Argentina’s current government, led by Javier Milei, has enjoyed the backing of international investors virtually from the day it took office—support that has only grown stronger as the new administration has notched up consecutive months of fiscal surpluses. However, things have taken a sharp turn. First came rumours of corruption involving senior government officials. But it was the electoral outcome in the Province of Buenos Aires (where the governing coalition suffered a clear defeat at the hands of Peronism) that triggered a full-blown crisis, boiling over from the political arena into the financial sphere.
For the markets, its defeat at the polls cast serious doubt on the government’s ability to push forward its liberal economic agenda—one that requires sustained effort over the medium to long term. This sparked capital outflows and heavy pressure on the exchange rate, which plunged to a low of 1,475 pesos per dollar. Sovereign bonds dropped below 45 cents, returning to levels seen before the current administration took office, while equity indices tumbled. Following weeks of tension, external support has finally arrived to shore up the Argentine government in its efforts to stabilise the country’s assets. The most high-profile support came from the US administration, with Treasury Secretary Scott Bessent announcing assistance via three mechanisms: a currency swap line of up to USD 20 billion with the central bank; purchases of dollar-denominated Argentine bonds; and a potential loan from the Exchange Stabilization Fund. The World Bank and the Inter-American Development Bank have also signalled their intention to fast-track aid programmes for Argentina.
International market instruments reacted very favourably to the prospect of this support. That said, some uncertainty remains over the conditions and duration of the measures announced. Meanwhile, domestic markets continue to show significant fragility, vulnerable to the prospect of sustained reserve interventions or the need for immediate steps to contain volatility.
The mid-term legislative elections are set for 26 October. In a market as polarised as Argentina’s, political events play a decisive role in shaping medium-term investor appetite. We believe it is prudent to wait for the outcome of these elections to gain clearer insight into the government’s ability to continue implementing its agenda—and, by extension, benefit from incoming capital flows.
Date of report: October 6th 2025