Argentina faces a high risk of volatility in its financial markets ahead of this Sunday’s by-elections. The elections are seen as a crucial turning point for President Javier Milei’s economic reform program.
Even though Milei is not running in the election, his party, La Libertad Avanza, will face a major test at the polls. This vote is a vote of confidence for the leader’s austerity policies and market-friendly stability strategy.
Having gained the support of US President Donald Trump, Milei also secured a $20 billion swap agreement with Washington.Peso in Historic Low, Bonds Under Pressure
In recent weeks, Argentine markets have experienced volatility. The peso has fallen to a record low against the dollar, while international bonds, which rose in 2024, have turned to losses in 2025. Investors expect sharp price movements depending on the election result.
According to experts, Trump’s statement, “If Milei loses, I won’t dedicate time to Argentina,” also increased the political pressure on the markets.
Market Rally Expected If Milei Wins
Half of the House of Representatives and one-third of the Senate will be renewed in the elections. Milei needs to achieve approximately 33% of the vote in both houses to retain her legislative power. Analysts say that a result above 35% would be considered a success.
Financial institution JPMorgan expects Milei’s bloc to secure enough seats to retain its veto power. In this scenario, increased US support and decreased political risk premium are predicted.
However, a negative outcome could jeopardize US support and lead to a sharp correction in the markets. Experts emphasize that a sustainable recovery is only possible with a credible strategy to strengthen international reserves.
