Argentina’s political landscape was jolted on September 7, 2025, as President Javier Milei’s movement, La Libertad Avanza, suffered a stinging electoral defeat in Buenos Aires Province’s legislative elections. The outcome, which saw the opposition Fuerza Patria alliance sweep nearly half the vote, sent shockwaves not only through political circles but also through the country’s already volatile financial markets.
Buenos Aires Province, home to almost 40% of the nation’s electorate, has long been considered a political bellwether. On Sunday, Fuerza Patria—a coalition including the opposition Judicialist Party—captured 47.28% of the vote, or about 3.8 million ballots, according to official figures reported by Argentina Reports and Reuters. Milei’s La Libertad Avanza trailed with 33.71%, roughly 2.7 million votes, securing only two of the province’s rural districts. In contrast, Fuerza Patria dominated both urban centers and most rural districts, clinching the first, third, eighth, second, fourth, and seventh districts.
This defeat marked the first major electoral setback for Milei’s movement since he swept to power with promises of radical economic reform and anti-corruption measures. The timing could hardly be worse for the self-described anarcho-capitalist, who faces crucial national midterm elections on October 26, 2025. As JPMorgan analyst Diego Pereira wrote, “The scale of the defeat far exceeded expectations,” highlighting the difficult road ahead for Milei’s administration.
Market reaction was swift and severe. According to Invezz and Reuters, the Argentine peso slumped nearly 6% against the dollar as markets opened the following Monday, before clawing back to a 3.1% loss by the end of trading. The benchmark Merval stock index plunged 13%, while US-traded Argentine stocks nosedived by almost 18%. Several foreign debt instruments posted their steepest drops since trading began in 2020, with the 2035 bond falling 6.1 cents in a single day. Morgan Stanley, which had previously recommended Argentine bonds, swiftly withdrew its “like” stance after the results, warning before the vote that a poor showing by Milei’s party could wipe up to 10 points from foreign debt prices.
The economic context was already grim. Over the past six months, Argentina’s economic woes have deepened, with Buenos Aires Province particularly hard-hit due to its reliance on commerce and construction. Despite official inflation statistics suggesting a modest 2% monthly increase, many Argentines felt their purchasing power eroding as wages failed to keep pace with rising costs for electricity, health care, and groceries. Hernán Vanoli, director of Sentimientos Públicos and one of the few pollsters to forecast a strong Fuerza Patria victory, told Argentina Reports, “If salaries aren’t rising at the same rate as electricity, health care or grocery bills, and there’s no improvement in sight, people get frustrated.”
The defeat also exposed Milei’s vulnerability to shifting public perceptions. One of his campaign’s main draws was his outspoken rejection of the political “Caste”—the entrenched elite he accused of decades of corruption. Yet a recent scandal involving his sister and close political adviser, Karina Milei, cast a shadow over his anti-corruption credentials. The controversy, which broke about a month before the elections, contributed to a 20% drop in the Merval index and further declines in international bonds, as noted by Invezz. “The result was much worse than the market expected. Milei took quite a big beating, so now he has to come up with something,” said Viktor Szabo, portfolio manager at Aberdeen Investments.
Governor Axel Kicillof of Buenos Aires Province, credited with strategically separating the provincial legislative elections from the national midterms to blunt Milei’s support, did not mince words in his victory speech. “The ballot boxes, with a 13-point margin, showed Milei that you can no longer govern with hatred, with insults, that you cannot abandon people with disabilities,” Kicillof declared from the provincial capital, La Plata. He continued, “Milei, the people gave you an order. You can’t govern for those from outside, for the corporations, for those who have the most. Listen to the people. We have to meet as the authority of the province where 40% of Argentines live. I await your call. Have the courage and bravery to call, work and reach an agreement.”
Milei, for his part, admitted the setback. “The result wasn’t positive,” he said, but framed it as “the ground floor from which we will start work” ahead of the October midterms. “There’s no option to repeat our mistakes. We will correct them,” Milei promised, later adding, “Despite this electoral result, I want to tell Argentines that the objective for which we were elected will not change. It will be re-doubled.”
Financial markets, meanwhile, remain jittery. Barclays analyst Ivan Stambulsky warned, “We’re likely to see strong FX pressure and declining reserves as the Ministry of Economy intervenes,” raising the specter of another peso depreciation before the midterms. Economy Minister Luis Caputo sought to reassure investors, insisting on September 7 that the country’s foreign exchange policy would remain unchanged. However, skepticism abounds, with UBS’s Shamaila Khan cautioning, “Any instability there can have a ripple effect on Argentine assets.”
Political analysts are divided on the broader implications. Some, like Sergio Armella of Goldman Sachs, argue that Buenos Aires Province is a traditional stronghold for the Peronists and that the result may not be replicated nationwide. “The provincial election stands to have a very limited effect on the policy mix of the Milei administration; it does represent a political setback for the government,” Armella told Reuters. Others, however, point to the symbolic importance of the province and the psychological blow to Milei’s reform agenda. As Shamaila Khan observed, the upcoming midterms will be “more influential in influencing market performance than the provincial vote.”
Underlying all these dynamics is a growing sense of uncertainty. The corruption scandal involving Karina Milei, the worsening economic situation, and the government’s perceived inability to deliver good news have all combined to erode public and investor confidence. As Hernán Vanoli put it, “When the economy is good, they tolerate corruption but don’t validate it. When the situation is bad, tolerance ends. It’s about prioritizing sources of stress. Common people will always prefer an honest person to a corrupt one.”
With five weeks remaining until the national midterms, Argentina finds itself at a crossroads. Investors, politicians, and ordinary citizens alike are watching closely to see whether Milei can steady the ship—or whether the turbulence of recent weeks is a sign of deeper troubles ahead.