As Argentina prepares for a potentially close presidential election, the peso faces mounting pressure. Historically, elections in Latin America have destabilized fixed or managed exchange rates, leading to abrupt devaluations. Javier Milei’s government has implemented a stabilisation plan that reduced inflation from 211% to 33.5%, anchored by a managed exchange rate.
However, some economists argue the peso is overvalued, hurting export competitiveness. With polls showing voter discontent over the sluggish economy, analysts warn of investor nervousness. Martin Rapetti of Buenos Aires University predicts currency pressure will intensify next year.
A recent test came during the October legislative elections, when a peso run threatened Milei’s reforms until the Trump administration provided a $20bn swap facility. Milei’s party won, boosting investor confidence. Supporters cite stronger fundamentals: exports rose 21% year-on-year, generating an $18bn trade surplus, and foreign reserves grew by $10bn in six months.
Mining and Vaca Muerta shale investments could triple exports within five years, according to deregulation minister Federico Sturzenegger. IMF chief Kristalina Georgieva expressed confidence in Argentina’s economic trajectory during a July visit.
Source: Financial Times Markets · Summarized by HeadlinesBriefing