Argentina’s libertarian president Javier Milei has suffered his first major electoral defeat since being sworn in 21 months ago, pushing his administration further into a deepening crisis.
On Sunday his Liberty Advances coalition was trounced by the opposition Peronists in mid-term elections for the legislature of Buenos Aires province, home to 38 per cent of the country’s electorate. Milei had sought to nationalise the contest held in the traditional Peronist heartland after a win in May’s mid-terms in the federal capital led him to predict his bloc would go on to win in the neighbouring province.
Over the final days of the campaign he lowered his expectations to a “technical tie”, but instead his coalition was defeated by more than 13 points.
The result leaves him poorly positioned heading into crucial federal mid-terms in October, when half the lower house of congress and a third of the senate is up for renewal. Milei has targeted a strong showing next month to boost his party’s position in congress, which has turned against him in recent months.
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Sunday’s result confirms the end of Milei’s honeymoon period, during which his approval rating remained high as he brought runaway inflation to heel, although at the cost of a punishing recession, and set about his radical libertarian ambitions to slash the size of the state.
The initial success of his so-called “chainsaw revolution” led him to be hailed by many right-wing figures around the world. British conservative leader Kemi Badenoch said Milei would be a “template” for her government, while he has also developed close ties with the Trump White House and won a cult following on Wall Street.
But the self-styled anarcho-capitalist and former sex guru, known for his unruly mop of hair, sideburns and communing with his dead dog Conan, has been weakened by the conjunction of interlocking crises in recent weeks.
The worst of these is an explosive corruption scandal involving his sister. The closing weeks of the campaign in Buenos Aires province were dominated by the affair, which broke last month with the leak of recordings allegedly outlining a kickback scheme involving medicines purchased by the national disability agency.
On one recording, Diego Spagnuolo, then-head of the agency and a close friend of Milei who previously acted as the president’s personal lawyer, claimed the president’s sister Karina Milei received 3 to 4 per cent in kickbacks on over-invoiced contracts from pharmaceutical companies.
The Milei siblings are notoriously close, with Karina serving as her brother’s secretary-general. She is widely seen as the most powerful member of his inner circle. Her brother refers to her as “The Boss”, she controls his agenda, and, despite having no political experience, oversees his party’s electoral campaigns. She has remained publicly silent since the recordings were aired.
In one recording, Spagnuolo, who has since been fired from the agency, can allegedly be heard saying: “They are stealing. You can pretend that you don’t know, but don’t try and pin the problem on me. I have all Karina’s WhatsApps.”
Milei came out in defence of his sister, saying his now former friend and lawyer was lying. “We are going to bring this to the courts and prove that he lied,” vowed Milei at a campaign rally from which he was forced to quit in a hurry after coming under a barrage of rocks.
Instead of rebutting the claims in court, the administration has sought to censor the press, asking a judge to halt the airing of recordings and order the seizure of phones and equipment from the journalists who broke the story. This led to a sarcastic response from opposition politicians who recalled how the president cited freedom of speech as his supporters circulated fake videos of his opponents. “They are intermittent libertarians,” said Margarita Stolbizer, leader of the social democratic party.
Given a huge part of Milei’s appeal rested on his promise to do away with the corrupt practices of Argentine political life, the scandal and his response to it are damaging, as they replicate many of the alleged particulars that scarred the presidency of Cristina Kirchner, the long-time leader of the Peronist movement currently serving a six-year sentence under house arrest for corruption.
An investigation into the allegations against Karina was opened by a judge following a complaint filed by Kirchner’s lawyer. In a tweet celebrating Sunday’s results, she remembered that Milei had attacked disabled people for trying to resist inclusion in his swingeing budget cuts, writing that “stigmatising the disabled, while your sister takes a 3 per cent bribe on their medications, is lethal”.
The scandal has also brought into sharper focus the Menem family’s role in the Milei administration. The Menem family is one of the most notorious representatives of what Milei calls Argentina’s “corrupt political caste”. In the leaked recordings, Eduardo Menem, the government’s undersecretary of institutional affairs, is identified as operating the kickback scheme with Karina. He is a cousin of the powerful president of the lower house in congress, Martín Menem, a key Milei ally and nephew of former president Carlos Menem.
During his decade in power in the 1990s, Menem was at the centre of a series of spectacular scandals that involved drug trafficking, illegal arms deals and multiple deaths. His political heirs have seen companies linked to their family experience a huge jump in business, with state bodies since sealing their alliance with Milei.
Menem initially helped run Milei’s alliance of convenience with other right-wing blocs in congress that enabled the president to pass many of his early reform measures. But a fracture has been caused by Milei’s constant attacks on supposed allies, as well as his open ambition to replace them in this year’s election cycle as the main force on the right.
In recent months, congress has rejected a string of the president’s legislative proposals. In a signal of the dangers he now faces, congress recently moved to reopen a shelved investigation into his involvement in a crypto-currency pump-and-dump scheme he promoted earlier this year that fleeced investors.
Congress has been emboldened to go on the offensive against the president as his radical effort to remodel the economy sputtered in recent months. Inflation has fallen dramatically but is still on course to end the year above 35 per cent, and the rebound from last year’s punishing recession has stalled. While hailed on Wall Street, Milei has so far been unable to attract much outside investment into the economy, meaning Argentina remains desperately short of dollars and is essentially a ward of the International Monetary Fund, with which Milei signed the country’s 23rd rescue programme in April.
Despite these problems, in his brief concession speech on Sunday night, the president warned “the course for which we were elected in 2023 will not be modified, but rather will be redoubled”. Markets responded on Monday with a renewed round of panic selling right across Argentine asset categories.
