Argentine Markets Surge as Milei’s Party Wins Midterms and Secures US Support Deal
- Why Are Argentine Markets Celebrating?
- How Significant Is the US Financial Package?
- What Does This Mean for Milei's Reform Agenda?
- Can Milei Build Legislative Consensus?
- FAQs About Argentina's Market Rally
In a dramatic turnaround for Argentina's economy, markets rallied sharply after libertarian President Javier Milei's party secured a decisive victory in midterm elections and finalized a $40 billion US support package. The peso soared over 10% against the dollar - marking its best trading day in modern history - while local stocks jumped 20% and international bonds gained 10-15 cents. This political and economic breakthrough comes as Argentines appear to endorse Milei's painful but effective reforms that have begun taming the country's notorious inflation.
Why Are Argentine Markets Celebrating?
The market euphoria stems from two key developments: First, Milei's La Libertad Avanza party outperformed expectations by winning 41.5% of votes in the crucial Buenos Aires province - traditionally Peronist stronghold - suggesting growing public support for his economic agenda. Second, the US confirmed a financial package including a $20 billion central bank swap line and potential $20 billion credit facility, both contingent on continued reform progress.
"This wasn't just a win - it was a political earthquake," remarked Thierry Larose of Vontobel Asset Management. "Milei has transformed from survival mode to having real negotiating power to push through previously impossible reforms." The BTCC research team notes that market reactions were immediate: Argentina's 2038 international bonds rebounded to 74 cents after recent pressure, while US-listed Argentine stocks like banks surged up to 50%.
How Significant Is the US Financial Package?
The $40 billion lifeline represents a crucial vote of confidence in Milei's leadership. According to TradingView data, the peso's 10% single-day gain against the dollar was its strongest performance in decades, though the currency remains nearly 30% weaker year-to-date after April's forex controls relaxation.
Christine Reed of Ninety One observed, "The US deal creates a positive feedback loop - it validates the reform path while providing dollar liquidity that could ease Argentina's chronic reserve shortages." Indeed, analysts suggest the government should capitalize on the peso's strength to rebuild depleted dollar reserves, currently at precarious levels.
What Does This Mean for Milei's Reform Agenda?
With midterm risks cleared, investors anticipate accelerated implementation of Milei's economic restructuring plan. Graham Stock of RBC BlueBay notes the results "extend the investment horizon" through the 2027 legislative elections, potentially attracting fresh capital inflows.
The reforms' early results appear promising - inflation has begun slowing despite initial hardships. As Carmen Altenkirch of Aviva Investors suggests, the election outcome might encourage Argentines to start selling rather than hoarding dollars, further stabilizing the currency. However, the government faces urgent challenges in maintaining this momentum while addressing persistent poverty rates.
Can Milei Build Legislative Consensus?
Interestingly, Milei struck a conciliatory tone in his victory speech, signaling willingness to work across party lines - a necessity given his minority position in Congress. This pragmatic approach contrasts with his fiery campaign rhetoric and suggests recognition that passing structural reforms requires broader support.
Market participants will closely watch whether Milei can translate this electoral boost into concrete legislative wins, particularly regarding labor market reforms and public spending controls that face Peronist opposition. The coming months will test whether Argentina's surprising political shift can sustain its remarkable economic turnaround.
FAQs About Argentina's Market Rally
How much did Argentine stocks rise after the election?
Argentine equities saw spectacular gains, with the Global X MSCI Argentina ETF surging 22% and the BKAR index of US-listed Argentine stocks jumping 40%. Some banking stocks soared as much as 50%.
What percentage of votes did Milei's party win?
La Libertad Avanza secured 41.5% in Buenos Aires province - historically Peronist territory - versus 40.8% for the Peronist coalition, with nationwide support exceeding 40%.
How has the peso performed this year?
Despite its recent 10% surge, the peso remains down nearly 30% against the dollar year-to-date after April's forex liberalization, reflecting Argentina's ongoing currency challenges.
