Argentine markets cheer Milei mid-terms triumph

Argentine stocks and the peso surged Monday after a stunning victory for President Javier Milei in midterm elections seen as an endorsement of his radical free-market agenda.

The benchmark Merval index was up over 20 percent at the start of trading and the peso appreciated by a whopping 9.5 percent against the dollar in early trading in Buenos Aires amid a climate of general investor euphoria.

US President Donald Trump, who twice came to the financial and political rescue of his close ally in recent weeks, congratulated Milei on his "landslide victory."

"Our confidence in him was justified by the People of Argentina," Trump, who had threatened to withhold aid if Milei lost the vote, wrote on his Truth Social platform while on an Asian tour.

Argentina's 10-year government bond yields also tumbled on the results, falling 3.83 points to 14.34 percent over Friday's close and signaling increased demand for the country's debt.

All eyes had been on the peso particularly after a turbulent few weeks for the Argentine currency, which Milei has spent over $1 billion trying to prop up.

Investors had fled the currency over fears that an election rout for Milei's La Libertad Avanza (LLA) party would wreck his program of cost-cutting and deregulation.

But in the end LLA cruised to an easy victory on continuing strong resistance to the long-serving, center-left Peronist movement which Milei defeated for the presidency in 2023.

LLA took 40.7 percent of the vote to renew half of the lower house Chamber of Deputies and one-third of the Senate, according to results from the National Election Commission based on 98.9 percent of polling stations. 

The Peronists polled 31.7 percent.

It was not yet clear how many seats each party had won. Milei claimed LLA had more than tripled its representation.

He appeared on course to win the one-third of seats he requires to prevent MPs overturning his reforms but will likely need to form alliances in the Senate.

An ebullient Milei predicted the new-look Congress would be "the most reformist... in Argentina's history."

- Trump's 'very strong endorsement' -

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Argentine markets cheer Milei mid-terms triumph

The election dealt a blow to the left-wing opposition, which had been on a high after defeating LLA in Buenos Aires local elections last month.

Buenos Aires governor Axel Kicillof, Milei's political nemesis, took heart in the fact that "six out of 10 Argentines have said that they don't agree with the model he's proposing."

The elections were the first national test of Milei's support since he won office as a "chainsaw" reformer, promising to slash one of the world's highest inflation rates and downsize a bloated state.

At an LLA election party in Buenos Aires, hundreds of his supporters celebrated with cheers, hugs, chants and even tears.

"I'm very happy and excited. I didn't expect such a large number," Facundo Campos, a 38-year-old marketing consultant, told AFP.

Ahead of the election, Washington promised an unprecedented $40 billion aid package to end market turmoil in Argentina, in the form of a $20 billion currency swap line and a further potential $20 billion from private banks and sovereign wealth funds.

- Turnout at four-decade low -

Milei has cut tens of thousands of public sector jobs, frozen public works, cut spending on health, education and pensions and led a major deregulation drive in his first two years in office.

His reforms have been blamed for initially plunging Argentines deeper into poverty. 

They did however, slow inflation by two-thirds and erase a 14-year budget deficit.

Ahead of the election, Milei had appeared weakened by corruption scandals involving two members of his inner circle.

Adriana Cotoneo, a 69-year-old pensioner voting in Buenos Aires, said she voted LLA, "not because I believe it's the best option, but because I'm clear about who I want to be gone (the Peronists)."

bur-cb/dw