It is a test of whether the government's economic program can survive contact with voters
JP Morgan's base case assumes a tight margin (≤5%) favoring either Kirchnerism or La Libertad Avanza, which would ease currency pressure and allow real interest rates to decline before October legislative elections. A Peronist victory by >5 points would likely push the dollar to the $1,460 band ceiling; however, JP Morgan assigns low probability to this scenario unless voter turnout falls below 50%.
- JP Morgan's base case: opposition or government victory by ≤5 points eases currency pressure
- Peronist victory by >5 points would push dollar toward $1,460 band ceiling
- Real wages up 2.6% overall since November 2023, but public sector down 14.3%, informal sector up 55%
- October 26 legislative elections determine congressional composition for second half of Milei's term
JP Morgan identifies Buenos Aires elections as crucial for Argentina's currency stability, projecting two scenarios: a narrow Kirchnerist victory or government win would ease peso pressure, while a larger opposition victory could push the dollar to band limits.
Argentina's financial markets are holding their breath ahead of Sunday's Buenos Aires provincial election, and JP Morgan has drawn a map of what comes next. The bank's strategists see the vote as genuinely consequential—not merely a midterm referendum on President Javier Milei, but a signal that will ripple through currency markets, interest rates, and the government's ability to govern through October's national legislative elections.
The bank laid out two distinct futures. In the first scenario—their base case—either the Peronist opposition wins by a narrow margin of five percentage points or less, or Milei's La Libertad Avanza pulls off a victory. Either outcome would be read by markets as a stabilizing result. Currency pressure would ease. Real interest rates, which have been punishingly high, could begin to soften even before the October elections. The fiscal damage from those elevated rates would diminish. Economic activity might recover momentum in the final quarter of the year. This is the scenario where the government's IMF-backed program stays on track.
The second scenario is darker. A Peronist victory by more than five points would likely send the dollar climbing toward the upper limit of Argentina's currency band—currently set at 1,460 pesos. JP Morgan assigns this outcome a low probability, but not zero. The bank notes that voter turnout becomes the crucial variable. In a province that has historically leaned Peronist, low turnout would hurt the government. Conversely, if turnout reaches around 60 percent and the government can retain at least half of the PRO party's voters from the 2023 governor's race, the opposition's margin would likely stay within that five-point threshold.
The economic backdrop matters. Inflation in late August was running at 2 percent month-over-month despite currency volatility and a 5 percent average depreciation of the peso. The bank found no major inflationary shock from those exchange rate movements. But wages tell a more complicated story. Since November 2023, when Milei took office, real wages have risen 2.6 percent overall—a modest gain. Yet the aggregate masks severe fractures. Public sector workers have seen real wages collapse by 14.3 percent. The formal private sector has barely moved, down 0.5 percent. The informal sector, by contrast, has surged 55 percent. Pensions have climbed 35 percent in real terms, returning to levels last seen in 2016 and 2017.
Consumer confidence, measured by the Torcuato Di Tella University index, dropped 6.6 percentage points in August. The bank noted a parallel moment last September, when Milei announced his intention to veto university funding legislation and confidence tanked—only to rebound 10 points once the political dust settled. That recovery offers a glimmer of hope for the government: confidence can shift quickly if the political narrative changes.
What hangs in the balance extends beyond Sunday. The October legislative elections will determine whether Milei has the congressional strength to pass tax reform and other measures required by his IMF agreement. A strong showing in Buenos Aires would suggest momentum heading into those national elections. A weak one could fracture his coalition and leave him legislatively crippled for the second half of his term. The province is not merely a waystation. It is a test of whether the government's economic program can survive contact with voters who are experiencing wage losses, high borrowing costs, and the accumulated friction of austerity.
Citas Notables
With currency pressures receding, real interest rates could begin to ease even before the October legislative elections, and the fiscal impact of such elevated rates would become less damaging.— JP Morgan analysis
In a province that has historically leaned Peronist, low voter turnout would likely work against the national government.— JP Morgan analysis
La Conversación del Hearth Otra perspectiva de la historia
Why does a provincial election in Buenos Aires matter so much to currency traders?
Because it's a referendum on whether Milei's government can hold its coalition together. If he loses badly, markets worry he won't have the votes in Congress to pass the reforms his IMF program requires. That uncertainty pushes investors toward the exits.
And if he wins narrowly?
Then the narrative is that he's stable, that his program is working, that there's no need to panic about the peso. Interest rates can come down. The economy can start to breathe again.
JP Morgan seems to think low turnout helps the opposition. Why would that be?
Buenos Aires has always been Peronist territory. When fewer people vote, the core Peronist voters—who are more motivated, more organized—show up. The government's voters are more dispersed, less reliably mobilized. So a quiet election favors the opposition.
What strikes you most about the wage data?
The fracture. Public workers have lost 14 percent of their purchasing power since Milei arrived. Informal workers have gained 55 percent. It's not one Argentina. It's several Argentinas experiencing completely different realities. That divergence will show up in how people vote.
Can confidence really swing back as quickly as it did last September?
It can, if the political story changes. But confidence is fragile. It's built on the belief that the government knows what it's doing. One more shock, one more sign of instability, and it shatters.