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“Exchange, exchange.” Under the scorching heat, scores of currency traders are selling American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), their business is booming ahead of the 26 October congressional elections in a country long used to holding the US dollar.

“The best time for purchasing is currently,” states a arbolito, declining to give her name. “[The dollar] dropped slightly but it’s deceptive – it will rebound.”

Similar to her, economic experts across the spectrum anticipate a devaluation of the national currency once the voting concludes. President Javier Milei has placed a limit on the currency to tame soaring price increases and now it is artificially high and foreign reserves are depleted, causing the national economy sluggish as buyers opt for low-cost foreign goods.

Ideal Conditions

Argentina represents a unique situation. Argentina has been repeatedly hit by sovereign defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, such as the powerful Peronist movement, and currently Milei’s conservative populism.

The president is a textbook populist: charismatic, unconventional, promising forceful measures to wrestle back command of economic management from the establishment for the benefit of ordinary citizens.

These key characteristics are shared by his political partner to the north, and by the UK politician, who styles himself as a beer-drinking people’s champion despite being a privately educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and severe budget reductions – had won plaudits from the IMF for contributing to bring inflation under control. The programme shares similarities with the policies of Milei’s idol Margaret Thatcher, who similarly viewed inflation as a dragon to be slain, no matter the cost.

But investors began losing confidence in Milei’s radical project lately after a poor performance in provincial elections and multiple graft allegations. Only massive economic support from abroad has averted what looked set to become a full-blown monetary collapse.

Contradictions

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, Boris Johnson, dismissed concerns about economic detail with confident resolve to implement the “will of the people” despite the establishment’s horror.

The Reform leader to date committed few policies in writing except for proposals for mass deportations, that he later appeared to revise spontaneously. He aims to rein in the central bank, perhaps even ditching its governor, the incumbent, with distrust of a stodgy establishment being a key part of the populist package.

His tax and spending policies seem unsettled: concerned about facing criticism for planning a Liz Truss-style splurge, he recently abandoned a pledge for significant tax reductions. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

Labour aims this position will allow it to depict the populist as intending to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing public investment.

An economics professor notes there are contradictions in Farage’s economic programme, as it stands. “The party is funded by affluent backers demanding tax cuts and deregulation, but also emphasizing the complaints of working people and the decline of industrial jobs,” he says. “There is a conflict here between wealthy supporters seeking radical free-market policies, and this story of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, research suggests populists of any stripe tend to fare well when confronting real-world challenges (although each charismatic individual promises distinct solutions).

A recent paper in the American Economic Review examined the performance of 51 populist presidents and prime ministers, over more than a century. It found that on average, after 15 years, gross domestic product per head tends to be a tenth less in countries governed by populist rulers compared to comparable countries with more mainstream regimes.

“Financial decline, decreasing macroeconomic stability and the erosion of institutions usually go hand in hand under populist governments,” argue the researchers.

Another intriguing finding of the research, though, is even with their negative impacts, populist figures tend to be good at retaining office, remaining in power for eight years, versus shorter tenures for mainstream politicians.

Put simply, it remains uncertain whether even if their policies fail, populists face immediate consequences in elections. Similar to pledges made to “take back control”, their appeal reaches beyond everyday financial matters.

Yet returning to Buenos Aires, regardless of if Milei’s populist project fails or is sustained by external aid, Argentina’s citizens are already bearing a heavy price.