After the vote on October 26 – a make-or-break moment that could derail his ability to keep pushing his free-market agenda through Congress – the outlook is much less clear.
Those doubts will be front and centre as local markets reopen after being shut on Friday for a holiday.
During that session, the relief that washed through Argentina’s markets after US treasury secretary Scott Bessent swooped on Thursday already showed signs of fading, with the country’s dollar bonds falling even before Donald Trump’s fresh round of tariff announcements soured risk appetite.
That’s because even as markets stabilise, traders are mindful of the risk that selloffs could flare up again if Mr Milei is dealt a resounding loss.
And beyond that, it is widely expected that Argentina will eventually have to ditch the currency-trading bands that have held the peso at artificially high levels.
“Bessent’s ‘whatever it takes’ sentiment and prospect for further support keeps upside optionality on bonds alive in the short-term,” said Kathryn Exum, co-head of sovereign research at Gramercy Funds Management.
“However, the outcome of the mid-term elections remains the major event followed by FX and political adjustment in the aftermath.”
Trading in the peso, which jumped 0.7pc on Thursday, was closed along with the stock market on Friday due to a local holiday.
But the price of Argentina’s dollar bonds dropped almost a cent, paring some of the previous day’s gains, and pushing the yield up to almost 13pc.
Mr Milei, who rose to power by promising to usher in sweeping reforms and budget cuts that would revive the economy and tame inflation, won over global investors as his policies started to take hold and show some success.
But after his party suffered a defeat in the Buenos Aires provincial election last month, investors started pulling out cash.
His administration responded by tightening currency controls and burning through its reserves to buy up pesos and fend off a devaluation that would likely worsen inflation and deal a fresh economic shock.
Bloomberg
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