Argentina’s Hard Reset: Milei’s Economic Reforms One Year Later
When Javier Milei assumed office a year ago, skeptics saw three potential risks. One, he might take an authoritarian turn, subverting liberal democracy. Two, his libertarian agenda could stall under the constraints of an opposition-controlled Congress and powerful and socialist unions, that his libertarian agenda would stall. Three, the pain of shock therapy would destroy his popular base, leaving him politically neutered.
None of those fears have materialized. Despite Milei’s combative rhetoric and some political maneuvering that has seen him flirt with unpalatable members of the political or judicial “caste” he despises, Milei has largely operated within democratic norms. He’s made significant progress on fiscal, monetary, and deregulatory reforms, warning Argentines upfront that sacrifices would be necessary to undo decades of economic mismanagement. Polls show that, despite hardship, half the country still supports him.
You might not be seduced by his verbal explosions or consider him a model of etiquette, but Milei has caught the world’s imagination with the early part of his libertarian revolution and delivered some impressive results. In just a year, his government turned a fiscal deficit of 15% of GDP (if we add 5 percent at the Treasury and 10% at the central bank) into a surplus, reduced public spending by 31%, and slashed monthly inflation to one-tenth of its previous levels. The keys to these achievements have been halting the central bank’s money printing, which led to swapping excess liabilities for Treasury debt and tackling Argentina’s bloated public sector.
His administration is also laying the groundwork for privatization and investment. Using sweeping decrees, an omnibus law, and a ministry tasked with cutting red tape, Milei has started liberalizing the economy. Early signs of recovery are visible: private credit is growing, and mining giants like BHP and Canada’s Lundin Group are investing in Argentina. Forecasts predict GDP growth of 4–5% in 2025.
As Milei predicted, the social pain has been considerable. Unemployment has risen to 8%, partly because Milei froze public works (although Argentina’s big informal economy makes official unemployment figures less relevant than in other parts of the world). Consumer spending is down 20%, and pensioners have seen their incomes fall behind inflation. Nevertheless, optimism is growing, and we should see a turnaround next year.
A tax amnesty has brought $20 billion back into the system. As foreign exchange reserves stabilize, fears of a major devaluation—and renewed inflation—are fading. The black-market dollar and the official dollar have converged, and the central bank has increased its foreign exchange reserves (although some are part of a swap deal with China and are not available for discretionary use). The incentives to attract capital included in the omnibus law should help bring foreign capital into various industries as soon as the foreign exchange and capital controls end. Milei inherited such controls and was reluctant to eliminate them before his stabilization programs came to total fruition.
Major challenges remain, including $44 billion owed to the IMF and nearly $15 billion in debt payments due next year. Still, Milei hopes 2025 will bring enough economic success to secure a majority in Congress after the midterms. Milei has so far relied on the votes of former president Mauricio Macri’s party, some of the members of a center-left party and a few reasonable Peronists (they exist!) to obtain sporadic victories in Congress. His major bet is that 2025 will bring enough good news that he will be able to build a solid majority after the midterm elections at the end of next year. If he does, the libertarian revolution will storm ahead. The world is watching.
