Argentine Markets Plunge Following Milei‘s Buenos Aires Election Defeat
Argentine financial markets experienced a important downturn on Monday following President Javier Milei’s party’s defeat in the Buenos Aires legislative elections over the weekend. The MERVAL,Buenos aires’ main stock index,plummeted 13.25% to close at 1,732,923.77 points.Together, the Argentine peso sharply devalued against the US dollar.
The peso officially traded at 1,422 per dollar,a 4.26% increase, bringing the exchange rate close to the upper limit established in argentina’s agreement with the International Monetary Fund (IMF) – approximately 1,468 pesos per dollar. Should the official rate reach this ceiling, the Central Bank (BCRA) would be required to intervene by selling dollars. The unofficial “blue dollar” rate, traded on the parallel market, reached 1,385 pesos per dollar.
While the market anticipated some negative reaction to Milei’s loss, the magnitude of the decline exceeded expectations. Buenos Aires accounts for 40% of the Argentine electorate, leading investors to become more pessimistic about the government’s performance in the upcoming October national legislative elections and the future of Milei’s economic reform agenda.JP morgan economists released a statement highlighting the concerns, stating, “The forceful defeat of the management Milei in the legislative election of term in Buenos Aires has launched serious doubts about his ability to obtain a positive result in the upcoming national elections and threatens the continuity of his reform agenda. Increased political risk is expanding economic vulnerability and complicating Argentina‘s path towards stabilization.”