Javier Milei, a professor of libertarian economics, was elected president of Argentina in 2023 on a platform of radical reform and better opportunities. However, how has his campaign for drastic change fared in the first 12 months?
With its abundance of natural resources, Argentina was undoubtedly one of the richest countries in the world a century ago. However, following the Great Depression, successive governments adopted unsustainable, populist spending plans that led to years of political and economic instability, exacerbated by corruption, record inflation, and the country’s designation as the largest debtor to the International Monetary Fund (IMF). The nation was crying out for change due to a suppressed economy and 27 million people, or 57.4% of the total population, living in poverty.
Enter Javier Milei, a libertarian, revolutionary professor of economics.
He declared, “We are the only political force with a specific plan to end inflation, unemployment, issues related to health, education, food, housing, and all the debts Argentine democracy owes the Argentines.”
What exactly is libertarianism?`
Libertarianism is defined as “a political philosophy that takes individual liberty to be the primary political value,” according to the Encyclopaedia Britannica. To put it another way, individuals are in complete control of their lives and are held accountable for their decisions.
“Private property, markets free from state intervention, free competition, and the division of labour and social cooperation, in which success is achieved only by serving others with goods of higher quality or at a better price” are the fundamental tenets upon which libertarianism is built.
Putting a radical concept into action
Javier Milei’s election manifesto centred on radical changes to end Argentina’s economic instability, including a complete overhaul of the state, a 15% GDP cut in public spending and tax cuts, the elimination of the central bank, and “dollarisation” of the economy to stabilise inflation.
He also proposed the closure or privatisation of state-run businesses and organisations that he claimed “serve as shelters for people receiving salaries without contributing meaningful work,” as well as a reduction in business red tape.
His anti-establishment rhetoric, which positioned him as an outsider, struck a powerful chord with the disenchanted electorate, particularly those living outside major cities, who felt ignored by the political establishment and were tired of the status quo and the legacy policies of former President Juan Perón.
They regarded Milei’s promises of radical economic transformation and his pledge to overthrow a “corrupt and inefficient state” as a ray of hope against skyrocketing inflation and falling living standards. His support varied demographically, even though he defeated his closest opponent by a margin of 55.7% to 44.3% and won in 21 of the 24 provinces.
With the most support from younger men and significant backing from middle- and upper-class voters, his libertarian, free-market views were especially appealing to younger voters who thought the current economic crisis was endangering their future. However, his socially conservative views on abortion and other matters worried many women voters, who were less sympathetic.
Has much changed in a year?
Regrettably, not quite yet. No star will be born and no miracle will happen overnight, no matter how bold the claims are. Economies are not like Broadway shows. However, a few days after taking office, Milei got to work addressing Argentina’s financial issues and shrinking the state, which he believed were essential to reaching his objective of a budget surplus.
He lowered state subsidies for transportation and gasoline, cancelled all new public works contracts, terminated 30,000 public jobs, depreciated the peso by 54%, and trimmed the number of cabinet departments from 18 to 9. This led to the first budget surplus since 2008, at 275 billion pesos ($284 million) in Q1 2024, or 0.2% of GDP. As of the time of writing, Argentina has had a government budget surplus every month of 2024.
Additionally, the IMF has provided $4.7 billion in loans to assist these budgetary measures, even though Milei has had to temporarily back down on his election pledges to dollarize the economy and dismantle Argentina’s central bank. Investor confidence has been bolstered by this turn to more conservative economic policies, as evidenced by the 7% increase in Argentina’s international bonds due in 2041 that followed his victory and the 60% rise in index-level bonds by March 2024.
Austerity measures and currency depreciation have contributed to the economy’s continued decline into depression. Milei did caution that things would probably get worse before they got better when he took office, and despite these seeming early victories, he has nonetheless had a difficult first year. Even with consecutive monthly declines, the core inflation rate is still more than 200%, having peaked at 300% in March 2024.
Over 60% of Argentines now live in poverty, up from 41.3% in the second half of 2023, according to the Instituto Nacional de Estadística y Censos República Argentina (INDEC).
According to August 2024 figures, the cost of a total basic basket (CBT), which includes food and non-food essentials, has increased by 230.1% year-over-year. As if that weren’t enough, government data released in September revealed a third quarterly drop, further contributing to the economy’s decline into depression as a result of the currency devaluation and austerity measures.
Argentina has witnessed severe social upheaval, occasionally involving violence, mostly from left-wing parties and marginalised people who are frustrated with Milei’s cuts to welfare programmes and the closing of public agencies like the official news agency. Continuous opposition challenges, however, are not entirely the fault of Milei and his initiatives.
The largest obstacle to his intended reforms has been the opposition of adversarial politicians in both houses of the Argentine government. Although he garnered a sizable majority of the presidential vote, his party, La Libertad Avanza (LLA), only secured seven of the Senate’s 72 seats and 15% of the Chamber of Deputies’ seats.
He bypassed the Chamber of Deputies and expedited the measures he believed were needed to “consolidate economic stability” by issuing an emergency decree (DNU 70/2023) ten days after taking office in December 2023, while Senate confirmation was still required.
Deregulation of energy, transportation, healthcare, and other sectors; the elimination of price controls; the removal of workers’ rights (including the right to strike); and the facilitation of the privatisation of state-owned companies were among the more than 300 legal revisions included in the decree.
Along with a strong legal and political backlash, this led to widespread voter protests. Javier Milei claimed that senators were more focused on safeguarding their own interests than advancing Argentina’s chances when the Senate rejected DNU 70/2023 in March 2024. He insisted that the decree remain in effect until the lower house rejected it or the courts ruled it unconstitutional. His omnibus bill, which was also proposed in December 2023, was a considerably more comprehensive legislative reform package that had over 600 articles aimed at restructuring Argentina’s economy through fiscal restraint, deregulation, and privatisation. Both houses rejected it in its original form after it generated significant controversy.
Just 45 days into Milei’s administration, it also sparked a 12-hour general strike in Buenos Aires in January 2024, organised by the General Confederation of Labour (CGT), the umbrella union, in protest of the proposed reforms. After extensive revisions, the bill passed the Chamber of Deputies in late April.
While it still aimed to curtail the role of the state in the economy, in line with Milei’s libertarian philosophy, it had fewer articles—just over 300—and some of the measures—particularly those pertaining to the labour market—were loosened. A political standoff resulted from the Senate’s ongoing deliberations in a tumultuous political environment.
Javier Milei presented the May Pact, a 10-point agreement that promised additional tax changes and provincial fiscal balance, in an attempt to garner support. After the Senate passed the trimmed Omnibus Bill in June, Milei finally signed the May Pact in July. He unveiled his 2025 budget ideas in September. The zero-deficit approach aimed to stabilise the economy by focusing on determining the available funds before allocating them. However, to accomplish this, he also suggested making large cuts to public spending, especially on social programmes and subsidies, which alarmed opposition parties and social groups.
Despite Argentina’s current recession, the budget also projects a 5% GDP growth in 2025 and a sharp decline in annual inflation from the current 230% to 18.3% by the end of the year, with monthly inflation falling to 1%.
The administration believes that fiscal restraint and these austerity measures will hasten the economy’s recovery. Don’t weep for Argentina’s Milei. While investors have reacted warily to the idea, with many seeing it as a step toward restoring market confidence in Argentina, opposition parties have harshly criticised the proposals, accusing Milei of further harming the working class with large public spending cuts.
The public response has been mixed. While Milei’s supporters welcome the proposed measures, many are concerned about the potential impact of significant spending cuts on society. Despite the attention his libertarian agenda has received in its first year, Milei has faced strong opposition from rival parties due to the absence of a government majority.
Unfortunately, public dissatisfaction has led to his early popularity with the electorate declining. Change cannot come quickly enough for the people of Argentina, and if given the chance, Milei’s reforms should have the intended impact, and things will improve.
El Loco gets a boost
On January 26, came the biggest endorsement of Milei’s radical reform policies, in the form of a credit rating upgrade by Moody’s. The Southern American country’s credit rating was raised on the back of improved government finances. Moody’s also raised its outlook on South America’s second-largest economy.
Moody’s now sees less risk of the Latin American economic major entering a debt default, thereby upgrading the country one notch to Caa3 from Ca and boosting its outlook to positive from stable. While Argentina’s new rating remains in junk territory, the upgrade represents the first in five years and most importantly, gives Milei a potent weapon against his detractors.
“Argentina’s credit fundamentals have improved over the past year, as a result of the effective and forceful policy adjustments that have led to a stabilisation of the macroeconomic environment,” Moody’s said, while noting other factors like cooling inflation, reduced government spending, and narrowing deficits.
These developments have brightened the debt outlook as well. After debt reached 156% of GDP in 2023, Moody’s estimated it sank to 77% in 2024 and predicted it would plunge further to 50% by 2026.
Javier Milei’s free-market shock therapy for Argentina, which has historically been plagued by high inflation, anaemic growth, onerous red tape, and debt defaults, has earned him the nickname “El Loco,” or “The Crazy One.” However, “El Loco” has found a new fan in the form of American tech maverick Elon Musk.
As he attended Donald Trump’s inauguration in January, Elon Musk boasted to the media about effecting massive spending cuts and government layoffs, apart from eliminating more than 900 regulations. Among these was the rule that guaranteed the children of some government workers their jobs after their parents died. Another cancelled regulation was one governing the sale of “normal” potatoes, which allowed vegetable stands to receive a bonus.
In September 2024, Musk even stated that his companies were looking for ways to invest in Argentina and support the South American country’s economic recovery.
Javier Milei established a Ministry of Deregulation and State Transformation, which may have inspired Elon Musk to later create the Department of Government Efficiency (DOGE) during the Trump administration. While Milei’s abrupt cuts to government spending initially caused the economy to contract by 3.5%, it experienced a swift rebound with a subsequent growth of 3%.
“A tax amnesty that helped bring USD 20 billion in assets from abroad and new measures to attract foreign currency inflows have allowed Argentina to build up its international reserves,” Moody’s added.
“The forceful shift in fiscal and monetary policies, the stabilisation of external finances, and the adoption of market-oriented reforms have boosted domestic private sector confidence and rekindled dynamism in domestic credit and financial markets,” the ratings agency noted.
However, Moody’s pointed to the easing of capital controls without sparking sudden volatility in inflows or outflows. Too much optimism could also overstimulate the economy and create other imbalances. Still, a new deal with the International Monetary Fund (IMF) would further bolster investor sentiment and help diversify Argentina’s funding sources, which could feed into key growth sectors of the economy.
“An acceleration of foreign investment inflows related to various projects in the energy sector to tap into the country’s vast natural hydrocarbon resources would improve Argentina’s medium-term export and growth prospects, further strengthening the sovereign credit profile,” Moody’s said.
Worries remain
Javier Milei’s cost-cutting drive to achieve economic efficiency for the Latin American major has come at a cost: a punishing recession, an increase in unemployment, and a fall in real wages across both the public and private sectors.
Poverty surged to 53% in the first half of 2024, up from 40% in 2023, the highest recorded jump in two decades. It has since dipped slightly to 50%, although the number of people estimated to be living in extreme poverty remains above 6 million. Nearly seven in ten Argentinian children are growing up poor, up slightly compared with 2023, according to UNICEF. And one million boys and girls are going to bed every night on an empty stomach.
Sergio Chouza, the economist behind local consultancy Sarandi, said, “Nothing about the current disinflationary dynamic has much bearing on the quality of life for families or the purchasing power of workers.”
Demand at food distribution centres and soup kitchens has surged across the country. Meanwhile, working-class Argentinians continue to be battered by the elimination of energy and public transportation subsidies, which has led to ballooning bills.
Will things improve? According to the World Bank, consumer spending and manufacturing are showing gains. In September 2024, wage growth outpaced inflation for the sixth consecutive month. Overall, it is estimated that 2025’s recession will give way to a 5% economic expansion.
“This is Argentina. The country is still in a tough situation. But you have to understand what the baseline was. The economic crisis inherited by Milei was like a bomb waiting to explode,” said Juan Ignacio Carranza from Aurora Macro Strategies, while interacting with Aljazeera.
“Economic activity and purchasing power from citizens haven’t improved yet… It’s still a very fragile situation. But now we at least have a path [forward],” he added.
Notably, Milei’s approval ratings remained relatively stable throughout his first year in office, a luxury that his three predecessors didn’t have.
According to pollster Poliarquia, Milei concluded his first year as president with 56% approval, up from 52% a month prior.
Javier Milei has been able to push through his policies despite his party having only a small minority of federal lawmakers, while not having provincial governors countrywide. The passing of a signature legislative package in 2024 aimed to boost growth and raise revenue required political pragmatism, with Milei backing a watered-down version of the original bill to get support from other parties.
“How he is managing the political situation has been the most surprising thing for all of us. Being in a really weak position with no support in Congress… I think that’s been his biggest success,” Carranza added.
However, Milei’s economic achievements in his first year are not necessarily indicative of future growth, as, in the words of Camilo Tiscornia, an economist and the director of the Argentine consultancy C&T Asesores Económicos, “The end result in terms of productivity, consumer spending, and investments all depends on how the private sector reacts to the new political economy. In other words, the government can’t decide when the economy will grow.”
The coming years will determine whether Milei’s gamble pays off. If inflation drops and growth returns, he may be vindicated. However, if economic pain continues without clear improvement, disillusionment could lead to political instability or a reversal of his policies. Libertarianism, in theory, champions free markets and individual prosperity, but its real-world application in Argentina remains uncertain.
Ultimately, Javier Milei’s success will depend on whether his vision can translate into tangible improvements for the Argentine people. If his reforms take hold and economic conditions improve, he may be remembered as a transformative leader. If not, his presidency could be seen as another chapter in Argentina’s long history of economic turmoil.