The defeat of La Libertad Avanza (LLA), President Javier Milei’s libertarian party, in the recently held Buenos Aires elections has spurred a rise in the Argentine peso-U.S. dollar exchange rate, putting Milei’s fixed bands flotation rate system at risk.

The Buenos Aires election, where over 33% of the nation’s votes are concentrated, allowed Milei’s opposition to show its strength by clenching close to 47% of the popular vote, nearly 13% over LLA numbers.

While Milei conceded defeat and stated that they had to accept it, he also stressed that his economic and fiscal policies would not change. “We will not back down even by a single millimeter,” he stressed.

Argentine stocks trading in international markets plummeted, and the national Merval index fell drastically by over 13%, signaling the fears of a government fallout after the election outcome.

The Argentine peso also experienced a correction, with Argentines rushing to the U.S. dollar to take refuge from the political uncertainty. The rate almost reached the ceiling of the upper flotation band, spurring fears for a possible central bank intervention to return normalcy to the markets.

Nonetheless, this would complicate the Argentine situation even more, as the reserves would have to be used to contain an unpredictable, growing demand for fresh dollars.

Even so, international institutions have faith in the strength of Milei’s to maintain its economic program even after this defeat. JPMorgan, the investment bank, claims that Milei still has room to implement his economic program, trusting that he can rectify his political mistakes to correct the situations leading to this blow.

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