Argentina 1 Year After Milei
Javier Milei has achieved what seemed impossible: stabilizing a nation on the brink of economic collapse in just one year. His steadfast commitment to fiscal conservatism and pragmatic reform has reversed years of mismanagement and positioned Argentina for long-term recovery. Through bold policies targeting hyperinflation, fiscal deficits, and regulatory overreach, Milei has delivered measurable results, proving that principled leadership can overcome even the most entrenched economic crises.
Emerging as a staunch critic of Argentina’s economic mismanagement, Milei rose to power amidst a dire economic crisis. At the end of 2023, Argentina was on the brink of hyperinflation, its currency in freefall, and its fiscal position unsustainable. In a dramatic election, he triumphed over the very architect of the crisis—Argentina’s minister of economy—who had overseen the policies that led to the nation’s collapse. With the economy on the verge of total failure, voters turned to Milei as the leader who could restore sanity, stability, and a path to recovery.
Tackling Inflation
In the months leading up to Milei’s presidency, Argentina’s economy was spiraling out of control. Inflation wasn’t just high—it was accelerating at an alarming pace, with weekly rates climbing higher and higher. Supermarkets saw prices for basic goods change not only daily but sometimes even between the morning and afternoon. The economy was teetering on the edge of collapse, with the destruction of the currency and the financial system imminent.
When Milei took office, inflation in Argentina was at an annualized rate of 306%, among the highest in the world. To address this, he introduced a two-phase monetary policy strategy:
Qualitative Stabilization of the Currency: The Central Bank’s reserves were rebuilt, and unsustainable public debt on its balance sheet was reduced. By mid-2024, net reserves turned positive, signaling restored financial credibility.
Quantitative Monetary Restriction: Starting in July 2024, Milei sharply curtailed the Central Bank’s money issuance, effectively halting inflationary pressures.
As a result, inflation plummeted to 28.8% annualized by November 2024, the lowest level since 2021. Analysts now predict that inflation could drop below 5% annualized by December 2025.
Exchange Rate Stabilization and Unifying the Market
Under the previous administration, Argentina’s currency system was plagued by manipulation. A “fake” official peso rate created a 200% gap between the fixed and market rates, further eroding trust. Milei addressed this by devaluing the peso to align with market realities, a painful but necessary adjustment. This devaluation was the main driver of the poverty increase seen during Milei’s first year. However, it is unfair to blame Milei for this, as the poverty spike was the inevitable consequence of years of hidden inflation and unsustainable policies designed to mask economic realities. Today, the exchange rate gap has shrunk to just 2.6%, with expectations of a fully unified exchange rate by year-end, marking a significant step toward restoring trust and stability in Argentina’s currency system.
The peso’s stability is another critical success. While it had plummeted from 200 pesos per dollar in 2022 to over 1,000 pesos per dollar before Milei’s presidency, it has since held steady at around 1,000 pesos per dollar for nearly a year, restoring market confidence.
Fiscal Responsibility: From Deficits to Surpluses
Argentina’s fiscal woes were another symptom of years of mismanagement. Public spending had spiraled out of control, funded largely through unsustainable debt and rampant money printing. Each new loan came with increasingly higher interest rates, worsening the country’s leverage ratio and pushing Argentina dangerously close to bankruptcy. With default looming and international confidence eroded, Milei’s government took bold steps to reverse this dire situation:
Implemented a shock doctrine of fiscal austerity, slashing unnecessary expenditures and achieving consistent fiscal surpluses.
By achieving fiscal surpluses throughout 2024—a feat unseen in recent decades—Milei was able to significantly reduce the debt-to-assets ratio, which had been nearly 90% before he took office and has now fallen to 66%.
A more sound financial situation reduced Argentina’s country risk dramatically from 28% at the start of 2024 to 7.3%, reflecting restored market confidence.
This fiscal discipline has created a virtuous cycle: as Argentina’s leverage ratio improves, the loans the country takes on now come with progressively lower interest rates. These lower rates, in turn, reduce the burden of debt servicing, further enhancing the leverage ratio. This improvement bolsters market confidence, which drives country risk even lower. By breaking the cycle of unsustainable borrowing and replacing it with responsible fiscal management, Milei has put Argentina on a path toward financial stability and restored international credibility.
Transforming Interest Rates and Reviving Private Lending
Under the previous administration, interest rates were raised to an astronomical 133%, a misguided attempt to combat inflation by suppressing demand. However, this approach tackled the wrong problems, addressing symptoms rather than the root causes of Argentina’s economic crisis. These exorbitant rates not only made borrowing nearly impossible for individuals and businesses but also created an environment of extreme uncertainty. Fixed-rate loans were practically unfeasible, as neither banks nor borrowers could predict whether inflation would outpace interest rates, forcing frequent and destabilizing rate increases. This instability made it difficult for banks to operate effectively and for Argentinians to plan their financial futures.
Milei took a radically different approach. By addressing the root issues—monetary mismanagement, fiscal irresponsibility, and regulatory overreach—he created a stable environment where interest rates could be safely reduced. Today, rates have fallen to 32.3%, with projections for further normalization by 2025. This has revitalized lending activity, with private sector loans increasing from $33 billion to $48 billion, signaling a healthier and growing economy.
Milei’s reforms have not only stabilized the financial system but also eliminated the uncertainty that plagued borrowers and banks alike. Businesses now have access to predictable financing, individuals can secure mortgages with confidence, and banks can operate in a functional lending environment.
Addressing the Poverty Rate
The mainstream media has widely reported that the poverty rate during Milei's presidency increased to over 50%, but this narrative lacks crucial context. One of the primary drivers of this increase was the depreciation caused by the devaluation of the peso, a necessary correction to the fake exchange rate maintained by the previous government. This adjustment, while painful, addressed a core structural issue that had been masking deeper economic dysfunction.
To put the poverty rate into perspective, it’s important to look at the numbers. At the end of Q4 2023, poverty was already at a high 45.2%—a figure inherited from the previous administration. In Q1 2024, during the aftermath of the devaluation, the rate spiked to 54.9%. However, as the economic recovery began in Q3, poverty decreased to 46.8%, and projections for Q4 indicate it will drop further to 44.6%, falling below the level before Milei got into power.
Rebounding Economy Amidst Structural Reforms
While Milei’s fiscal and monetary adjustments initially triggered a recession, it was short-lived. By the third quarter of 2024, economic activity had rebounded, with GDP nearly returning to pre-adjustment levels. Sectors like housing and industrial production are showing significant signs of recovery, with housing prices falling 30% in real terms due to deregulation, which spurred a surge in activity. Contrary to claims that inflation is falling because Milei “destroyed the economy,” the evidence shows the opposite: inflation has been dropping most dramatically since the third quarter, during the very period when economic recovery began. By October 2024, inflation reached its lowest levels in years.
Milei’s Ministry of Deregulation and Transformation of the State has been a cornerstone of Argentina’s recovery, playing a key role in fostering economic growth. This ministry has been systematically dismantling burdensome regulations that had long stifled economic activity and innovation. One of its most notable reforms was the elimination of price controls on rents, which led to a tripling of housing availability in Buenos Aires and a 30% drop in rental costs in real terms. These changes have revitalized the housing market, encouraged investment, and spurred broader economic activity.
This commitment to deregulation has been instrumental in driving Argentina’s remarkable growth projections. By reducing bureaucratic barriers and creating a business-friendly environment, Milei’s Ministry of Deregulation and Transformation of the State has laid the foundation for sustained economic expansion. JP Morgan’s projection of an 8.5% GDP growth for 2025 demonstrates the success of these reforms. Combined with low inflation and a stable exchange rate, this growth positions Argentina to transform into a regional economic powerhouse and a financial hub for Latin America in the near future.
Social Media and Milei’s Role in Reshaping Economic Policy
Milei’s success isn’t confined to policy; his ability to communicate his vision has also set him apart as a cultural phenomenon. He engages with mainstream outlets like Bloomberg, The Financial Times, and The Economist—even gracing the cover of the latter—while also connecting with younger audiences through podcasts and social media. His high-profile interviews with prominent figures like Tucker Carlson and Lex Fridman have been viewed millions of times, amplifying libertarian principles and expanding his influence to global audiences.
Milei has also earned the admiration of prominent figures like Elon Musk, Vivek Ramaswamy, and Donald Trump, who see him as a role model for economic and government reform. Inspired by Milei’s transformative policies, Musk and Ramaswamy have expressed interest in replicating his ideas in the Trump administration. This admiration led to the creation of the Department of Government Efficiency (DOGE) under the Trump administration, designed to streamline governance and reduce waste, mirroring Milei’s strategy of dismantling inefficiency and bureaucracy.
This dual strategy of mainstream credibility and grassroots relatability ensures that Milei’s message resonates across diverse demographics, both domestically and internationally, solidifying his status as both a policy innovator and a cultural success. If Argentina’s situation continues to improve under Milei’s leadership, it could spark a global resurgence of neoliberalism, redefining economic and political ideologies worldwide.
Conclusion
Javier Milei has done more than stabilize Argentina’s economy; he has normalized life for its citizens. Prices no longer change by the hour, mortgages are no longer impossible to obtain, and people can plan their futures with confidence. Families can save without the fear of inflation eroding their hard-earned money and can now secure loans to study, expand businesses, or even start new ventures. Long-term planning for major milestones like inheritance and retirement is returning as a reality. The days of resorting to black-market dangerous exchanges for dollars are over, as the exchange rate gap has disappeared, allowing individuals to budget for groceries, travel with a stable peso, and enabling businesses to export and import goods without the fear of rate mismatches.
Milei’s reforms have restored dignity to everyday life in Argentina, creating an environment where people and businesses can thrive. But beyond this normalization, he has set Argentina on a path to becoming an economic powerhouse. With projections of unprecedented growth, a stable currency, and declining inflation, Argentina has the potential to emerge as a financial hub for Latin America. Milei’s success in turning around Argentina’s economy is not just a national achievement; it has the power to influence global leaders and redefine economic policy worldwide, signaling a potential resurgence of neoliberalism and market-driven reforms. Milei’s leadership proves that bold, principled actions can bring transformative change, offering hope not just for Argentina but for the world.