political mandate to pursue reforms, as evidenced by the 21.77% surge in the Merval index and substantial gains in sovereign bonds [0].

Key economic indicators show progress, with inflation declining from peak monthly rates of 25.5% to approximately 2.1% monthly, and Argentina achieving its first fiscal surplus since 2010 [0]. However, social impacts remain significant, with poverty still affecting 31.6% of the population and veteran investors warning about continued pressure on middle class and businesses [1].

For decision-makers, the critical factors to monitor include monthly inflation trends, fiscal balance sustainability, poverty and unemployment metrics, foreign exchange reserves, and congressional reform progress [0]. The balance between economic stabilization and social welfare represents an ongoing political challenge that could affect reform sustainability.