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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are hawking US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving ahead of the October 26 congressional elections in a nation accustomed to saving in the US dollar.

“The optimal moment to buy is now,” says one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it will rebound.”

Like her, economic experts from all backgrounds anticipate a depreciation of the Argentine peso after the election is over. The president has imposed a cap on the currency to control triple-digit price increases and currently it remains overvalued and foreign reserves are depleted, causing Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, such as the powerful Peronist movement, and currently Milei’s conservative populism.

Milei is a textbook populist: charismatic, unconventional, vowing forceful policies to wrestle back control of the economy from the establishment for the benefit of the people.

These key characteristics are shared by his political partner in the United States, as well as Nigel Farage, who presents himself as a beer-drinking champion of the common man despite being a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and deep public spending cuts – had earned praise from international lenders for helping to bring price rises under control. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw rising prices as a monster to be slain, no matter the cost.

But investors started to doubt in Milei’s radical project lately after a poor performance in local polls and a series of corruption scandals. Solely massive financial intervention by the US has averted what seemed destined to be a full-blown currency crisis.

Inconsistencies

The vote for Brexit several years ago likely contained some of the same logic, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to implement the “will of the people” despite elite opposition.

The Reform leader has so far outlined limited plans to paper except for proposals for mass deportations, that he later seemed to adjust spontaneously. He wants to curb the Bank of England, possibly replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of the populist package.

His fiscal plans appear to be in flux: concerned about being accused of proposing reckless spending, he lately abandoned a pledge to make significant tax reductions. His Reform party deputy, the party chairman, said they would focus instead on public spending cuts.

The opposition aims this stance will enable it to portray the populist as intending to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of boosting public investment.

Jo Michell says there are contradictions within the populist platform, as it stands. “Reform are bankrolled by very wealthy people calling for lower taxes and deregulation, but also talking a lot about the complaints of working people and the loss of industrial jobs,” he explains. “There’s a tension there among wealthy supporters seeking Thatcherism on steroids, and this story of bringing back UK employment and reindustrialisation.”

Maintaining Control

In truth, the evidence indicates populists of any stripe tend to fare well when confronting real-world challenges (though of course every populist leader promises distinct solutions).

Recent research from a leading journal examined the outcomes of dozens of populist leaders, over more than a century. It found that on average, over the long term, GDP per capita is often a tenth less in countries run by populist leaders than in similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance usually occur together under populist governments,” argue the paper’s authors.

A further interesting result of the research, however, is that even with their negative impacts, these leaders tend to be good at retaining office, remaining in power for eight years, compared with four for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to regain sovereignty, their attraction reaches beyond mundane economics.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is kept on life support by external aid, Argentina’s citizens have already paid a heavy price.