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“Exchange, exchange.” Under the scorching heat, scores of money changers are offering American currency on Florida Street, a bustling pedestrian strip in Buenos Aires. Referred to as arbolitos (“little trees”), they are thriving before the October 26 congressional elections in a nation accustomed to holding the greenback.

“The best time to buy is currently,” says one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Like her, economic experts from all backgrounds anticipate a devaluation of the national currency once the election is over. President Javier Milei has imposed a cap on the peso to tame soaring inflation and now it is overvalued and reserves are exhausted, leaving the national economy stagnant as consumers opt for low-cost foreign goods.

Fertile Ground

The nation represents a unique situation. The country has frequently been racked by debt defaults and economic crises and the electorate have been receptive for decades to left-leaning populist movements, such as the influential Peronist movement, and now the president’s conservative populism.

The president epitomizes populist leadership: charismatic, iconoclastic, promising forceful measures to wrestle back control of economic management from traditional elites for the benefit of ordinary citizens.

These defining traits are shared by his political partner to the north, as well as the UK politician, who styles himself as a beer-drinking champion of the common man even though he is a privately educated former stockbroker.

Until recent months, Milei’s approach – including widespread sell-offs and severe public spending cuts – had earned praise from the IMF for contributing to bring inflation under control. 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 defeated, regardless of the consequences.

However investors started to doubt in the government’s agenda in recent months following a shaky result in provincial elections and a series of corruption scandals. Solely massive economic support from abroad has averted what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum in 2016 arguably had some of the same logic, and its figurehead, the former prime minister, dismissed concerns regarding fiscal impacts with confident resolve to implement the “will of the people” despite elite opposition.

Farage has so far outlined limited plans to paper except for proposals for large-scale removals, that he later seemed to adjust on the hoof. He aims 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 in flux: wary of being accused of proposing reckless spending, he recently dropped a pledge for significant tax reductions. His Reform party deputy, Richard Tice, said they would focus instead on reductions in government expenditure.

The opposition aims this position will enable it to depict the populist as planning to bring back austerity – an argument Rachel Reeves has emphasized often, contrasting it with her strategy of boosting public investment.

An economics professor notes there exist inconsistencies in Farage’s economic programme, as it stands. “The party is funded by very wealthy people calling for tax cuts and deregulation, but also emphasizing the complaints of ordinary workers and the decline of industrial jobs,” he says. “There is a conflict here among rich backers seeking Thatcherism on steroids, and this story of bringing back UK employment and industrial revival.”

Holding on to Power

In truth, research suggests populists of any stripe often perform poorly when faced with practical difficulties (although every populist leader claims to offer something unique).

Recent research in the American Economic Review analysed the performance of dozens of populist leaders, over more than a century. It found typically, after 15 years, GDP per capita tends to be a tenth less in countries governed by populist rulers than in similar economies under conventional leadership.

“Financial decline, weakening economic fundamentals and the erosion of institutions typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding from the study, though, is that despite their economic costs, populist figures tend to be good at retaining office, lasting on average eight years, compared with shorter tenures for mainstream politicians.

Put simply, it is not clear whether even if their plans crash, populists face immediate consequences in elections. Like the Brexiters’ promise to “take back control”, their attraction reaches beyond mundane economics.

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