Milei’s Win Is Echoing Across Latin America

Argentine President Javier Milei’s right-wing party, La Libertad Avanza, won 41% of the vote in the the national midterm legislative election on Oct. 26. (LUIS ROBAYO/AFP via Getty Images)

About the author: Gustavo Medeiros is head of research at Ashmore Group, an investment management firm dedicated to emerging markets.

In Latin America, economic reform mandates often wilt by halftime. But in Argentina, a reformer just proved austerity can be turned into lasting electoral capital.

Argentine President Javier Milei’s coalition outperformed expectations in the parliamentary midterms on Oct. 26, clearing the lower house threshold that gives him veto power. Since assuming the presidency in 2023, Milei has successfully shocked the economy through austerity measures that have turned a fiscal deficit into a surplus, curbed inflation, and raised gross domestic product.

Milei’s victory sends an important signal to Argentina’s neighbors: Market friendly administrations with policy credibility can win in Latin America. That could compress risk premia across the region.

Momentum for reform measures similar to Milei’s is building. After two decades of left-wing rule, Bolivia just elected center-right candidate Rodrigo Paz, whose “capitalism for all” agenda echoed many elements of Milei’s program of deregulating, cutting spending, and constricting the money supply.

Over the next year, Chile, Peru, Colombia, and Brazil will also hold national contests. Chile has maintained macro stability through various political shifts, but its economic growth is flagging and it must now contend with mounting social pressures from its aspirational middle class. Frontrunner José Antonio Kast, a Republican, wants to consolidate fiscal accounts, streamline regulations, and cut corporate taxes to spur investment.

Peru and Colombia face more fragmented elections. In Colombia, restoring fiscal discipline is essential after four years of unsustainable deficit expansion under Gustavo Petro, the country’s first leftist president in recent memory. The economy has taken a hit from uncertainty caused by Petro’s policies, tanking his approval rating to about 30%. In Brazil, the center-right candidate Tarcisio de Freitas is championing macro stability and promising to unlock much needed infrastructure investment. He is nearly tied with the the current left-wing president in polling for second round votes.

In Mexico, the Morena administration under President Claudia Sheinbaum, although still left-wing, is becoming more pragmatic. Sheinbaum has adopted a more technocratic approach to energy and fiscal management than her predecessor. She is prioritizing macro stability and institutional coordination to secure nearshoring and foreign direct investment inflows that are redefining Mexico’s economic landscape right now. This subtle shift should reinforce investor confidence and could anchor the region’s reform momentum.

Reform cycles like these have been notoriously short-lived in Latin America, however. Politicians often believe that fiscal discipline and tight money lose friends—and elections. Argentina offers a solid counterexample: Voters reward discipline. Fiscal adjustments and disinflation can become political assets when the alternative is drift.

Timing helps. A weaker U.S. dollar this year has prompted global investors to diversify from U.S. assets. Latin American politicians are waking up to the fact that reform could attract capital more rapidly, reinforcing growth and further strengthening their political mandates.

Washington is also expressing renewed interest in Latin American liberalization with sticks and carrots. The current administration recognizes that economic stagnation fuels instability and migration. Supporting higher regional gross domestic product growth can improve social stability, reduce immigration pressure, and strengthen cooperation in the fight against narcotics.

At the same time, the U.S. is increasing pressure on “nonaligned” countries—building up its military presence next to Venezuela and cutting aid to Colombia. Most surprising was the administration’s large tariffs on Brazil, traditionally an ally with which the U.S. runs a trade surplus. The recent rapprochement between President Donald Trump and Brazil’s President Luiz Inácio Lula da Silva suggest tariffs are likely to be temporary.

With its friends, the Trump administration has been generous with support. A $20 billion swap line from the U.S. Treasury to stabilize the Argentine peso, along with a loan package for bond buybacks, helped anchor the country’s markets during the election.

That backing was seen as political—the administration is an ally of Milei. But it was also of strategic importance. Argentina’s market-oriented shift aligns with the Trump administration’s policy of tax incentives to promote private sector growth and aid fiscal consolidation via tariffs. The U.S. private sector has already responded with more confidence in Argentina. OpenAI’s said last month it will invest $25 billion in a data center in the country.

Economic liberalism is becoming mainstream again. From Buenos Aires to Mexico City, pragmatic changes and fiscal credibility are catalyzing investment. That should boost productivity and GDP growth. And, if sustained, this shift can trigger a broad repricing of risk assets across the region: stronger currencies, tighter spreads, and rerated equities.

The message from Argentina’s midterms transcends borders. Reform can pay politically. Fiscal discipline can win elections.

As global investors recalibrate exposure to emerging markets, credible fiscal frameworks and market-friendly policies can be decisive factors. Latin America is rediscovering that sound economics isn’t only compatible with democracy, but also essential to its renewal.

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