{"id":254477,"date":"2025-10-27T12:00:11","date_gmt":"2025-10-27T12:00:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/254477\/"},"modified":"2025-10-27T12:00:11","modified_gmt":"2025-10-27T12:00:11","slug":"can-milei-save-argentinas-economy","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/254477\/","title":{"rendered":"Can Milei Save Argentina\u2019s Economy?"},"content":{"rendered":"

Earlier this fall, bribery allegations<\/a> against Karina Milei, President Milei\u2019s sister and closest adviser, damaged Milei\u2019s image as a political outsider tasked with challenging the country\u2019s corrupt establishment. LLA also lost heavily<\/a> to Peronist opposition in Buenos Aires\u2019 provincial elections last month\u2014a signal that the government\u2019s reform agenda might be losing support among the Argentine people. This defeat triggered widespread uncertainty in global markets about the prospects of Milei\u2019s government and led to a sell-off of the peso. On the verge of yet another monetary crisis, Milei turned to the White House for help, and last week, the U.S. Treasury threw Milei\u2019s drowning government a life preserver. The two countries\u2019 $20 billion currency swap line briefly stabilized the Argentine economy as voters headed to the polls over the weekend. And shortly before the election, Jos\u00e9 Luis Espert\u2014Milei\u2019s top candidate for the nation’s key battleground region, Buenos Aires Province\u2014resigned<\/a> over his financial ties to an alleged drug-trafficker.<\/p>\n

But as ballots were counted across Argentina on Sunday evening, an unexpected result emerged. Milei\u2019s party, contrary to recent expectations, won big\u2014a signal that much of the country is still on board with the free market crusader\u2019s ambitious reform agenda. As of this morning, LLA had received<\/a> 41 percent of the votes nationwide with more than 99 percent of ballots counted, beating the closest opposition party by nearly a 10-point margin. More crucially, LLA gained 64 seats in the lower house. This crosses the critical one-third threshold, letting LLA block opposition bills and back presidential decrees. Milei\u2019s legislative gains create an opportunity to pursue the deeper structural reforms economists say Argentina needs\u2014if he can build the political coalitions his go-it-alone approach has so far avoided.<\/p>\n

Milei\u2014a libertarian economist\u2014ran for Argentina\u2019s presidency amid prolonged economic stagnation and runaway inflation. By 2023, the country\u2019s economy had not seen meaningful growth<\/a> for more than a decade, and annualized inflation was climbing quickly<\/a> into the triple digits. Under President Alberto Fern\u00e1ndez\u2019s Peronist coalition, which won the presidency in 2019, Argentina was racing toward uncontrollable hyperinflation, debt default, and economic collapse.\u00a0<\/p>\n

\u201cThere was a sense that there was a need for radical change,\u201d Emilio Ocampo, an Argentine economist and historian at the University of CEMA in Buenos Aires, told TMD. \u201cAnd the only person who embodied that possibility was Javier Milei.\u201d\u00a0<\/p>\n

Within his first months in office, Milei cut the number of government ministries in half<\/a>, fired thousands<\/a> of state employees, and implemented hundreds of deregulations<\/a>. He entered office in December 2023 promising to cut down Argentina\u2019s chronically high government spending and expansive regulatory regime. By the end of 2024, Milei had cut government spending by around 30 percent. Argentina recorded its first budget surplus in more than a decade.\u00a0<\/p>\n

Milei\u2019s reforms weren\u2019t only successful for the country\u2019s balance sheet. Poverty in Argentina decreased<\/a> from more than 50 percent at the beginning of 2024 to below 40 percent by the end of Milei\u2019s first year in office. GDP growth also rebounded, with the OECD estimating<\/a> that Argentina\u2019s economy will grow by 5.2 percent in 2025 and 4.6 percent in 2026, up from contractions of 1.9 percent and 1.3 percent in 2023 and 2024. The government\u2019s elimination of rent controls<\/a> also sparked a revival in the country\u2019s housing market. Real rents have fallen by<\/a> almost a third, and rental supply has tripled.\u00a0<\/p>\n

Many economists credit Milei with achieving what much of the field thought was all but impossible for Argentina\u2014quick, substantive reform. \u201cHe addressed the fiscal and institutional side of the equation,\u201d Monica de Bolle, an economist at the Peterson Institute for International Economics, told TMD. \u201cWhat he did was commendable\u2014very deep and very ambitious reforms. And he was actually able to do them, which is surprising.\u201d<\/p>\n

But there is also a growing consensus that Milei\u2019s successes are still partial. \u201cAll these deregulations that we hear about, they are great, but they are not the big reforms, the big regulations,\u201d Nicolas Cachanosky, an Argentine economist at the University of Texas at El Paso, told TMD. According to Cachanosky, several much larger systemic reforms are still needed for the fiscal and deregulatory achievements of the Milei government to truly change the country\u2019s long-term trajectory\u2014most notably, reforms to welfare programs, labor market regulation, and taxes. \u201cThose are much deeper structural changes than the ones we\u2019ve seen so far,\u201d Cachanosky said.<\/p>\n

While Milei has successfully stabilized Argentina\u2019s economy\u2014at least for the time being\u2014he has done so without much support from the country\u2019s bicameral National Congress. As a result, Milei has leaned heavily on reforms that he can implement through executive decrees, which, like executive orders issued by American presidents, lack the durability of formal legislation. \u201cOnce you stabilize the economy, you need to pass new bills\u2014tax reform, pension reform, labor reform\u2014things that would improve your competitiveness over time,\u201d Sergio Berensztein, a Buenos Aires-based political analyst, told TMD.<\/p>\n

Argentina\u2019s other looming challenge is its idiosyncratic currency regime. Most Argentines actually save, price, and spend in U.S. dollars, rather than the country\u2019s legal currency, the peso, which they don\u2019t trust. This makes Argentina particularly vulnerable to dollar shortages during periods of economic uncertainty and dramatically limits the government\u2019s monetary capabilities. Many economists believe that the only feasible way out of this is through official dollarization\u2014a strategy that Milei initially embraced during his presidential campaign.<\/p>\n

\u201cThis is an economy that is already de facto dollarized,\u201d Ocampo, who has advised Milei on dollarization efforts, said. \u201cOfficial dollarization in Argentina is simply a recognition of a fact.\u201d However, Milei\u2019s support for dollarization appears to have soured\u2014or at least stalled. His government has not made any substantive moves toward adopting the dollar as the country\u2019s legal currency, and in the run-up to yesterday\u2019s election, Economy Minister Luis Caputo told news channel<\/a> LN+ that \u201cDollarization could be an alternative, but for now it is off the table.\u201d In part, he explained, this is because \u201cwe don\u2019t have enough dollars to guarantee a successful dollarization.\u201d<\/p>\n

But, de Bolle told TMD that \u201cIf [Milei] doesn\u2019t do anything about the monetary regime that Argentina has, eventually he\u2019s going to face the same problem that his predecessors faced.\u201d<\/p>\n

Milei\u2019s name was not on yesterday\u2019s ballots, but his ability to pursue further reforms to the country\u2019s political and economic institutions certainly was. For durable changes to Argentina\u2019s labor, tax, welfare, and monetary systems to have any chance of passing through a divided National Congress, Milei\u2019s libertarian La Libertad Avanza party needs to both nurture support among the Argentine public and build effective political coalitions.<\/p>\n

Passing that one-third threshold and becoming the biggest party in the lower house gives LLA far more legislative power. But it\u2019s still a minority party that needs to form political coalitions to pass more durable legislation. \u201cMilei needs to build alliances and consensus with the moderate forces both in the [legislature] \u2026 And Milei is not that kind of politician,\u201d Berensztein said. \u201cThere is a big \u2018if\u2019, whether Milei is going to be willing, able, and effective in building bridges with opposition leaders, which is instrumental for him to be able to implement structural reforms.\u201d<\/p>\n

According to Carlos Gervasoni\u2014a professor of politics at the Universidad Torcuato Di Tella in Buenos Aires\u2014both Argentines at home and investors abroad will be watching closely for signs that a coalition capable of pushing further reform is beginning to take shape. \u201cIs he going to try to build the coalition that he has not built so far, or is he going to try to keep ruling by himself?\u201d Gervasoni told TMD. \u201cThe second option is a recipe for disaster\u2014the first is the only viable way for [Milei] to end his presidency in good shape.\u201d\u00a0<\/p>\n

The stakes are high. Without a legislative coalition, Milei\u2019s bigger reforms can\u2019t proceed, and Argentina risks falling backward into the economic dysfunction that it has spent the past two years trying to escape. But during his Sunday night victory speech at the LLA\u2019s electoral headquarters, Milei was jubilant but not confrontational, and explicitly stated his willingness to work with opposition parties. \u201cThere are dozens of deputies and senators from other parties with whom we can find basic agreements,\u201d he told the crowd. \u201cWe want to invite most of the governors who will have legislative representation to discuss these agreements together.\u201d<\/p>\n

Regardless of his choices in the coming weeks, his party\u2019s midterm victory demonstrates that the novice politician is still capable of surprising both his supporters and detractors. \u201cMilei proved again that he is unmatched in pulling rabbits out of his hat,\u201d Ocampo said. \u201cShorting him has proven to be a terrible investment so far.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Earlier this fall, bribery allegations against Karina Milei, President Milei\u2019s sister and closest adviser, damaged Milei\u2019s image as…\n","protected":false},"author":2,"featured_media":254478,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[28,24713,101,138175,24992,1922,55933,2402,3140,26906,9335,9107],"class_list":["post-254477","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-capitalism","tag-economy","tag-entitlement-reform","tag-fiscal-policy","tag-foreign-policy","tag-government-spending","tag-inflation","tag-latin-america","tag-libertarianism","tag-monetary-policy","tag-regulation"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/254477","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=254477"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/254477\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/254478"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=254477"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=254477"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=254477"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}