Argentina peso slumps 67% at open after Milei loses local vote

Argentina peso slumps 67% at open after Milei loses local vote

The Argentine peso experienced a significant devaluation of 67% at the opening of trading on September 2, 2025, following the defeat of President Javier Milei’s party in the Buenos Aires local elections. The dramatic fall in the peso's value comes as a result of the political turmoil and economic instability that has gripped the country.

The party of President Milei, La Libertad Avanza (LLA), suffered a crushing defeat in the Buenos Aires elections, with their candidate Diego Valenzuela securing only 34% of the vote, far behind the Peronist left-wing challenger Gabriel Katopodis, who received 47.4% [1]. This defeat marks a significant setback for Milei's right-wing policies, which have included aggressive economic austerity measures.

The currency's devaluation follows a series of political and economic crises, including allegations of corruption involving Karina Milei, the president's sister and secretary-general of the presidency. The scandal, which surfaced through leaked audios from former National Agency for Disability (Andis) director Diego Spagnuolo, has shaken investor confidence [2]. The Treasury, led by Finance Secretary Pablo Quirno, has intervened in the foreign exchange market to stabilize the peso, raising interest rates and tightening forex restrictions on banks to restore investor confidence.

The economic measures implemented by the Milei government have been under pressure, with inflation dropping significantly since his term began, but economic activity falling 0.7% in June [2]. The currency's devaluation and the drop in sovereign bonds, which reached their lowest level since April 2025, reflect market distrust amid the corruption scandal. Argentina’s country risk has risen above 800 points, complicating access to international markets.

The upcoming legislative elections on October 26, when half the Chamber of Deputies and a third of the Senate will be renewed, are seen as a critical test for the government. The defeat in Buenos Aires, home to nearly 40% of Argentina’s population, is a significant blow to Milei’s hopes of expanding his influence and consolidating support. The corruption scandal may sway undecided voters, and the government faces difficulties in Congress, losing 16 of 17 votes since April.

The peso's devaluation and the drop in sovereign bonds highlight the fragility of investor confidence after 18 months of Milei’s government. The economic crisis compounds a stagnant scenario, with consumption and industry remaining unrecovered, and foreign investments falling short of expectations. The October election will be critical in determining the future of Milei's economic policies and his government's ability to navigate the current political and economic challenges.

References:
[1] https://www.aljazeera.com/news/2025/9/8/argentinas-milei-suffers-crushing-setback-in-buenos-aires-election
[2] https://www.mixvale.com.br/2025/09/02/argentine-treasury-intervenes-in-forex-market-to-stabilize-peso-amid-karina-milei-scandal/