How austerity proved to be a winning ticket for Milei

Core Insights - Javier Milei's La Libertad Avanza party achieved a significant victory in Argentina's mid-term congressional elections, with approximately 10 million votes supporting his agenda, which is seen as a mandate for his economic reforms [2][4] - The election results indicate a shift towards "macroeconomic prudence," as nearly half of the voters preferred Milei's approach over left-wing parties, reflecting a desire to avoid large fiscal deficits [3][4] Political Landscape - Following the elections, Milei-supporting parties will hold 104 out of 257 seats in the lower house, providing him with the necessary support to uphold presidential vetoes and negotiate for a majority in key votes [4] - Analysts view this outcome as a pivotal moment for Milei, allowing him to advance his ambitious reform agenda and move past previous challenges [4] Economic Reforms - Milei's administration has initiated a "shock therapy" approach, focusing on austerity measures, liberalizing the exchange rate, and transforming Argentina into an export-driven economy to combat inflation and manage debt [5] - The first phase of reforms included devaluing the official exchange rate, which initially led to record monthly inflation of nearly 26%, but projections suggest a decrease to under 2% monthly by mid-2025 [6] - Significant cuts were made to government ministries, civil service employment, and public spending, alongside the abandonment of infrastructure projects and revisions to labor laws and the tax code, resulting in a budget surplus for the first time in a decade [7]