Alarm bells are likely ringing in government circles after the resounding defeat suffered by Argentinian President Javier Milei's ultraliberal right-wing party La Libertad Avanza at the hands of the Peronist coalition Fuerza Patria in Sunday's legislative elections.

Milei accepted the "clear defeat" after the results were announced and promised to "correct what needs to be corrected."

The province of Buenos Aires is the most populous district in Argentina, boasting 40% of the electorate, and also has the highest concentration of poverty. It is a stronghold of Peronism and election results here are key.

Axel Kicillof, the center-left Peronist governor of the province had decided to hold local legislative elections before the national legislative elections scheduled for 26 October.

"President Milei presented this election as a kind of plebiscite for his government," explained Lucia Vincent, a political scientist at Argentina's University of San Martin (UNSAM), in an interview with DW, highlighting the political weight of these elections.

"Milei chose to nationalize this provincial election, and that was clearly a mistake," Hernan Lechter, director of the Argentine Centre for Political Economy (CEPA), told DW.

But political analyst Ignacio Labaqui of the Argentine Catholic University (UCA) argued that there were other factors involved: "Absenteeism and the fragmentation of the non-Peronist vote explain the reasons behind this election," he said, noting that the result had "to do with rather crude mistakes in the government's electoral strategy, arrogance and a lack of generosity towards political allies," referring to verbal attacks against some provincial governors that Milei has made.

Results cause markets to plunge

The markets also reacted negatively to the results. On Monday, the dollar opened at 1450 Argentine pesos, up between 5 and 7% since Friday, while the Merval index suffered a sharp 13% drop on Wall Street.

How will these results affect citizens' pockets? "What has become clear from the overwhelming result is the complicated economic situation that Argentinians are experiencing," said Lechter, who is also a professor at the University of Buenos Aires.

Despite the fact that inflation has been reduced to 2% per month, wage increases were capped at 1%. "Utilities continue to rise above wages, and food prices are also on the rise," he explained. "Inflation is poorly measured. This has already been recognized by the International Monetary Fund, which is demanding that the government modify its methodology with new weightings."

"Without a doubt, the audio recordings published in the corruption case involving Karina Milei accelerated the decision-making process for a large part of society," he insisted. The president's sister and right-hand woman, who serves as secretary general of the presidency, is under investigation for allegedly demanding 3% cuts from pharmaceutical companies and laboratories supplying medicines to the National Disability Agency (ANDIS).

Triumph for Buenos Aires Governor Axel Kicillof

"What we saw yesterday is a triumph for the governor of the province of Buenos Aires, Axel Kicillof, a triumph both inside and outside the province," political analyst and advisor Gustavo Marangoni told DW. He said that Kicillof had "bet big and won." "The big loser was Milei himself, because he decided to nationalize a provincial election, and he was also defeated as the father of this economic model, since the result of the day can only be interpreted as an economic protest vote."

Will this result represent a turning point for Milei's government? "Beyond the scandals linked to wiretapping, beyond the president's manners, beyond the territorial structure, yesterday there was a resounding response to the heart of the government's economic program, which is austerity," Marangoni replied.

According to Vincent, who is also a member of the Network of Political Scientists, the precedent of the Libra cryptocurrency corruption case and the audio recordings of Karina Milei requesting bribes are certainly decisive factors. But she added that "the cruelty towards vulnerable populations, such as pensioners in our country, which found its maximum expression in the cuts to the disabled" was not a "minor factor" either. For her, this result is "a red flag for the government."

"This government was supposed to be honest and put an end to corrupt politics," she explained, saying these were supposed to be doomed to the chainsaw.

'Wake-up call for the government'

For Lechter, "this was undoubtedly a wake-up call for the government."

However, he warned against getting "ahead of ourselves before the election in October," explaining that Milei could review his policies and make corrections and different proposals. Nonetheless, he said that "this election is very significant and could have an impact on other provinces" in the national legislative elections.

"If Milei, far from listening to this message, deepens his policies and becomes more aggressive, I think the defeat could be even worse in October," said Vincent. "But if this helps him to change course, the electorate may give him a new vote of confidence."

For Labaqui, "this is clearly a warning sign for the government, which faces an enormous challenge ahead in economic terms, due to the tension with the exchange rate. We will see how it navigates this in the coming weeks."

"If the movements that started the market today continue and intensify, Milei's government runs a very significant risk in the national legislative elections in October," warned Marangoni. "Let's remember that, in Argentina, governing also means governing the peso-dollar exchange rate, and if that variable escapes the government, inflation also escapes it. The central issue is the economy. The Libra cryptocurrency scandal and the audio recordings about bribes are secondary," he concluded.

This article was originally published in Spanish.