As Argentina approaches its presidential election next year, concerns are mounting over potential pressures on the peso and the country’s economic stability. The current government, led by President Javier Milei, has implemented a stabilization plan that has significantly reduced inflation—from 211 percent when Milei took office in 2023 to 33.5 percent in recent months. Central to this plan has been a managed exchange rate, which authorities have carefully maintained as a tool to control inflation.

Despite these gains, some economists and business figures argue that the peso remains overvalued. While this currency valuation supports inflation control, critics say it worsens challenges for local industries amid Milei’s broader economic liberalization efforts. The policy landscape is further complicated by Argentina’s history of sharp economic policy reversals around elections, which has often unsettled currency markets.

Polling ahead of the upcoming vote points to a tightly contested race, stoking investor anxiety about the peso’s stability. Martin Rapetti, a professor of economics at Buenos Aires University, said that although the current situation appears relatively controlled, pressure on the currency is expected to increase next year. Similar dynamics were seen before last October’s legislative elections, when investors feared a poor showing for Milei’s government and triggered a run on the peso, threatening previous macroeconomic gains. The situation stabilized only after the U.S. administration, viewing Milei as a key regional ally, extended a $20 billion currency swap facility. Market sentiment improved further following Milei’s legislative victory.

Proponents of the government’s approach point to strengthened economic fundamentals that they say provide a more resilient base for the currency. They highlight substantial reforms enacted after the election and an export boom fueled by new investments in mining and energy production—especially development of the Vaca Muerta shale formation. Argentina’s exports rose 21 percent in the first eight months of 2026 compared to the previous year, generating a trade surplus of $18 billion, more than triple last year’s figure. Minister for deregulation Federico Sturzenegger forecast that exports could triple within five to six years due to these investments.

Government foreign currency reserves have also grown steadily, with the central bank having met its $10 billion target for reserve accumulation nearly six months ahead of schedule. Additionally, Argentina’s exchange rate policy has become more flexible, including widening the trading bands for the peso. Support from China is expected to continue following the renewal of a $19 billion bilateral currency swap agreement in August. The International Monetary Fund has expressed confidence in Argentina’s ability to meet its debt obligations, underscoring a relatively stable external outlook.

However, uncertainties remain. The U.S. support that helped stabilize markets last year is not assured in the future, despite Washington’s interest in maintaining regional influence. Economists caution that the peso’s overvaluation—estimated by the IMF at between 9 and 20 percent—limits competitiveness, particularly for the manufacturing sector. Industrial leaders also report difficulties stemming from the removal of trade regulations, which have increased the presence of contraband and dumped imports, notably from China. Martin Rappallini, head of the Argentina Industrial Union, emphasized the toll on local businesses and employment.

Argentina’s external financing needs pose an additional challenge. The country must refinance approximately $26 billion in foreign currency debt in 2027 and over $30 billion the following year. The Milei administration has opted against seeking international market financing, citing prohibitively high borrowing costs. Finance Minister Luis Caputo stated in July that the government’s plans do not rely on international markets, viewing them as optional rather than essential.

Nonetheless, Argentina’s risk premium—the spread over U.S. Treasury yields—has been rising, moving from 4 percentage points earlier this year back above 6 percentage points. This increase suggests growing investor unease and raises questions about the country’s ability to access international financing if needed. As the presidential election approaches, policymakers and investors alike will be closely watching how Argentina navigates these fiscal and currency pressures.