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“Exchange, exchange.” Under the scorching heat, scores of currency traders are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known 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 one arbolito, refusing to provide her name. “[The dollar] went down slightly but it is a fake-out – it’ll rise again.”

Like her, economists across the spectrum anticipate a depreciation of the Argentine peso after the voting is over. President Javier Milei has imposed a cap on the peso to tame soaring inflation and currently it remains artificially high and reserves are depleted, leaving Argentina’s economy sluggish as buyers turn to low-cost foreign goods.

Fertile Ground

Argentina is a very special case. The country has frequently been hit by debt defaults and financial turmoil and the electorate have been receptive for decades to left-leaning populist movements, in the form of the influential Peronist movement, and currently Milei’s conservative populism.

Milei epitomizes populist leadership: captivating, iconoclastic, vowing forceful policies to reclaim command of the economy from the establishment on behalf of ordinary citizens.

These key characteristics are shared by his political partner to the north, as well as Nigel Farage, who presents himself as a pint-swilling champion of the common man despite being a public school-educated ex-finance professional.

Up until lately, Milei’s approach – involving widespread sell-offs and severe budget reductions – had earned praise from international lenders for contributing to bring price rises in check. The programme has something in common with that of his political hero the former UK prime minister, who similarly viewed inflation as a dragon to be slain, no matter the cost.

However financial markets started to doubt in Milei’s radical project in recent months following a shaky result in provincial elections and a series of corruption scandals. Only large-scale economic support by the US has averted what seemed destined to be a major currency crisis.

Inconsistencies

The 2016 referendum several years ago likely contained some of the same logic, and its figurehead, the former prime minister, swept away concerns about economic detail with confident resolve to enact the “will of the people” despite elite opposition.

The Reform leader to date outlined limited plans in writing except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He wants to rein in the central bank, possibly replacing its head, the incumbent, with scepticism toward traditional institutions being a key part of the populist package.

His tax and spending policies appear to be unsettled: concerned about being accused of planning reckless spending, he recently dropped a promise to make significant tax cuts. His second-in-command, the party chairman, said they would concentrate instead on reductions in government expenditure.

The opposition hopes this stance will allow it to portray the populist as intending to reintroduce fiscal tightening – a point Rachel Reeves has made repeatedly, contrasting it with her strategy of increasing government spending.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by affluent backers calling for lower taxes and reduced rules, yet also talking a lot about the complaints of ordinary workers and the decline of industrial jobs,” he says. “There’s a tension here among wealthy supporters who want Thatcherism on steroids, and this narrative of restoring UK employment and reindustrialisation.”

Holding on to Power

Realistically, the evidence suggests neither left nor right populists tend to fare well when confronting real-world challenges (though of course 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. It found that on average, over the long term, GDP per capita is often a tenth less in countries governed by populist leaders compared to similar economies under conventional leadership.

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

Another intriguing finding from the study, though, is despite their economic costs, these leaders tend to be good at retaining office, lasting on average eight years, compared with four for their more moderate equivalents.

Put simply, it remains uncertain whether even if their plans crash, populists immediately pay the price at the ballot box. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

But back in Buenos Aires, whether the government’s agenda collapses or is sustained by external aid, the Argentine people are already bearing a heavy price.