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Javier Milei’s first year as Argentina’s president has been a period of radical economic transformation, marked by libertarian policies aimed at tackling historical issues such as hyperinflation and fiscal deficits. These measures have brought both notable achievements and significant challenges for the population and the nation’s economic future.
From Hyperinflation to Fiscal Adjustment
When Milei assumed office in December 2023, he inherited a devastated economy with annual hyperinflation at 211%, poverty affecting 45% of the population, and a 1.6% recession . His strategy to combat inflation included an unprecedented austerity program and a massive legislative package known as the “Ley Bases,” which introduced over 200 fiscal adjustment measures. This reform package reduced monthly inflation to 2.7% by October 2024, although annual inflation remained near 200% due to statistical carryover effects.
Argentina’s economy showed signs of recovery in the third quarter of 2024, emerging from a severe recession with a 3.9% GDP growth compared to the previous quarter. However, GDP still contracted by 2.1% year-over-year.
The growth was driven by consumer spending, investment, and strong exports in agriculture and mining, though sectors like manufacturing and construction remain depressed.
Structural Reforms and Deep Cuts
A cornerstone of Milei’s economic policy has been fiscal consolidation. This involved drastic reductions in public spending through ministry eliminations, subsidy reductions, and infrastructure privatizations.
These measures led to the first budget surpluses in years but also increased poverty to 53%, exacerbated by cuts to social assistance programs and the peso’s devaluation .
Milei defended these policies as necessary for economic stabilization, arguing that the Argentine state had become overly bloated.
International Impact and Limited Support
Internationally, organizations like the International Monetary Fund (IMF) praised Milei’s reforms, calling them bold and necessary for restoring macroeconomic stability. However, this praise contrasts with growing domestic dissatisfaction, as the most affected sectors begin questioning the viability of his model.
The president has also faced challenges in Congress, where his coalition lacks a majority. While he managed to pass parts of his legislative package, resistance from the Senate and moderate lawmakers has limited his ability to implement more ambitious reforms .
Criticism and Future Challenges
Despite initial successes, Milei’s economic vision has sparked divisions. Supporters argue these measures were inevitable after decades of economic mismanagement. Critics, however, contend that his adjustment policies have worsened social inequalities and increased vulnerability among the poorest sectors.
His administration’s challenge will be to prove that this “temporary pain” can yield sustainable economic benefits in the years ahead.
Today, Milei’s administration faces the challenge of sustaining growth to improve living standards ahead of the mid-2025 elections, where he hopes to expand his political influence. Analysts forecast 5.2% growth in 2025, but note that the recovery will likely be uneven across industries. Key hurdles for the government include lifting currency and capital controls to attract foreign investment and build foreign reserves.
Argentina stands at a critical juncture, where the country’s economic and social future hangs in the balance.
Can Milei maintain his agenda amid growing opposition and the constraints of a fragmented political system?
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