There’s good news out of Argentina, where President Milei is presiding over efforts to tame inflation and strengthen the country’s currency. Inflation last month fell, on a monthly basis, to the lowest level in five years. Under Mr. Milei Argentina’s peso is up some 40 percent, in real terms, against the dollar, reports the Financial Times’s Michael Stott. Mr. Milei, too, scored a victory in recent elections, seen as a referendum on his presidency, at Buenos Aires.

The peso’s resurgence against the greenback — but not gold — is a reminder that the opportunity beckons for Mr. Milei to embrace the cause of monetary reform. Argentina’s economy, ravaged by years of left-wing Peronism, has a long way to go. Inflation has improved on a monthly basis, but the annual rate in June was a 39 percent increase. That’s better than the 290 percent rate recorded in April 2024, but far from price stability.

“The potent peso is policy,” Mr. Stott reports, and Mr. Milei “is betting that it will help him achieve the goal on which he has staked his political reputation: killing inflation.” Yet Argentina’s midterm elections loom in October, suggesting a possible race against time for the self-described anarcho-capitalist president to lock in his economic and political gains before the possibility of a Peronist resurgence in the nation’s legislature.

Mr. Milei, whose party lacks a working majority in the legislature, is already being buffeted by measures pushed by his opponents. The Senate last week passed three bills that “significantly hike spending on social security and other programs,” Bloomberg reports, threatening “to derail the austerity drive” Mr. Milei has made a hallmark of his administration. He is, per Bloomberg, vowing to veto the bills and “possibly ask courts to intervene.”

The additional spending pushed by legislators, Bloomberg reports, “could reach around 2.5% of gross domestic product,” and “would likely erase the budget surplus” that Mr. Milei achieved after pushing spending reductions in his first 18 months in office. The measures, too, by loosing the floodgates of government social services spending, would threaten Mr. Milei’s hard-won progress in curbing inflation.

Based on Mr. Milei’s successes so far in pushing back the role of the state in Argentina’s economic life, after winning a landslide mandate from the voters to curb inflation, one does not want to rule out the prospect of further progress. Yet the headwinds Mr. Milei faces are a reminder of the entrenched constituency for the government welfare spending and inflationary policies that had driven Argentina’s economy into the ditch before his term began.  

“There is still a world in which Milei triumphs at the elections, moves quickly to unwind the overvalued exchange rate and builds reserves, winning more investment,” Mr. Stott writes. Yet, he adds, “risks remain high.” It is a mistake, though, to ignore the popularity of the stronger peso, which is fueling optimism in the leadup to the midterms. It suggests the merit of Mr. Milei staying the course, and that yet more gains could come by making the peso as good as gold.