The Argentine peso and share prices dropped sharply Monday after President Javier Milei’s libertarian party suffered a drubbing in a key provincial election.
The dollar rose 5.3 percent compared to Friday as trading opened in the currency market and shares of Argentine companies that trade on Wall Street lost nearly 20 percent.
The Buenos Aires Stock Exchange recorded losses over 12 percent.
The financial markets reacted after budget-slashing Milei’s La Libertad Avanza (LLA) party came out nearly 14 percentage points behind the victorious center-left Fuerza Patria coalition in elections in Buenos Aires Sunday.
Buenos Aires is the country’s most populous province and economic powerhouse, and the vote was considered a bellwether for national legislative elections in October.
Milei governs with a minority in Congress.
The dollar’s rise Monday took the peso to the ceiling of a floating band established by the government in April amid high currency volatility.
This came after the South American nation reached agreements for $42 billion in loans from global financial institutions in what the International Monetary Fund said was a vote of confidence in the government’s economic reforms.
Argentina, with its long history of economic crises, hyperinflation and defaults, already owed the IMF $44 billion under a 2018 loan agreement — the lender’s biggest ever — on which it has since renegotiated the repayment terms.
Milei has slashed public spending, dismissed tens of thousands of public servants and led a major deregulation drive since taking office in December 2023 as he seeks to limit debt, wipe out stubborn inflation, boost growth and replenish foreign reserves.
The cuts have brought thousands out on the streets to protest the resulting hardships inflicted on millions.
The drubbing for Milei’s party was far greater than opinions had predicted.
His government went into the election under a cloud following a corruption scandal involving the president’s sister and right-hand woman, Karina Milei.
It also came three days after Milei suffered a major setback when Congress overturned his veto of a law increasing allowances for disabled people.
On the economic front, the self-described “anarcho-capitalist” is struggling as well, despite success in fighting inflation and in erasing a fiscal deficit.
Last week, his government began selling treasury dollars to stem the peso’s depreciation, which had been gaining pace in recent weeks despite high interest rates.
Milei, who vowed after Sunday’s vote to “accelerate” his libertarian reforms, called a cabinet meeting from which no details have emerged.
Chief of Staff Guillermo Francos said Monday it may be “time for self-criticism, to analyze where we’ve failed, and why the macroeconomic results are not reaching the people.”
