Just over a year ago, Javier Milei, the eccentric, chainsaw-wielding libertarian economist, won the presidency in Argentina against a backdrop of soaring inflation and rising poverty. Since taking office, Milei has aggressively pursued a free-market program of fiscal austerity and deregulation. This approach contrasts strongly with Perónism, the strongly interventionist economic ideology followed by most Argentine presidents since its namesake, Juan Perón, rose to power in 1946.
Milei’s critics, including prominent economists such as Thomas Piketty, warned that his agenda would prove catastrophic. Though Argentina still faces severe economic challenges, Milei has largely proven these doubters wrong and achieved several victories worth celebrating.
Monthly inflation has fallen sharply since Milei took office. Rising prices have been a recurring problem in Argentine history, with the government frequently turning to the central bank to print money to finance its excesses. Unlike many of his predecessors, Milei has reduced federal spending (by 28 percent) and cut the number of federal ministries in half.
This fiscal discipline has been paying off. In October 2024, Argentina achieved its first budget surplus in 12 years. Since last May, monthly inflation has stayed below 5 percent; in November, it was 2.4 percent, the lowest since July 2020.
If we annualize the data since May 2024 (that is, if we express these monthly changes as if they had lasted an entire year), we find annual inflation trending down to about 33 percent. While that is extremely high by American standards, it’s a welcome change for Argentina, which has been reeling from triple-digit inflation on a year-over-year basis since the beginning of 2023.
Austerity has not been painless, as Milei himself cautioned in his inaugural address. Slashing government spending deepened the recession that began in 2023, and poverty and unemployment have both risen. But the recession ended in the third quarter of 2024, as the economy grew at a 3.9 annual rate. Economists now forecast that Argentina’s economy will expand 4.2 percent in 2025.
According to the Financial Times, this growth would only bring GDP per capita back to its 2021 level, so Argentina still has a long road ahead. Nevertheless, the strong rebound in the face of steep austerity, coupled with a rapidly improving inflation environment, is a significant milestone.
Argentina’s changed fortunes are not just the result of a more disciplined fiscal policy. Milei’s newly created Ministry of Deregulation has been radically liberalizing the economy. This is crucial, as Argentina has one of the worst regulatory environments in the world. It is known for its many stifling regulations, which have more to do with protecting politically connected incumbent firms than with improving public welfare.
As the Cato Institute’s Ian Vasquez and Guillermina Sutter Schneider observe, the Ministry of Deregulation has been removing about one regulation per day. For example, the government has repealed its rent-control law. In Buenos Aires, the supply of apartments is up threefold, and rents have fallen nearly 50 percent in real terms. Vasquez and Schneider also note the deregulation of imports, which has led to cheaper home appliances and clothing, as well as the removal of rules favoring Argentina’s state-owned airline.
Milei still faces daunting challenges. One is the issue of currency controls, which keep the Argentine peso stronger relative to the U.S. dollar than the black-market rate, restrict the number of dollars that Argentines can buy every month, and require exporters to convert foreign currency earnings into pesos. Milei has vowed to end the controls, which deter investment in Argentina, but this change could come with drawbacks. If the currency controls are removed, the nation could see a surge in demand for dollars, and the peso’s value could fall. To prevent a collapse in the peso, which could reignite inflation and cause economic chaos, the government could prop up its value by buying pesos with dollars. Unfortunately, Argentina has very few dollars in reserve and already owes $44 billion to the International Monetary Fund. Milei is working to secure a new loan, but the IMF may be wary of lending to a nation that is already its biggest debtor.
To succeed, Milei needs to maintain his current momentum. He must convince outsiders, whether private investors or the IMF, to invest in his country. The best way to do that is to keep eliminating burdensome rules and regulations and continue putting the country’s fiscal house in order. Let’s hope he can do it.
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