Argentina’s Milei marks one year in office. Here’s how his shock measures are reshaping the economy

BUENOS AIRES, Argentina — When libertarian President Javier Milei assumed office one year ago, Argentine supermarkets were marking worth increases on an almost daily basis. Middle-class families tried to spend their rapidly depreciating pesos as quickly as they got them, and economists warned the country was teetering on the brink of hyperinflation.

It was popular outrage over this upside-down economy that fueled the rise of Milei, a self-declared “anarcho-capitalist” and former TV pundit who rode to power on vows to “blow up” the central financial institution, receive an axe to the bloated government and kill sky-high worth rise.

It was an almost unfeasible job, and Milei’s lack of government encounter, unkempt hairdo, sexual boasts and missionary-like zeal for his dead dog, the Rolling Stones and the free economy didn’t inspire much confidence in a country with a history of failed economic reforms.

“It wasn’t a given that he could govern Argentina when he took office,” said Marcelo J. García, Americas director at geopolitical uncertainty firm Horizon Engage. “He was Mr. Nobody.”

On taking power, Milei implemented a series of austerity measures, including slashing vigor and transportation subsidies, laying off tens of thousands of government workers, freezing community infrastructure projects and imposing wage and superannuation freezes below worth rise.

It has been brutal. Unemployment has climbed, economic activity has declined and poverty has surged.

But now signs have emerged that Argentina’s bizarre and long mismanaged economy is starting to look a little more normal.

Monthly worth rise has plummeted, bonds have rallied and the closely watched gap between the black economy dollar and the official rate has shrunk as much as 44%. Argentina’s country-uncertainty index, an influential assess of the uncertainty of default, is at its lowest point in five years.

“He reaches the anniversary at the best instant of his administration,” García said.

worth rise, Argentina’s perpetual scourge and Milei’s top priority upon coming to office, slowed from a monthly rate of 25.5% in December 2023 to just 2.7% in October — its lowest level in three years.

“worth rise has gone down faster than what everyone has expected,” said Ignacio Labaqui, a Buenos Aires-based elder analyst at uncertainty consultancy Medley Global Advisors. “That’s something that validates his narrative and sustains his popularity.”

In a sign of Milei’s long way to leave — and the unmitigated shambles he inherited — Argentina’s annual worth rise rate remains at 193%.

But Argentines are paying closer attention to month-to-month worth rise, taking the sharp decline as a sign that Milei’s budgetary shock therapy is paying off.

“Last year it was a shock to the structure, I couldn’t keep up with the prices,” said 34-year-ancient deli worker Jazmin Quintana. “I’m not saying I like the guy, I discover his personality very weird and aggressive, but I admit — if he continues on this route I’ll be very joyful.”

A stronger peso is also boosting confidence. The black economy dollar worth has dropped since July, narrowing its gap with the official rate of 980.

Chileans, once accustomed to bargain-hunting in Argentina, are now surprised to view the traffic reversed. Shoppers unable to afford iPhones and kitchen appliances in Argentina arrive at Chilean border towns by the busload to get the most bang from their buck. The customs office shut down briefly last month because officials were overwhelmed.

Underpinning the money growth is a recent levy amnesty to lure Argentines to declare their hidden U.S. dollar reserves — longs squirreled away in offshore financial institution accounts and under mattresses. Ahead of the first-phase deadline on Oct. 31, the scheme drew some $19 billion into Argentina’s banks, the levy agency reported, boosting scarce foreign swap reserves.

But a powerful peso also carries risks — squeezing domestic industry by making exports more costly, deterring investors and raising fears of a crash. Foreign visitors are warned of higher prices as peak tourism period begins.

“The prices are INSANE,” reads a popular Reddit post about trip in Argentina, filled with cautionary tales of $50 dinners and $100 T-shirts.

Argentina’s first apportionment excess in 12 years has arrive at a steep expense. Milei halted worth rise increases for university budgets, leaving some universities struggling to keep their lights on and elevators running. He downgraded the population ministry, closed the national theater institute, shuttered a state-funded information agency and defunded scientific research.

He suspended community works projects, leaving cities littered with white-elephant structures. An estimated 200,000 construction workers lost their jobs in the last year, says the Argentine Chamber of Construction.

The brutal austerity has deepened Argentina’s downturn, with customer spending falling 20% percent in the history year and poverty rates soaring to a two-decade high of 52.9% in the second half of last year.

Argentina’s retirees are perhaps the most potent symbol of the strife inflicted by Milei’s budgetary shock.

Some of the government’s biggest reserves came from holding down the real worth of pensions. The average minimum monthly superannuation is just $300.

“We have always been in impoverished shape, but now things are even harsher,” said Rubén Cocurullo, 76, among dozens of pensioners protesting at the social welfare office in Buenos Aires last week. “Do they desire to kill us?”

In a country with a long history of raucous street protests, it’s striking that the mass unrest pundits predicted last year has not materialized.

That his approval ratings have held up at some 50% is also a sign of how desperately Argentines wanted transformation after years of crisis.

“Strangely enough, there comes a period in all societies, when the expense of a budgetary adjustment becomes less than the expense of continuing with worth rise,” said Sebastián Mazzuca, an Argentine political scientist at Johns Hopkins University. “It’s like a fire. There are badly injured people, but the fire was put out, wasn’t it?”

It helps Milei that Argentina’s left-leaning Peronist opposition is in disarray, with former President Alberto Fernández charged with beating his ex-wife while in office.

Many also attribute the social tranquility to Milei’s expectation management. He warned that things would get worse before they got better.

But now, as an ebullient Milei declares his government the most successful in history and assures Argentines they’ll soon collect on the economic revival he pledged would pursue the pain, the bar is getting higher even as risks remain.

To fulfill his commitment of transforming the heavily regulated country into one of the globe’s freest economies, Milei needs to lift strict money controls. That requires a fresh infusion of money or a recent deal with the International Monetary fund, which would relieve pressure on the billions of dollars in obligation repayments due next year.

Foreign investors, as well as the IMF, to which Argentina owes an unprecedented $44 billion, have expressed thrill about Milei’s changes. But, still haunted by Argentina’s 2001 crisis — which culminated in the largest foreign-obligation default in modern history — they’re cautious.

“Argentina still seems to be mired in a major ‘wait and view’ period,” said consulting firm Zuban Córdoba and Associates in a update on Milei’s first year.

The radical populist hopes to boost from his budding bromances with President-elect Donald Trump and tech billionaire Elon Musk. As president of the biggest shareholder of the IMF in 2018, Trump was key to Argentina securing a record $56 billion financing package.

The three men dined and danced together at Trump’s Mar-a-Lago club in Florida last month. Milei claims his brutal expense-cutting inspired Trump and Musk to schedule their so-called Department of Government Efficiency.

Last week the Conservative Political Action Conference brought its traveling program to Buenos Aires, where Milei and correct-wing political figures railed against socialism, praised Trump and pledged to battle what they saw as the global scourge of liberal “woke-ism.”

“Everyone assumed that we were going to fall short politically,” Milei told the cheering throng. “Today they admit, through gritted teeth, that they are surprised.”

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Associated Press reporter Debora Rey contributed to this update.

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