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“Exchange, exchange.” Under the blazing sun, scores of currency traders are offering US dollars along Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“small trees”), they are thriving ahead of the October 26 congressional elections in a country long used to saving in the greenback.

“The optimal moment for purchasing is now,” says a arbolito, refusing to provide her identity. “[The dollar] went down a little but it is a fake-out – it will rebound.”

Similar to her, economists across the spectrum expect a depreciation of the Argentine peso once the voting is over. President Javier Milei has placed a limit on the peso to control soaring inflation and currently it is overvalued and foreign reserves are exhausted, causing the national economy sluggish as consumers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has frequently been racked by sovereign defaults and financial turmoil and the electorate have been receptive for decades to leftwing populism, in the form of the powerful Peronist movement, and now Milei’s rightwing version.

The president is a textbook populist: captivating, iconoclastic, promising forceful measures to wrestle back command of economic management from traditional elites for the benefit of the people.

These key characteristics are also seen in his political partner to the north, as well as Nigel Farage, who styles himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Up until lately, the president’s strategy – including widespread sell-offs and deep public spending cuts – had earned praise from the IMF for contributing to bring inflation in check. This plan shares similarities with the policies of Milei’s idol Margaret Thatcher, who also saw inflation as a dragon to be defeated, no matter the cost.

However investors began losing confidence in Milei’s radical project lately following a shaky result in local polls and a series of corruption scandals. Only large-scale financial intervention from abroad has prevented what looked set to become a major monetary collapse.

Inconsistencies

The vote for Brexit in 2016 arguably had some of the same logic, and its leader, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to enact public demand in the face of the establishment’s horror.

The Reform leader to date outlined limited plans to paper aside from proposals for large-scale removals, which he subsequently appeared to revise on the hoof. He wants to rein in the central bank, possibly ditching its governor, the incumbent, with distrust toward traditional institutions as a central element of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he recently dropped a pledge for large tax cuts. His second-in-command, the party chairman, said they would focus instead on reductions in government expenditure.

Labour hopes this stance will allow it to portray the populist as planning to reintroduce austerity – a point Rachel Reeves has emphasized often, contrasting it with her approach of boosting government spending.

An economics professor says there are contradictions within the populist platform, as it stands. “Reform are bankrolled by affluent backers demanding tax cuts and deregulation, but also talking a lot about the grievances of ordinary workers and the loss of industrial jobs,” he explains. “There’s a tension there among wealthy supporters seeking radical free-market policies, and this story of bringing back UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists tend to fare well when confronting practical difficulties (though of course every populist leader promises something unique).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found that on average, after 15 years, gross domestic product per head tends to be 10% lower in nations run by populist rulers than in comparable countries under conventional leadership.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance usually go hand in hand under populist governments,” contend the researchers.

A further interesting result from the study, however, is even with their negative impacts, populist figures are often effective at retaining office, remaining in power for eight years, versus four for mainstream politicians.

In other words, it remains uncertain whether even if their policies fail, populists face immediate consequences at the ballot box. Like the Brexiters’ promise to regain sovereignty, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, regardless of if Milei’s populist project fails or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.