The trouble began earlier this month when President Javier Milei’s party suffered a landslide defeat in provincial elections in Buenos Aires, which were closely watched as a bellwether ahead of next month’s national midterms. That result, which came amid a damaging corruption scandal, shook investor confidence in Milei’s ability to continue pushing through his program of austerity and libertarian reforms. Milei’s agenda has had some success in taming rampant inflation, which has come down from a peak of 289 percent in April 2024 to 34 percent in August, on an annual basis. But as part of its efforts to keep costs down, the government had kept the peso artificially elevated so that imports would be more affordable, which prevented Argentina from building up its foreign exchange reserves. When it came time to prop up the currency in response to the recent sell-off, authorities lacked the reserve firepower to do so.