The mid-term legislative election confirmed what seemed more than uncertain in the previous election: Javier Milei managed to expand his political base and ensure the ability to maneuver in Congress. With nearly 41% of the votes, La Libertad Avanza advanced in both chambers and was in a position to defend vetoes, decrees and policies that until now had been at risk. The day was read as a plebiscite on the economic direction and, mainly, on social patience in the face of a situation in which macro indicators show a visible improvement, but daily life continues to be, for the majority, uphill.
The market reaction began with the first rumors. Argentine bonds rose between 15% and 23% overnight and stocks listed in New York rose as much as 35% before the open. The perception is clear: with this result, the economic program has political continuity and international support. The jump was concentrated in banks and energy, with very marked advances in Banco Galicia, Banco Macro, YPF and Pampa Energía.
Downward inflation. The fall in monthly inflation, which went from 12.8% prior to the start of the administration to 2.1% in the last record, is the main pillar of the official story. Milei presented it as evidence that fiscal discipline and monetary restriction work. Without emissions, without widespread subsidies and with cuts in public works, the Government managed to stabilize prices, but that stabilization did not come without a cost: real wages in decline, depressed consumption and profound social deterioration.
The election suggests that a significant part of society is willing to tolerate sacrifice in the name of avoiding a new crisis. However, that tolerance is not infinite. The great test for the Government begins now: transform macroeconomic stabilization into a recovery noticeable in the pockets. If inflation continues to fall, but income does not improve, the social mood can turn with the same speed as the market celebrated this victory.
The dollar as an anchor. The exchange rate was the key tool to stop inflation, but its stability was sustained with extremely scarce reserves. Cooperation with the United States, materialized in a financial package of up to 40 billion dollars, provides air, but does not resolve the underlying issue: Argentina needs to genuinely generate dollars again.
From now on, the market will closely monitor whether the Government allows itself to increase the exchange rate or insists on maintaining the anchor until inflation is lower. A sudden correction would put the disinflationary process at risk; A correction that is too late would increase the exchange rate delay and the tension on reserves. In that sense, the administration must calibrate an intermediate path that does not cause prices to go haywire, but does not compromise external competitiveness either. The “timing” will be decisive.
Financial rally. The rally in bonds and stocks after the election was one of the most significant movements in recent years. The reading was coordinated: greater governability, guarantee of external support and continuity of the economic program. However, this enthusiasm does not equate to structural normalization. The prices had been incorporating a bad election for the ruling party and an increase in political risk; this assumption was disproved by the polls, and the market reacted by correcting this excess of uncertainty.
For this renewed optimism to be sustained over time, the government must give concrete signals of new political ties and gradual reactivation of activity. Financial relief can accommodate expectations, but only the improvement of the real economy will be able to consolidate a new stage of growth.
A new stage, but without room for errors. Milei gained time, power and a vote of confidence. The company made it clear that it does not want to go back, but it also hopes to start seeing tangible results. The Government now faces the most difficult opportunity: to consolidate stability and translate it into growth. With the new parliamentary balance, the Casa Rosada has room to advance what the ruling party describes as second-generation reforms: labor modernization, tax simplification, sectoral deregulation and a deeper process of openness and competition in the economy. They are less visible measures than fiscal adjustment, but more decisive in boosting investment and productivity.
The central question is no longer whether the economic program continues, but whether the Government will be able to improve daily life without sacrificing the macro order it managed to build. Argentina is closely familiar with stabilizations that seemed solid and were dismantled when politics fractured or social patience ran out. This time, the Government’s bet is that the combination of conviction, speed and a broader political window will allow stability to be transformed into growth before wear and tear sets in again.
*Sergio Rodríguez Glowinski is director of IngEco and Stock Broker in the US:
by Sergio Rodríguez Glowinski
