[Economics] Argentina under Milei - Assessment of Economic Consequences

Siehe auch:
[Wirtschaft] Argentinien unter Milei - Bewertung der Wirtschaftlichen Folgen

Javier Milei (La Libertad Avanza/LLA) has been President of Argentina since December 10, 2023, and is more than halfway through his term. As president and supposed revolutionary Milei (LLA) is becoming increasingly popular. Here the previous development of Argentina should serve as a basis for evaluation instead of promises.

However after more than two years of Milei’s (LLA) administration, and in light of current figures and various measures he has implemented, it is evident that his policies have caused massive damage to the economy. Immediately at the start of Milei’s (LLA) term the inflation rate skyrocketed, despite significant sacrifices, it remains at an exceptionally high level. GDP continues to stagnate, industrial production is in decline, and the unemployment rate has risen. While the officially reported poverty rate has increased, the Milei (LLA) administration faces accusations of falsifying this figure. Furthermore there are now two major allegations of corruption against Milei (LLA).

Milei (LLA) and Argentina’s economic and financial policies are both polarizing and fascinating. However there is no consensus regarding their success. The following analysis aims to evaluate the quality of economic and financial policy under Milei (LLA).

Recession and De-Industrialization
Combating Inflation - Methods & Social Costs
The Role of the IMF and the US-Dollar
More Unemployment and more Poverty
Allegations of Corruption
Conclusion
The Alternative

Recession and De-Industrialization

Based on GDP as the most prominent key indicator and current figures, Argentina's economy initially contracted by 4.7% under Milei (LLA). And by the end of 2025 after two years in office Argentina's real GDP is only 2.7% higher then before. This already provides an initial impression of how little has been achieved and how much damage has been done.

[1]

In addition industrial production (semi finished products, machines and systems) has literally collapsed since Milei (LLA) took office. Under Milei (LLA) industrial production has declined continuously with the exception of the first half of 2025. This decline is comparable to that of 2020 during the pandemic although the current de-industrialization is longer and with a lower maximum value. This decline is particularly devastating because labor productivity increases primarily in industrial production. After all labor productivity is defined as the ratio of economic output divided by labor input. Future economic growth therefore shrinks by the amount of labor productivity in the industrial production that no longer exists.

[2]

This decline is particularly devastating because labor productivity increases primarily in industrial production.

Similar to Germany myths and errors are also evident in the Argentine foreign trade record. The current foreign trade and current account surplus is often praised and attributed to Milei (LLA). In retrospect since 2019 clearly before and without a Milei (LLA) Argentina usually had a foreign trade and current account surplus. While this dynamic is fundamentally beneficial for small economies and developing countries as it allows them to earn foreign currency reserves that can be used to guard against currency speculation. But if Argentina would try to achieve growth from abroad with export surpluses then this would be a hopelessly slow undertaking with an export rate of only 10.3% (2023) and 12.6% (2024).

[3] [4] [5]

Combating Inflation - Methods & Social Costs

Just as it is now Argentina is also expected that the state makes a surplus and best takes more than it spends thus making a budget surplus. Logic and empiricism are opposed to the expectation that this leads to economic growth. One person's spending is another person's income and vice versa. And in an economy the sum of every spending equals the sum of every income. So when the government runs a deficit private households and businesses run a surplus and vice versa.

In a system in which nothing else changes every saving leads to a reduction in demand.

And if neither the private household sector nor companies generate demand in an economy then only the state sector can generate demand. National accounting show that in a system where nothing else changes any act of saving leads to a reduction in demand. As described above the sector foreign/current-account cannot keep up with this gap in demand. And if the sector corporations does not indebt/invest during a poor economy then the sector state can and should indebt/invest in order to fill the lack of demand. For a state with its own currency budget deficits do not pose a problem as the state holds the monopoly on currency issuance. For the state determines what constitutes legal tender and in what currency taxes must be paid. And if necessary the state can incur debt in its own currency without incurring interest costs by having its own central bank purchase that debt.

For a state with its own currency budget deficits do not pose a problem as the state holds the monopoly on currency issuance. For the state determines what constitutes legal tender and in what currency taxes must be paid.

In 2020 during the pandemic the low point for the Argentine GDP is marked. In fact the budget deficit of 8.5% in 2020 was followed by a reversal of GDP from shrinking to growing. As a result the Argentine economy shrank. However the budget deficit has since shrunk to approximately 1.1% (2025). And just as the high budget deficit followed a recovery from GDP growth a stagnating GDP growth follows the low budget deficit.

And just as the high budget deficit followed a recovery from GDP growth a stagnating GDP growth follows the low budget deficit.

[6]

Milei (LLA) is often credited with having reduced the inflation rate. During the month he took office, the inflation rate rose from 160.9% to 211.4% annually and from 13.4% to 28.3% monthly. Further on the inflation rate climbed further reaching a peak of 292.2% annually in April 2024. It was only after this point that the inflation rate fell to approximately 30% annually and 2% monthly. At first glance this pattern resembles a price shock.
When supply decreases it is to be expected that prices will rise. And since goods do not exist in a vacuum but depend on other goods and economic demand the subsequent drop in demand following the initial reduction in supply likely contributed to a temporary spike in the inflation rate. Possible causes for this include the slump in industrial production under Milei (LLA) and imported inflation resulting from the devaluation of the Argentine currency. The devaluation of the Argentine currency has already caused an immediate shift from deficits to surpluses in the country's foreign trade and current account balances. Devaluing one's own currency makes domestic goods cheaper and thus more competitive abroad, while simultaneously making imports more expensive.

In addition Milei (LLA) with his politics as a whole is promoting a reduction in demand. On the one hand the Milei (LLA) government has increased the pensions below the inflation rate which can be seen by the massive protests of pensioners in the country. This reduction in the pensioners' income inevitably leads to a reduction in demand and is certainly partly responsible for the long-term lower inflation rate.
And almost everywhere but especially in the libertarian spectrum the reduction in real estate prices since 2024 has been praised as a result of the termination of price controls on the real estate market. This inevitably contributed to a long-term lower inflation rate. However it is unlikely to believe that massively new properties have been created on the real estate market within less than a year. On the other hand it is logical that the poorer economic situation and lower demand have led to bankruptcies as well as ending housing contracts and as a result an oversupply due to vacancy occured. Thus the government of Argentina has combated inflation with poverty and recession. [7] [8] [9] [10] [11]

[12] [13]

However the goal of a stable and low inflation rate is far from being achieved. The inflation rate has been rising again since May 2025. In May 2025 the monthly inflation rate reached a low of 1.5% and has since risen to 3.4% in March 2026.

The Role of the IMF and the US-Dollar

To reduce the inflation rate the Milei administration (LLA) is also pursuing the so called "Achor-Approach" to combat high inflation. For this purpose Argentina buys its own currency the Argentine peso with foreign exchanges to increase its exchange rate. Then imports become cheaper in Argentina and are increasingly competing with local goods. In addition exports from Argentina become more expensive and are increasingly competing with goods from other countries. In this way companies can be put under price pressure and consequently employed people under wage pressure. How long the Argentine economy withstands this pressure and when the inflation rate is seen as low enough is open. More bankruptcies, unemployment and poverty are at least possible. And it is possible that the perseverance of the Argentine economy is less than the will of the Milei government (LLA) to reduce the inflation rate. [14] [15]

The prerequisite for this "Anchor-Aproach" is a loan over 20 billion US Dollar in foreign exchanges by the International Monetary Fund (IMF) which is particularly unpopular in Latin America. And as a prerequisite for the IMF loan Argentina was required to abolish capital controls. This is happening while Argentina continues to maintain a high key interest rate of currently 29%. This creates the conditions for carry trade. [14] [15] [16]

This involves borrowing money in a low-interest currency and then investing it in a high-interest currency to earn the difference. Carry-Traders can make a profit as long as the interest rate differential exceeds the currency's depreciation. Internationally this is often referred to as emerging markets since money flows into the high-interest country. But then investments are confused with speculation. In addition Carry-Trades drive up the exchange rate of the currency of the high-interest country because demand for that currency has increased. There is therefore no market mechanism that prevents Carry-Traders and their disastrous consequences.

In addition Argentina has been promised a further 20 billion US-Dollar on top of the initial 20 billion US-Dollar by the IMF. The US government pledged a 20 billion US-Dollar loan to Argentina just before the October 2025 congressional elections. On the one hand this extends the Argentine government's staying power. At the same time however granting this loan immediately prior to the elections in Argentina creates the impression of election interference or even manipulation. [17] [18]

More Unemployment and more Poverty

Economic and financial policy should neither have beautiful key figures as well as the interests of companies as an aim, but should increase the prosperity of the population. However the results of this policy for the Argentine population are mixed and in part controversial. So the unemployment rate has dropped before Milei (LLA) took office and then rose to a new high.

[19]

In addition the quota of those affected by poverty has risen dramatically with Milei (LLA). As of mid 2024 42.5% are affected by poverty. According to this the official poverty rate has dropped dramatically and now stands at just 24.1%.

[20] [21]

The Argentine statistics agency (INDEC) confirmed in 2025 that the methodology for determining the number of people affected by poverty had been changed. Meanwhile Rodolfo Aguiar General Secretary of the State Workers' Association (ATE Nacional) claims that the actual figure is twice as high as reported.

However these figures are disputed. The Argentine statistics agency (INDEC) confirmed in 2025 that the methodology for determining the number of people affected by poverty had been changed. Meanwhile Rodolfo Aguiar General Secretary of the State Workers' Association (ATE Nacional) claims that the actual figure is twice as high as reported. The allegation is that the official statistics regarding those affected by poverty have been manipulated. [21] [22]

Allegations of Corruption

Milei is regarded at least by his supporters as a noble and selfless savior of Argentina. Those who lost their assets in the wake of the "Libra-Gate" scandal would certainly disagree.
In February 2025, Milei (LLA) promoted the cryptocurrency "Libra" on the platform X though he later retracted the endorsement. In the interim the price of "Libra" surged only to subsequently crash. Investors reportedly lost around 100 million US-Dollars in the process.
Consequently lawyers in Argentina and the US filed fraud lawsuits against Milei (LLA) however he maintained that he had no connection to the project. Yet data from the seized phone of the businessman behind "Libra" reveals that he and Milei (LLA) spoke by phone multiple times prior to the promotion of the cryptocurrency. Furthermore investigators discovered an agreement in the businessman's notes regarding a monetary payment in exchange for Milei's (LLA) promotional efforts. This alleged agreement reportedly involved a total payment of 5 million US dollars to Milei (LLA). [23] [24] [25]

While Milei (LLA) frequently argues against the state, describing it as systematically dysfunctional or corrupt he himself faces similar allegations. Immediately after taking office Milei (LLA) abolished the anti-nepotism rule and appointed his sister Karina Milei (LLA) as Secretary General of the Presidency.
Then in August 2025 a corruption scandal involving Karina Milei (LLA) came to light through various leaks and recordings of conversations. The case specifically concerns kickbacks at the National Disability Agency (Agencia Nacional de Discapacidad/ANDIS). Karina Milei (LLA) allegedly received a 3% bribe from every contract amounting to hundreds of thousands of US-Dollars per month. Audio recordings implicate Karina Milei (LLA), her closest advisor Eduardo Menem, and Diego Spagnuolo the head of ANDIS. [26] [27] [28] [29] [30]

Conclusion

It was assumed that confidence in so- alled "free markets" and deregulation would automatically generate strong growth and investments. Yet the promised and still touted economic miracle in Argentina is nowhere to be seen. Unemployment is higher than before, and GDP is stagnating. Fiscal policy is driven by ideology rather than pragmatism, while monetary policy is caught between the currency appreciation sought to combat inflation and the necessary devaluation of the Argentine currency. What is marketed as a painful but necessary process of economic restructuring is in reality economic decline and deindustrialization.

What is marketed as a painful but necessary process of economic restructuring is in reality economic decline and deindustrialization.

The assumption that a deregulated economy automatically leads to greater growth thus remains wishful thinking on the part of economic liberals and libertarians. And this realization could take hold among the Argentine population. Admittedly, Milei’s party LLA performed relatively well in the October 2025 congressional elections securing 40% of the vote. However the party still relies on coalition partners and garnered a lower share of the vote than Milei (LLA) achieved in the presidential election two years earlier (56%). [31]

The Alternative

Argentina is not lost or a hopeless case. But instead of acting at the expense of its own population and economy the Argentine government should reintroduce price controls to break the wage price spiral to reduce the inflation rate. Argentina has not an inflation caused by scarce resources or full employment. The paths to reduce the inflation-rate already taken here should be rejected due to the bad results.

The capital controls should be reintroduced immediately. If Carry Trade is established this will probably be misinterpreted as an emerging markets and a financial crisis in Argentina is becoming increasingly inevitable.

The budget deficit should not simply be reduced to zero. Instead the budget deficit should complement the economy as a whole. As long as full employment has not been achieved a budget deficit can enable the private sector to generate surpluses. More generally a budget deficit can offset the savings of private households and businesses.

Furthermore Argentina should definitely start a state fund to avoid the Dutch disease. Here income from the export of raw materials is immediately invested abroad. As a result the demand for its own currency the Argentine peso is reduced or less increased with higher exports of raw materials. This prevent a harmful reduction the competitiveness of the Argentine economy. This dynamic applies regardless of the currency in which exports are traded. After all Dutch disease depends on capital flows not the unit of measurement used for them.
No state fund means that higher exports of raw materials increase the demand for its own currency the Argentine peso and cause a harmful increase of the competitiveness of the Argentine economy. This means that exports become disproportionately more expensive and lose competitiveness and that imports become disproportionately cheap and gain competitiveness. As a result exports fall and imports displace the domestic economy.

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