Introduction: Argentina’s Gamble on Javier Milei
On December 10, 2023, Javier Milei took office as Argentina’s most radical leader in decades, promising to dismantle the bloated state, crush inflation, and restore economic stability. In his campaign, he famously wielded a chainsaw as a symbol of the sweeping cuts he would make to government spending.
One year later, the results are as dramatic as his rhetoric. Argentina’s budget deficit has vanished, inflation has fallen from nearly 300% to 17%, and foreign investors are once again looking at the country with interest.
But for ordinary Argentines, the reality is harsh. More than 50% of the population now lives in poverty, wages have collapsed, and social spending has been gutted. Universities are protesting, industries are struggling, and millions are barely surviving.
So, has Milei’s economic experiment worked? Is Argentina on the path to prosperity, or has it merely traded one crisis for another? Let’s break down the numbers, policies, and political challenges that will define Milei’s legacy.
Argentina’s Economic Crisis: What Milei Inherited
Before evaluating Milei’s impact, it’s important to understand how broken Argentina’s economy was when he took office.
Hyperinflation and a Collapsing Economy
By 2023, Argentina was one of the most inflation-ridden economies in the world. Prices were rising at an annual rate of 200%, peaking at nearly 300% in early 2024. This wasn’t a sudden crisis but the result of decades of economic mismanagement, excessive government spending, and constant money printing by the central bank.
- The Argentine peso had lost nearly all its value.
- The country’s foreign exchange reserves were negative.
- Public debt was spiraling out of control.
- The budget deficit had become unsustainable, with government spending far exceeding revenue.
- Subsidies kept energy, transportation, and food prices artificially low, leading to fiscal imbalances.
Argentina was on the brink of hyperinflation—a complete collapse of its monetary system. Enter Javier Milei, an anarcho-capitalist economist, who came to power promising radical solutions.
Milei’s Shock Therapy: The Policies That Reshaped Argentina
Milei did not waste time implementing his economic agenda. His reforms were bold, aggressive, and deeply controversial.
1. Slashing Government Spending
Milei cut public spending by 30% overnight. This included:
- Eliminating half of government ministries and laying off 30,000+ public employees.
- Cutting energy and transportation subsidies, leading to massive increases in utility bills and fuel prices.
- Suspending infrastructure projects, halting key developments.
- Freezing public sector salaries, reducing wage expenses.
His goal? A fiscal surplus—something Argentina had not seen in 14 years. And he delivered. By mid-2024, Argentina had a budget surplus for the first time since 2010.
2. Crushing Inflation
One of Milei’s most significant moves was halting money printing.
- The Central Bank of Argentina drastically cut monetary expansion, a key driver of inflation.
- The government removed price controls, allowing markets to set real values for goods and services.
- Spending cuts reduced excess demand, slowing down price increases.
The result? Inflation, which had reached a staggering 25% per month in early 2024, plummeted to 2.7% in December 2024. The annualized inflation rate fell to 117% by the end of the year—still high but a massive improvement.
3. Boosting Trade and Investment
Milei’s policies restored some investor confidence:
- Argentina is projected to post its largest trade surplus in history ($18-19 billion) in 2025.
- Foreign investment surged—mining giant Rio Tinto announced a $2.5 billion lithium project, and Shell is backing a $3 billion energy pipeline.
- Argentina aims to become a net energy exporter, leveraging the Vaca Muerta shale reserves.
4. Devaluing the Peso and Deregulating Markets
Milei devalued the Argentine peso, allowing it to float closer to real market levels. This led to:
- A jump in the exchange rate from 700 to 1,000 pesos per US dollar.
- Reduced black market trading of foreign currencies.
- $19 billion in capital inflows due to a tax amnesty program encouraging legal savings.
5. Cracking Down on Welfare and Corruption
Milei slashed social assistance programs, arguing they created dependency and corruption. His administration:
- Investigated benefit fraud, cutting funding to 1,000+ fake aid centers.
- Reviewed disability pensions, finding rampant fraud.
- Encouraged private charity over government welfare.
The message was clear: People must become self-reliant—a sharp contrast to Argentina’s traditional welfare-heavy policies.
The Human Cost: Poverty, Protests, and Pain
While Milei’s policies have stabilized the economy, they have also inflicted severe hardship on ordinary Argentines.
Poverty Soars to 50%
- 53% of Argentines now live in poverty—the highest level in 30 years.
- 7 in 10 children live in poverty, according to Reuters.
- Food prices, even with slower inflation, remain painfully high.
Social Unrest and Industrial Decline
- Universities have seen mass protests over budget freezes.
- Consumer spending has dropped by 20%, deepening a 2024 recession (-3.6% GDP).
- Argentina’s industrial sector shrank by 20%, raising fears of long-term deindustrialization.
Milei argues that this pain is temporary and necessary to reset the economy, but for millions, survival has become a daily struggle.
The Road Ahead: What’s Next for Milei’s Argentina?
Debt Challenges and IMF Relations
Argentina still faces massive debt obligations:
- A $44 billion loan from the IMF needs repayment.
- A $16 billion lawsuit over the YPF oil expropriation could strain finances.
- Argentina is negotiating another $8 billion IMF loan to stabilize liquidity.
Will Milei Deliver Economic Growth?
Despite 2024’s recession, major financial institutions predict growth in 2025:
- OECD: +4% GDP
- IMF & World Bank: +5% GDP
- JP Morgan: +8.5% GDP
The challenge? Ensuring this growth translates into better living conditions for everyday Argentines.
Political Risks: The 2025 Midterms
Milei’s party, La Libertad Avanza, holds a minority in Congress. The 2025 midterm elections will determine whether he gains enough power to push further reforms—or if opposition forces regain strength.
Conclusion: Has Milei’s Experiment Worked?
Milei has succeeded in stabilizing Argentina’s economy—but at a massive human cost. His supporters argue this pain is necessary for long-term prosperity. His critics say he’s creating a society of suffering.
The next 12 months will determine everything. If Milei delivers growth and reduces poverty, history may judge him as a savior. If not, Argentina’s next election could bring his radical experiment to an abrupt end.
For now, Argentina holds its breath—waiting to see if Milei’s vision will truly lead them out of economic purgatory.
