Released on September 8, 2025
Argentine markets were worried about the government’s ability to implement the government’s ability to implement the government’s economic reform agenda after President Javier Miley’s party’s fierce defeat at the hands of Peronist opposition in local elections.
On Monday, the peso fell almost 5% against the US dollar at 1,434 per greenback, but the benchmark stock index fell 10.5%, while the index of Argentine stocks traded on US exchanges lost more than 15%. Some of the country’s international bonds saw its biggest fall since they began trading in 2020 after a $65 billion restructuring transaction.
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The Peronist’s overwhelming victory marked the tough battle for Mairay in the mid-term national elections on October 26th.
According to Pramol Dhawan, PIMCO’s EM Portfolio Manager, the government is currently facing a difficult choice between PESO falling ahead of the mid-term next month or allowing it to spend its foreign exchange reserves to intervene in the Forex market.
“Since there is a risk of derailing the IMF programme and reducing the national outlook for future market access to refinance external debt, choosing an intervention will likely prove counterproductive,” Dhawan said in an email. “The more resources a government allocates to currency defense, the less it is available to meet its obligations to bondholders, which increases the risk of default.”
He stated early signs that the government could double-double its current strategy “will become a strategic failure.”
The 13-point gap in the election for Buenos Aires (PBA) in favor of opposition Peronists was far wider than what the votes expected or what the market was priced. The government’s set-off in the poll adds to the recent headwinds of markets that have up until recently surpassed Latin American peers.
“There was a reservation about the market being too satisfied with the election results for Buenos Aires. The foreign exchange market will undoubtedly be in the spotlight as any instability can have a ripple effect on Argentine’s assets.”
“However, it is important to note that simply using fees to support the currency is unlikely to provide a lot of security in the market,” she added. “In my opinion, midterm elections have more weight and the outcome will have a significant impact on how Argentine assets will function in the coming months.”
The bond market sale saw the 2035 issue of 2035 at 6.25 cents, the biggest drop every day since its post-issuance in 2020.
Based on the official number, Perrost received 47.3% of the votes statewide, with Maylei’s party candidates accounting for 33.7%, with 99.98% of the votes counted.
Argentina has been one of the major reform stories of emerging markets since Mailey became president in December 2023 – has seen the markets under heavy pressure last month following the corruption scandal in which Mailey’s sister and political gatekeeper Karina Miley has been accused of accepting government contract bribes.
The government’s defeat also came after the IMF approved the $20 billion program in April, of which $15 billion has already been paid. The IMF has enthusiastically supported Mairay’s government reform programme to the point that director Christarina Georgieva invited Argentina to stay in reform earlier this year.
The IMF did not respond to questions about whether the vote would change relations with the Mairay administration or change the program.
Market sales
Argentina’s main equity index has fallen by about 20% since the government’s corruption scandal was destroyed and international government bonds were sold, and recent suspicious peso pressures forced authorities to begin intervening in the Forex market.
“The results were much worse than the expected market. Mylay was hit so badly that we now have to come up with something,” said Victor Schuzabo, portfolio manager at Aberdeen Investments.
Morgan Stanley had warned in the preliminary stage of the vote that if Mailey stopped his agenda due to radical reforms, international bonds could fall to 10 points. On Monday, the results tug the banks to a “similar” stance on bonds.
Barclays analyst Ivan Stanbulsky pointed to comments from Economy Minister Louis Caputo on Sunday.
“As the Ministry of Economy intervenes, there is likely to be a strong pressure on FX and declining reserves,” Stambulsky said. “If FX sales continue, the market will wonder what will happen if the economic team is forced to depreciate the currency in the mid-October.”
However, some analysts predicted that the rest of the country is unlikely to vote strongly against Mairay, as in the province of Buenos Aires, given that it is a traditional Peronist hub.
They also expected the Mairay government to stick to a program of fiscal discipline despite economic issues.
“The mid-term election state of Buenos Aires has had very negative consequences for the Mairay administration, poses doubts on its ability to produce positive outcomes in the national vote in October, putting the reform agenda at stake later in the semester,” JP Morgan said in a client note on Sunday.
“The policy mix adopted in the coming days and weeks to address rising political risks is crucial in shaping medium-term inflation expectations, and ultimately the success of the stabilization program.”
