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“Cambio, cambio.” Under the blazing sun, scores of currency traders are selling American currency on Florida Street, a bustling shopping street in Buenos Aires. Known as arbolitos (“small trees”), their business is booming ahead of the 26 October midterm elections in a country accustomed to saving in the US dollar.

“The best time for purchasing is currently,” says one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it’s deceptive – it’ll rise again.”

Similar to her, economic experts across the spectrum anticipate a depreciation of the Argentine peso after the election is over. The president has placed a limit on the peso to tame triple-digit inflation and currently it is overvalued and reserves are depleted, leaving Argentina’s economy stagnant as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina is a very special case. Argentina has been repeatedly hit by sovereign defaults and economic crises and its voters have been receptive over the years to left-leaning populist movements, such as the powerful Peronist movement, and now Milei’s conservative populism.

Milei epitomizes populist leadership: charismatic, unconventional, promising forceful policies to reclaim control of economic management from traditional elites on behalf of the people.

These key characteristics are also seen in his ally in the United States, as well as the UK politician, who styles himself as a pint-swilling champion of the common man even though he is a public school-educated former stockbroker.

Until recent months, the president’s strategy – including widespread sell-offs and severe public spending cuts – had earned praise from international lenders for contributing to bring inflation in check. This plan shares similarities with the policies of Milei’s idol the former UK prime minister, who also saw inflation as a monster to be slain, regardless of the consequences.

But financial markets began losing confidence in the government’s agenda in recent months following a shaky result in provincial elections and a series of corruption scandals. Only massive financial intervention from abroad has prevented what looked set to become a major monetary collapse.

Contradictions

The vote for Brexit several years ago likely contained similar reasoning, and its leader, Boris Johnson, swept away concerns regarding fiscal impacts with a bullish determination to enact public demand in the face of the establishment’s horror.

The Reform leader has so far outlined limited plans to paper except for a call for large-scale removals, that he later appeared to revise spontaneously. He wants to rein in the central bank, perhaps even replacing its head, the incumbent, with scepticism toward traditional institutions as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of proposing a Liz Truss-style splurge, he lately dropped a promise for large tax reductions. His second-in-command, the party chairman, stated they would focus instead on reductions in government expenditure.

The opposition aims this stance will enable it to portray the populist as intending to bring back fiscal tightening – a point Rachel Reeves has emphasized often, comparing it unfavorably to her strategy of boosting public investment.

An economics professor 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 ordinary workers and the decline in manufacturing employment,” he says. “There is a conflict there between wealthy supporters who want radical free-market policies, and this story of restoring British jobs and reindustrialisation.”

Holding on to Power

In truth, research suggests populists of any stripe tend to fare well when confronting practical difficulties (although each charismatic individual claims to offer something unique).

Recent research in the American Economic Review analysed the performance of 51 populist presidents and prime ministers, over more than a century. The study revealed that on average, after 15 years, gross domestic product per head is often 10% lower in nations governed by populist rulers compared to similar economies with more mainstream regimes.

“Financial decline, weakening economic fundamentals and the decay of governance typically occur together with populist rule,” argue the paper’s authors.

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

In other words, it is not clear that even when their plans crash, such leaders face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond everyday financial matters.

But returning to Buenos Aires, whether Milei’s populist project collapses or is sustained by external aid, the Argentine people are already bearing a heavy price.