Argentina markets tumble after Milei defeat in Buenos Aires vote

Lead

On Sept. 8, 2025, Argentine financial markets plunged after the Peronist opposition won a decisive victory in the Buenos Aires provincial vote, undermining confidence in President Javier Milei’s reform agenda. The peso slid nearly 6% versus the dollar on the open, the domestic benchmark index fell about 13%, and US-traded Argentine stocks dropped close to 18%. The result — a 13-percentage-point margin in a province where Peronists secured 47.3% against Milei’s 33.7% — raised immediate questions about political momentum ahead of national midterm elections on Oct. 26. Traders and analysts signalled heightened pressure on bonds, foreign-exchange reserves and the administration’s ability to carry out planned economic changes.

Key Takeaways

• The Buenos Aires Province vote on Sept. 7–8 produced a 47.3% share for Peronists versus 33.7% for Milei’s party with 99.98% counted.
• The peso weakened almost 6% against the dollar at market open on Sept. 8, reflecting abrupt FX market stress.
• The domestic benchmark stock index (.MERV) was down about 13%, while the US-traded Argentina index (.BKAR) fell nearly 18%.
• ‘Since a corruption scandal involving Karina Milei, Argentina’s main equity index had fallen roughly 20%, amplifying the market reaction to the vote.
• Markets and banks signalled that any sustained FX intervention could deplete reserves and that policy credibility will be tested ahead of Oct. 26 midterms.

Background

Javier Milei took office in December 2023 promising rapid, market-oriented reforms that attracted investor attention across emerging markets. His program included tight fiscal targets, currency policy shifts and plans to overhaul state institutions. Argentina had earlier completed a roughly $65 billion sovereign debt restructuring under former President Alberto Fernández in 2020; since then, international bond trading for restructured paper resumed but remained sensitive to political shocks.

Buenos Aires Province is Argentina’s most populous and politically consequential region and is traditionally a Peronist stronghold. Polling ahead of the vote had suggested a closer contest than the outcome delivered, and markets had been pricing in a narrower margin. The Milei presidency has endured a recent political controversy involving his sister and close adviser, Karina Milei, which coincided with significant market volatility and forced authorities to intervene in the FX market at times.

Main Event

Official tallies released on Sept. 8 showed Peronist candidates collecting 47.3% of the provincial vote against 33.7% for Milei’s party, with 99.98% counted. The roughly 13-point gap exceeded both public polling and market expectations, prompting an immediate reassessment by investors about the government’s legislative and political prospects.

At the open on Sept. 8 the peso depreciated nearly 6% versus the dollar and Buenos Aires equities plunged about 13%. Argentine shares listed in the United States recorded steeper declines, with the .BKAR index down close to 18% as overseas investors reacted to perceived increases in political risk.

Bond trading reflected a sharp repricing of sovereign risk: the country’s 2035 bond fell about 6.1 cents, marking one of its worst days since the 2020 restructuring issue began trading. Several analysts said this was consistent with prior warnings from banks that a heavy electoral setback for Milei could trigger two-way pressure across FX, equities and sovereign spreads.

Analysis & Implications

The scale of the provincial loss complicates Milei’s path to implement bold economic changes ahead of the Oct. 26 national midterms. A weakened mandate could limit the administration’s ability to pass laws or maintain market-friendly reforms, making investors question the durability of the policy mix. Financial firms cautioned that political uncertainty tends to amplify capital flight and push yields higher on sovereign and corporate bonds.

FX intervention to support the peso has short-term stabilising effects but risks reducing central-bank reserves if sustained. Several market strategists noted that deploying reserves to prop up the currency may offer only temporary relief and could erode policymakers’ credibility if not backed by fiscal or structural measures. Persisting FX sales would also raise the possibility of a forced depreciation ahead of the midterms, with knock-on effects for inflation expectations.

International investor appetite for Argentine assets — already dented by the corruption allegations and a recent 20% drop in the main equity index — may remain muted until political clarity returns. Banks and asset managers flagged that a recalibration of the government’s communications and strategy is likely in the coming weeks as authorities seek to shore up support and reassure markets.

Comparison & Data

The table shows the immediate market moves on Sept. 8 alongside broader losses traced to the political controversy. While province-level voting is not identical to national sentiment, Buenos Aires Province carries outsized economic and political weight, amplifying the market signal sent by the result.

Reactions & Quotes

The foreign-exchange market will be closely watched; simple reserve use is unlikely to fully reassure investors, and the midterm outcome will shape asset performance in the coming months.

Shamaila Khan, UBS (Head of Fixed Income Emerging Markets and Asia Pacific)

UBS warned that market complacency regarding the provincial vote had been misplaced and that FX stability is central to investor confidence. Analysts emphasised that reserve deployment without a credible policy framework would not be a durable fix.

The scale of the defeat exceeded expectations and signals a challenging national midterm battle; the administration may need to recalibrate its strategy in the weeks ahead.

Diego Pereira, JPMorgan analyst

JPMorgan noted the electoral result increases political pressure ahead of Oct. 26 and could prompt tactical shifts from the Milei administration to shore up its position.

Markets reacted strongly — Milei took a large hit and now faces the task of regaining investor trust while preserving his reform agenda.

Viktor Szabo, Aberdeen Investments (portfolio manager)

Unconfirmed

• Whether the national government will use a sustained drawdown of FX reserves to defend the currency is not confirmed and depends on forthcoming policy choices.
• It is not yet verified whether the Buenos Aires result will be replicated in other provinces during the Oct. 26 midterms; regional dynamics differ.
• Any internal restructuring or personnel changes within Milei’s team in response to the vote remain speculative until formally announced.

Bottom Line

The provincial defeat on Sept. 7–8 delivered a clear political setback for President Milei and promptly transmitted into financial-market stress: sharp currency depreciation, steep equity losses and a notable bond selloff. While the government retains tools to respond, their use carries costs and may provide only temporary calm absent a credible, broader policy response.

Markets will test the administration over the next five weeks before the Oct. 26 midterms; investors will watch for signs of a coherent political recalibration, assurances on FX policy and any steps to restore institutional confidence. Absent such signals, volatility across Argentine assets is likely to persist.

Sources

• Reuters — News report on market reaction and election results (media)
• Central Bank of Argentina (BCRA) — Official FX and reserves data (official)
• J.P. Morgan — Analyst note referenced on electoral implications (bank research)
• UBS — Comment from emerging markets fixed income team (bank research)
• Goldman Sachs — Market commentary on macro conditions (bank research)