For decades, Argentina has been a cautionary tale of a once prosperous nation undergoing slow multi-decade collapse, proof of what happens when a society persistently ignores all the warning signs of prolonged mismanagement.
In November 2023, Argentina’s voters broke with the past and elected Javier Milei, an economist with a wild haircut, the rhetorical style of a radio “shock jock,” and a radically different recipe for reversing national decline—free market economics and drastic cuts in the size of the state.
After over a year in office, he can point to success in cutting deficits and reducing the country’s staggering inflation rate, though much economic reform work lies ahead. Politically, he has benefited from the Peronist opposition’s divisions and its refusal to present any serious alternative program. His own popularity remains high despite the pain his policies have produced, a tribute to the Argentine public’s desperate desire for change.
Milei can display a messianic and, indeed, authoritarian streak, with abusive rhetoric directed at those who criticize him. While the public looks for progress on Argentina’s economy, he often drifts into tirades against “woke” leftism and cultural warfare far from their main concerns. Argentines have paid a high price in lost jobs and earning power for his anti-inflation crusade, and while he can point to some positive signs, the hoped for broad-based economic recovery is, at best, only beginning to emerge and it is not clear how long it will be before patience with austerity wears thin.
A Right Turn on Economy Policy
For the bulk of the last two decades, a particularly extreme form of left Peronism was dominant, during the presidencies of Nestor Kirchner (2003-2007), his wife and then widow, Cristina (2007-15) and Alberto Fernández (2019-2023). Spending discipline was ignored, labor unions and organized street-level “social movements” linked to the government were privileged. Inflation soared, while efforts to contain its effects through exchange controls, price controls, subsidies to key sectors, and welfare payments only worsened the situation.
As inflation peaked—hitting 289 percent in April of 2024—the public turned to an unlikely alternative in Javier Milei, a locally educated economist and media personality with a mop of untamed hair, a penchant for wearing leather jackets, and a repertoire of violent denunciations of the “caste” of politicians, union bosses and favored businessmen who in his view had brought the country to ruin. His ideology was libertarianism, and his prescription was a drastic reduction in government spending and the size of the state.
Upon taking office, Milei moved swiftly to implement his program using two main vehicles: “the chainsaw” – ruthlessly reducing government employment and spending; and the “blender” – keeping salaries, pensions, and welfare payments well below inflation. The results were dramatic. The deficit was reduced dramatically and inflation dropped quickly. While still high by any objective standard, it has been on a downward trajectory. Analysts predict annual inflation for 2025 of 23.2 percent, a remarkable improvement from a situation where a breakout into Weimar Republic-style hyperinflation had seemed a distinct possibility.
After considerable wrangling, Milei was able to gain enough support in Congress to pass legislation to give him powers to move forward with his policies, including not only spending cuts, but a program of privatization and state reform which is only beginning to be implemented, as well as tax incentives to encourage foreign capital to invest in Argentina.
His efforts to stabilize Argentina’s runaway economy have come at a price—layoffs of public workers in an environment where the private sector has yet to pick up the slack, and salaries and pensions which do not make up for still high, albeit significantly reduced, inflation. Public investment in infrastructure has largely halted. The result was a sharp recession and an increase in poverty, which would seem to be a recipe for social unrest. Nonetheless, his popularity remains remarkably high considering the circumstances, hovering around 53 percent.
A Work in Progress
While inflation continues downward, Milei has a daunting task ahead. The Argentine peso is still subject to controls, though the crazy quilt of multiple rates which his predecessors had instituted has been greatly simplified. He led off with a needed devaluation of Argentina’s artificially over-valued peso. But there are concerns that to keep inflation under control the government has over time allowed the peso to once again become too strong—evidence for which is the large number of Argentines traveling to Uruguay, Brazil and Chile to vacation and shop, because these countries have become bargains for them.
Freeing up the exchange rate will require deft management, including a new agreement with the International Monetary Fund, to which the country is deeply indebted, that will enable it to recapitalize its central bank, which lacks the foreign currency reserves needed to support a free floating peso without triggering a return to high inflation. (His proclaimed ultimate goal is the dollarization of Argentina’s economy, although this seems far off.)
Slowly but surely, the government is taking steps to reform the economy, untangling the web of controls which have impeded its functioning. The agricultural sector, Argentina’s key source of foreign currency, has until recently been forced to pay taxes on its exports, and has lobbied hard for their abolition. The Milei administration had been reluctant until recently to abandon this source of revenue. But spurred on by difficulties the sector is facing as a result of drought, it has now agreed to relax them for six months, an important step forward.
Milei has promised a thoroughgoing effort to prune state involvement in the economy and has named a minister for deregulation and state transformation. Legally he has the power to sell some (although not all) state-owned enterprises, but the process has only just begun, with one firm so far, a metal products producer nationalized in 2021, sold to an American buyer. Still, large segments of Argentina’s economy have been deregulated to allow greater competition. These include rental property markets, inter-city bus transportation, the postal service, retail commerce, and aviation, where an “open skies” policy has been implemented.
As for results, beyond lowering inflation (no small thing), there are some signs of recovery after the inevitable brutal recession his austerity policies triggered. In recent months salaries in the formal economy have increased ahead of inflation and unemployment has slightly decreased although it still hovers near seven percent. Foreign investors, while still cautious, are looking at taking advantage of the new tax benefits and more positive business environment to invest, particularly in the energy sector. But for many Argentines, times remain tough.
Messy Politics
Milei’s current popularity gives him political space to pursue his big plans for now. He benefits from disarray among the Peronists, who are still reeling from their defeat. Former President Cristina Kirchner remains their foremost figure. But she faces several criminal cases for corruption making their way through the court system, and other Peronists are beginning to raise their profiles.
The Peronists’ real weakness is their inability to come up with a plausible alternative to Milei’s approach to governing. For now, they are unprepared to go beyond constant criticism of the harm which his policies are said to have done, while saying nothing as to how they would deal with inflation and economic stagnation. Their main hope seems to be that Milei will eventually run out of steam.
Though the Peronist opposition remains on its back foot, Milei struggles to maintain a coalition providing needed political support. Crucial for this effort is “Republican Proposal,” (Spanish initials PRO), the center-right party of former president Mauricio Macri, a wealthy businessman who had made some efforts at reform but whose 2015-2019 presidency proved to be merely an interregnum between periods of Peronist rule.
Milei wants PRO’s support, while at the same time hoping to take votes away from it at the next Congressional elections in October 2025, as his political operatives are trying to build his own small party, Freedom Advances, into a true force. Even with support from PRO, Milei needs to squeeze votes from other parties, such as the old line centrist Radical Civic Union and dissident factions among the Peronists.
Picking Friends and Enemies At Home
Milei gained power with hot rhetoric including personal insults against his opponents, whom he has called “crooks,” “mandrills” (a type of monkey) and “parasites.” He also constantly attacks Argentine journalists and figures in the entertainment world who have criticized him. Pro-Milei podcasters abuse his opponents even further. All of this raises questions. How would Milei act if he had greater control of Argentina’s Congress and courts? Underneath his libertarian philosophy is there a streak of authoritarianism.
As a campaigner, Milei took his libertarian approach beyond economics to lifestyle issues, and even made reference to his own rather unconventional sexual history. Over time he has become a cultural warrior, employing tropes found in the rhetoric of new global hard right. This reached an extreme at the recent World Economic Forum in Davos, where he criticized “gender ideology,” while loosely linking homosexuality and pedophilia. His remarks were denounced by Argentine opinion leaders across the political spectrum, and a protest march took place in Buenos Aires. Milei in response said his remarks had been distorted by the media.
And Abroad
While he certainly has enough to do domestically in trying to secure a sustained economic recovery, Milei has not been shy about preaching his gospel of shrinking the state abroad at venues ranging from conferences of conservative political activists to the United Nations General Assembly. He has picked fights with leftist leaders such as Brazil’s Lula da Silva and Spain’s Pedro Sánchez, and relishes being seen as a leading right-wing populist, with Italy’s Giorgia Meloni, Hungary’s Victor Orbán and El Salvador’s Nayib Bukele.
But most of all, he highlights his relationship with Donald Trump, whom he visited at Mar-a-Lago in November and whose inauguration he attended. Some of the affinities between the two politicians are natural—a willingness to engage in abusive rhetoric, a contempt for the existing establishment, suspicion of multilateralism, and a sense of themselves as national saviors.
Milei seems to be increasingly taking positions which parallel Trump’s policies. He has announced Argentina’s withdrawal from the World Health Organization and possible exit from the Paris climate change accord. And he has gone out of his way to praise a provincial governor who is building a barrier along the border with Bolivia to contain illegal immigration.
Milei may hope to gain some benefit from his ties with Trump. He will need US support to gain more financing from the International Monetary Fund, and is now well positioned to obtain it. (Of course, his efforts at economic reform have been sufficiently serious as to win some sympathy at the Fund in any event.) Milei has also spoken of his desire to gain a free trade agreement from the Trump administration. But in the short term, with US trade relations with longstanding partners in doubt, this seems implausible.
One area of foreign policy where Milei has sharply broken with his predecessors has been regarding Israel. Although still nominally a Catholic, he has made clear his fascination with Judaism and by extension, with Israel, and has gone so far as to name his personal spiritual advisor, a rabbi with whom he has studied, as Argentina’s ambassador there.
His Peronist predecessors, in addition to harboring suspicions of Israel, had maintained links with Iran. During Cristina Kirchner’s administration, an agreement was signed under which Iran was to participate in the investigation of the 1994 bombing of the AMIA Jewish community center in Buenos Aires, despite the fact that Iranian operatives had in fact been implicated in the attack.
Milei by contrast has been unreserved in his support for Israel, and has pressed for a continued investigation of both the AMIA bombing and the death of Alberto Nisman, the case’s former prosecutor. He has described Nisman’s death in 2015 under mysterious circumstances as a “murder at the hands of the darkest forces of power.”
How Patient Will Argentines Be?
Milei has his strong points. He is actually a trained economist, which is important given the nature of Argentina’s crisis. He has a clear idea of what he wants to do, while his opponents are divided and without an alternative project. And he has shown, despite often wild rhetoric, that he can cobble together the necessary votes in Congress to move his program forward. The sharp decline in inflation which his policies have brought has put the Argentine people on his side, at least for now.
But questions remain as to how long this will last. At some point, the Milei show – abuse of opponents, chumminess with Trump and other ideological soul mates, and globetrotting advocacy for libertarianism – may start to wear thin.
His country needs investment and job creation from sources of capital, both domestic and foreign, which have been burned by Argentina many times in the past. While he has some reason to be hopeful for sustained economic recovery, how profound it will be and how soon it will arrive is largely beyond his control. The clock is ticking both for him and for Argentina.
