Argentinian President Javier Milei has made significant and controversial changes to the country’s economic policies since taking office. He has implemented drastic spending cuts, reduced government spending by 30 percent, and achieved a fiscal surplus in his first full month in office. His focus on austerity measures has led to a decrease in inflation rates, with monthly inflation at its lowest in over four years. Argentina’s central bank has also been able to build up new foreign currency reserves, improving the country’s macroeconomic stability and reducing its risk of default.
Despite the positive macroeconomic indicators, Milei’s reforms have had a significant impact on the country’s working class. Poverty rates have surged, with 50 percent of the population living in poverty and over 6 million considered to be living in extreme poverty. Children are disproportionately affected by these conditions, with nearly seven in 10 growing up poor. The elimination of subsidies for energy and public transportation has further strained working-class families, leading to increased demand at food distribution centres and soup kitchens. While there are some signs of economic recovery, with consumer spending and manufacturing showing gains, the situation remains fragile.
Milei’s ability to manage expectations and maintain stable approval ratings throughout his first year in office has been noteworthy. He has been transparent about the short-term pain of his economic reforms, preparing the public for the challenges ahead. Despite facing a weak political position without support in Congress, Milei has been able to push through key reforms, including a legislative package aimed at boosting growth and raising revenue. However, the long-term success of his economic policies will depend on how the private sector responds and whether the government can address key issues such as capital controls and the exchange rate.
While Milei has touted his first year in office as a success, some economists remain skeptical of the sustainability of his policies. The overvalued peso and reluctance to free up the exchange rate may pose challenges for attracting capital and paying off foreign debts. Depreciating the peso could help address these issues but may also lead to another round of inflation, undermining Milei’s achievements in reducing inflation rates. Despite Milei’s claims that his government is the best in history, the true impact of his policies remains to be seen, especially as the country continues to navigate economic challenges in the coming years.
