Milei's economy: the 'Argentine miracle' or an unsustainable model?

Buenos AiresJavier Milei is facing one of his worst moments since taking office as president of Argentina twenty months ago. Last Sunday, a clear defeat for the ruling party in the province of Buenos Aires, against a Peronist party that—despite internal divisions—went to the polls united, taking the pulse of a country and, above all, of an economic situation that is being affected in disparate ways: within Argentina's social majority, a portion is secure thanks, in part, to stable prices; while another portion cannot make ends meet and lives with an increasingly precarious quality of life.

Aside from the questioning of her economic policy, Milei has other issues to grapple with, such as the perceived systematic mistreatment of vulnerable groups like retirees and people with disabilities, and the alleged corruption scandal hitting the core of her government, particularly her sister, Karina, who allegedly orchestrated the distribution of overruns in the state purchase of medicines for people with disabilities. The justice system is already investigating the case, but the suspicion of corruption has dealt a severe blow to public opinion, especially to those who believed in a "new" Argentina, free of "caste" and "white-collar criminals," as Milei has often referred to the politicians who preceded her.

This adverse situation forces us to reflect. If the electoral collapse can be attributed to the strong hold of Peronism in the province of Buenos Aires, the contempt and arrogance inherent in Milei's style, and corruption as almost a practice incorporated into the collective imagination of Argentine politics, then we must look at the economy: for many, the ultra-liberal is currently leading the country. In conversation with the newspaper ARA, economist Iván Carrino asserts that the country is embarking on "a path of fiscal balance." The reason is that macroeconomic figures, so far, speak in favor of Milei's plan: inflation last August was 1.6%, and the year-on-year inflation rate for 2025 is expected to reach 36.7%. In 2024, the same figures were 4.2% and 117%, respectively, and two years ago—still under the government of Alberto Fernández—they were 12.4% and 211%. "Milei is addressing a fundamental issue, which is the fiscal issue, which had not been addressed by [Presidents Carlos Saúl] Menem (1989-1999) or [Mauricio] Macri (2015-2019)," both of whom were liberal and followed privatizing economic policies and reducing public spending. According to the expert, the formula is simple: "Don't spend more than you collect."

A sustainable model?

But there are also those who, including other items in the analysis, question the sustainability of this model. "The current decline in inflation is largely based on an artifice," economist Roberto Cachanosky tells ARA: "The government is delaying the exchange rate with the dollar," meaning Argentina would be fictitiously supporting the value of its currency, "operating in the futures market at a price that, operating in the futures market at a price that, incurs losses," according to this expert. Furthermore, Cachanosky denies the fiscal surplus the government boasts about: "The debt the Central Bank had with the banks has been transferred to the Treasury, and continues to exist, generating interest each month, but it is not included in the fiscal result." Furthermore, he questions the social cost of cuts in public spending, which are cornering not only vulnerable groups such as pensioners, people with disabilities, or key sectors such as health, but also the country's own infrastructure, such as roads: "If a light breaks in my house, another day the roof, and another day the floor, and I won't have a home."

Another item pointed to by skeptics is the increase in unemployment, which is approaching 8%, the highest figure since the beginning of Milei's administration, the result of mass layoffs in the public sector, along with stagnation in the private sector: "An orthodox plan has been applied," Carrino says, reminiscent of the austerity plan that was applied in Europe after the 2008 crisis: "Is it desirable? I think so, because Argentina has no other option." Regarding poverty – an issue of particular concern to Argentines, given the sustained increase it had seen between the end of the previous administration and the beginning of this one, which reached 52% – the data indicate that it would have fallen to 37.8% in the last quarter, according to Cachanosky, normal values in the country2, since the figure was exactly the2. International (IMF), both experts agree that they would have sought "alternatives" and, regarding future prospects, they agree that the government should seek "more consensus" with the opposition to avoid, as Cachanosky says, "that this crisis breaks out for the least suspected cause."