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“Exchange, exchange.” Beneath the scorching heat, dozens of currency traders are offering American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Known as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a nation long used to saving in the US dollar.

“The optimal moment to buy is currently,” says a arbolito, refusing to provide her name. “[The dollar] dropped slightly but it is a fake-out – it will rebound.”

Like her, economists across the spectrum expect a devaluation of the national currency after the election is over. President Javier Milei has placed a cap on the peso to control soaring inflation and currently it is overvalued and reserves are depleted, causing the national economy stagnant as consumers turn to cheap imports.

Fertile Ground

Argentina represents a unique situation. Argentina has been repeatedly racked by sovereign defaults and economic crises and the electorate have been receptive for decades to leftwing populism, such as the powerful Peronism, and currently the president’s rightwing version.

Milei epitomizes populist leadership: charismatic, iconoclastic, vowing muscular measures to reclaim control of the economy from traditional elites for the benefit of ordinary citizens.

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 public school-educated ex-finance professional.

Up until lately, Milei’s approach – including extensive privatisations and deep budget reductions – had earned praise from the IMF for contributing to control inflation in check. This plan has something in common with that of his political hero the former UK prime minister, who similarly viewed rising prices as a dragon to be defeated, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months after a poor performance in provincial elections and multiple corruption scandals. Solely large-scale 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 figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with confident resolve to implement public demand despite the establishment’s horror.

The Reform leader has so far outlined limited plans in writing except for proposals for large-scale removals, that he later seemed to adjust spontaneously. He aims to curb the central bank, perhaps even ditching its governor, Andrew Bailey, with scepticism of a stodgy establishment being a key part of the populist package.

His fiscal plans seem unsettled: concerned about facing criticism for proposing a Liz Truss-style splurge, he lately dropped 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 hopes this stance will enable it to portray the populist as planning to reintroduce fiscal tightening – a point the chancellor has emphasized often, contrasting it with her strategy of increasing public investment.

Jo Michell says there exist inconsistencies within the populist platform, as it stands. “The party are bankrolled by affluent backers demanding tax cuts and reduced rules, but also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict here between rich backers seeking radical free-market policies, and this narrative of restoring UK employment and industrial revival.”

Holding on to Power

Realistically, research suggests populists of any stripe tend to fare well when faced with practical difficulties (although every populist leader promises something unique).

A recent paper in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. The study revealed typically, after 15 years, gross domestic product per head is often a tenth less in nations governed by populist leaders compared to comparable countries with more mainstream regimes.

“Economic disintegration, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” contend the paper’s authors.

Another intriguing finding of the research, though, is even with their negative impacts, these leaders are often effective at holding on to power, lasting on average a considerable time, versus shorter tenures for their more moderate equivalents.

Put simply, it is not clear whether even if their policies fail, populists immediately pay the price at the ballot box. Like the Brexiters’ promise to “take back control”, their appeal reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda collapses or is sustained through foreign assistance, Argentina’s citizens have already paid a heavy price.