Argentina’s legislative election of 26 October 2025 was not merely a midterm. It was a referendum on whether the country would continue along Javier Milei’s path of fiscal stabilization, deregulation, and market reform, or drift back toward the Peronist cycle of inflation, controls, subsidies, and policy reversals. The electorate chose continuity. Milei’s La Libertad Avanza (LLA) won about 40.8% of the national vote, became the fastest-growing force in Congress, and secured the one-third threshold in the lower house needed to help sustain presidential vetoes and strengthen his bargaining position for the second half of his term.

That result was not an accident, nor can it be reduced to charisma or media theater. It reflected a harder political fact: by late 2025, enough Argentines concluded that Milei’s policies, however painful, were producing visible macroeconomic improvement, while the opposition still represented the memory of chronic inflation, fiscal disorder, and repeated policy whiplash. Some analysts tied Milei’s stronger-than-expected result to fear of renewed turmoil if austerity and reform were abandoned; polling analysts likewise said many voters were willing to give the government more time precisely because they did not want to relive earlier crises.

The Real Reasons Milei’s Party Won

The first reason was inflation. When Milei took office in December 2023, Argentina was on the edge of macroeconomic breakdown. Official data showed monthly inflation at 25.5% in December 2023, while annual inflation for 2023 ended at 211.4%. By September 2025, monthly inflation had fallen to 2.1% and year-on-year inflation to 31.8%; by October 2025, INDEC reported monthly inflation at 2.3% and annual inflation at 31.3%. In monthly terms, that means inflation fell by 23.2 percentage points from December 2023 to October 2025, a drop of roughly 91.0%. In year-on-year terms, comparing the 211.4% 2023 year-end rate with the 31.3% October 2025 rate, the reduction was 180.1 percentage points, or about 85.2%. That is not propaganda; it is arithmetic.

The second reason was fiscal credibility. In 2024 Argentina posted its first budget surplus in more than a decade. It is reported a full-year budget surplus of 1.76 trillion pesos, equal to 0.3% of GDP, and a primary surplus of 10.41 trillion pesos, or 1.8% of GDP. For a country long defined by chronic fiscal deficits monetized through inflation, that mattered politically as much as economically. Voters did not need to read Austrian economics to understand that a government finally imposing budget discipline was different from the old pattern.

The third reason was that Milei convinced a critical share of voters that his reforms were not abstract ideology but a necessary break with a failed model. Media such as The Economist, noted that his subsidy cuts, deregulation, and fiscal tightening had drastically slowed inflation, while investors and analysts viewed his victory as opening the door to deeper labor and tax reforms. Directorio Legislativo also emphasized that the election materially strengthened Milei’s congressional position even without giving him an outright majority, which mattered because Argentine politics often turns on whether presidents can actually defend decrees and vetoes against a fragmented legislature.

The fourth reason was negative memory. Argentine voters did not vote in a vacuum. They voted with the experience of Peronist inflation, capital controls, fiscal indiscipline, and recurrent exchange-rate crises in mind. Some analysts saying the result reflected fear of renewed economic turmoil if the country abandoned Milei’s program. This was not a philosophical seminar. It was retrospective voting under severe macroeconomic uncertainty.

Why There Was Capital Flight Before the Election

Before the election, Argentina suffered what many observers described as capital flight, though in practical market terms it appeared as a combination of peso weakness, bond selloffs, reserve depletion, and investor hedging. The most important reason was plainly political: markets feared that a Peronist resurgence would weaken or even reverse Milei’s reform agenda. After Milei’s party suffered a heavy defeat in the Buenos Aires provincial vote in September 2025, it is reported that the peso lost as much as 5.6% in a day, the stock market fell 13%, and international bonds posted some of their steepest losses since the 2020 restructuring, because investors feared the government would lose the political capacity to continue reform.

But that was not the only reason. A second factor was uncertainty over exchange-rate policy. In April 2025, even while Argentina was negotiating a $20 billion IMF program, traders remained anxious because there was little concrete detail about the future of the peso, capital controls, and the exchange-rate regime. That uncertainty triggered a $1.6 billion reserve drain as the central bank fought to stabilize the currency. In other words, not all pre-election financial stress was electoral in the narrow sense; some of it was the consequence of unresolved questions about how and when the government would move from stabilization to fuller normalization of the foreign-exchange market.

A third factor was reserve fragility. By 8 October 2025, the Treasury had sold around $2 billion in recent sessions to support the peso, and that dollar deposits held at the central bank had plunged from $1.44 billion to just $680 million in a matter of days. Markets do not like governments that must burn scarce reserves in front of an election. Even reformist investors can become nervous when the policy toolkit looks temporarily thin.

A fourth factor was scandal and political noise. It is reported in early September that markets had also been rattled by corruption allegations involving Milei’s sister and a broader sense of political pressure, legislative setbacks, and governability risk. One does not need to endorse every market mood swing to recognize that in Argentina’s history, politics and finance are tightly linked.

A fifth factor was Argentina’s structural reputation problem. After the election that foreign direct investment had long been held back by an unpredictable policy landscape and recurring boom-bust cycles, usually linked either to elections or to the agricultural cycle. That reputation predates Milei by many years. It is one of the reasons every Argentine election is read by markets not just as politics, but as a possible regime change.

Why Socialist Commentary Misread the Capital Flight

This is where much socialist commentary went wrong. A familiar argument in socialist-leaning newspapers and among ideologically committed scholars was that the pre-election turbulence somehow proved the failure of Milei’s “anarcho-capitalism.” That argument confuses personal philosophical identity with actual public policy.

Milei may personally identify with anarcho-capitalist ideas in the realm of political philosophy. But what he implemented in office was not anarcho-capitalism. He did not abolish the state. He did not privatize law. He did not eliminate public administration. What he actually did was standard, recognizably orthodox economic stabilization combined with market reform: spending cuts, subsidy reductions, deregulation, fiscal surplus, attempts to simplify the tax and labor framework, and a gradual dismantling of controls that had distorted prices and capital allocation. The package in exactly those terms, as some media indicated, can be summarized as: slashing subsidies, sharply reducing inflation, posting a fiscal surplus, tearing down currency controls, and pressing deregulation.

To blame capital flight on “anarcho-capitalism” is therefore second-hand ideology masquerading as analysis. The proximate drivers were much more concrete: electoral uncertainty, fear of Peronist return, unresolved exchange-rate expectations, reserve weakness, legislative defeats, and scandal risk. Those are ordinary emerging-market variables, not proof that Argentina was being run as a Rothbardian anarcho-capitalist model.

Milei’s Actual Policy Results by October 2025

The most obvious result was disinflation. Officially, monthly inflation fell from 25.5% in December 2023 to 2.3% in October 2025. Before Milei’s inauguration, monthly inflation had been running at 12.8% in November 2023, while by September 2025 it was down to 2.1%. However one chooses the baseline, the decline was dramatic.

The second result was fiscal. Argentina moved from chronic deficit to surplus in 2024 and maintained fiscal balance as the anchor of policy into 2025. The government’s 2026 budget presentation might stress fiscal stability as the central rule of the administration.

The third result was deregulation. In January 2025, Milei’s government was already preparing “chainsaw 2.0,” extending red-tape cuts through a dedicated deregulation ministry. Whatever one thinks of the style, the substantive goal was clear: reduce administrative barriers and lower the cost of doing business.

The fourth result was a recovery in growth expectations. Reuters’ July 2025 poll said Argentina’s economy had picked up strongly at the start of 2025 after a two-year recession, with economists then expecting 5.0% growth in 2025. Later official data showed 2025 growth came in at 4.4%, still a marked turnaround after the 2024 contraction.

Unemployment: Early Pain, Then Some Improvement Before the Vote

A serious article should not conceal the labor-market costs. Market reform in a previously overstaffed and heavily distorted economy was never going to be painless. Argentina’s unemployment rate was 5.7% in late 2023, when Milei took office. It then rose as austerity, restructuring, and state cutbacks hit employment. Reports indicated that the unemployment was 7.7% in the first quarter of 2024, 6.4% in the fourth quarter of 2024, and 7.9% in the first quarter of 2025. The latest official release before the October 2025 election showed unemployment easing to 7.6% in the second quarter of 2025, while the employment rate edged up from 44.4% to 44.5%.

That sequence matters. The labor market did worsen early in the reform. That is normal when a government cuts bureaucracy, subsidies, and politically protected niches. A reform that reallocates labor from unproductive public or quasi-public positions toward a more market-oriented economy will often produce short-run dislocation before it produces a healthier composition of employment. By the second quarter of 2025, the official data suggested some stabilization, though not a full labor-market triumph. That is the honest reading.

Why the Reforms Were Not “Easy”

It is fashionable among some socialist-wing commentators to claim that Milei’s reforms were easy, that “anyone could have done them,” and that cutting spending is simpler than governing. This is unserious.

First, Milei governed without a congressional majority. Even after the October 2025 election he still lacked an absolute majority and needed alliances to move legislation. Before the election the opposition had already overturned several of his vetoes on spending bills. Reform in Argentina is difficult precisely because the state is full of entrenched veto points.

Second, he implemented adjustment in a country with inflation above 200%, weak reserves, long-standing capital controls, and a public habituated to subsidies. That is not an easy starting point.

Third, he had to communicate pain while preserving enough political legitimacy to keep going. That may be his underappreciated strength. Milei communicated reform in morally intelligible terms: not as technocratic fine-tuning, but as the necessary surgery after years of fiscal fraud. One need not admire every theatrical flourish to see the political capacity involved. In a democracy, stabilization succeeds only if a sufficient portion of society accepts short-run costs for long-run gains. His 2025 midterm result suggests many Argentines did.

Conclusion

The 2025 legislative election was won by Milei’s party because enough Argentines judged that the government’s harsh medicine was working, and because they feared the alternative. The pre-election capital flight was driven above all by uncertainty: fear of Peronist return, doubts about the exchange-rate path, reserve weakness, political setbacks, and Argentina’s old reputation for policy reversal. It was not evidence that “anarcho-capitalism” in office had failed, because what Milei actually implemented was not anarcho-capitalism at all, but fiscal stabilization and market reform of a very recognizable kind.

The wider lesson is also plain. Socialist commentary too often relies on second-hand labels instead of first-hand institutional analysis. It calls a standard anti-inflation and deregulation program “anarcho-capitalism,” then blames every market tremor on ideology rather than on electoral risk, reserves, incentives, and credibility. That may be emotionally satisfying. It is not serious economics.

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How to Cite this Article (APA 7th edition)

Wang, H. H. (2025, October 29). Why Milei Won Argentina’s 2025 Legislative Election. [Blog post]. William Hongsong Wang. https://williamhongsongwang.com/2025/10/29/why-milei-won-argentinas-2025-legislative-election/