President Javier Milei Improved Argentina in His First Year as Planet's First Libertarian President

As much as I love Argentina culturally, its economy has been ruined by nearly eight decades of Peronist government largesse, including gargantuan government redistribution programs, protectionism, an exceptionally interventionist monetary policy in which the central bank printed money like it grew on trees, and general disregard for property rights (not to mention the civil rights abuses throughout Argentina's modern history, especially in the 1970s). Argentinians were so dissatisfied with the rampant inflation, eroding purchasing power, and pervasive poverty that in 2023, they elected the first self-identifying libertarian head of state, Javier Milei. It is more than Milei's eccentric personality, which included waving a chainsaw at political rallies promising how he was going to cut government spending. Milei had an established career as an economist, author, and professor prior to becoming President. 

This week commemorates the one-year anniversary that he assumed his role as head of state for Argentina. So-called conventional wisdom predicted that Milei's "shock therapy" would make matters worse for Argentina. While I was thrilled to see a libertarian head of state that could potentially be an inspiration to other world leaders to cut back on regulations, taxation, and government spending, I knew he had to contend with a lot. Plus, Argentina had been ranked as a repressed economy by Heritage Foundations' Economic Freedom Index prior to Milei's election. It turns out that in spite of the political and economic obstacles had to face, Milei had a successful first year. 

• Within the first few months, he was able to cut enough government spending where Argentina had a budget surplus for the first time in over a decade. Milei has continued to generate a budget in subsequent months (IARAF). When you compare Milei's surpluses to previous deficits, the difference is astounding. It is even more so when you consider that Argentina has spent the last 113 out of 123 years running up deficits. 

 

• Milei's elimination of rent control was so effective that it lowered housing prices while expanding the housing supply. 
• Milei has also passed a daily average of 1.8 deregulations since he entered office, which is significant because Argentina is one of the most regulated countries on the planet and its economic growth is thus stifled by regulations. This does not even include trimming the government from 19 ministries to nine ministries. 
• In October 2024, monthly inflation dropped to 2.7 percent, which was about 30 percent a year ago. While that level of inflation seems unfathomable for the Western world, monthly inflation in Argentina has not been this low since November 2021, according to government officials at the Instituto Nacional de Estadística y Censos (INDEC). For a country that has gone through literal hyperinflation, this is a great accomplishment. 

• Argentina's central bank, Banco Central de la República Argentina (BCRA), has lowered the interest rate from 133 percent in December 2023 to 33 percent in December 2024. While this is still among the highest in the world, this move on BCRA's part will lower costs of borrowing money ought to increase investment, consumer spending, and job creation. 
•  Fitch Ratings upgraded Argentina's credit rating to "CCC" last month because of an ability to pay foreign-currency bond payments without issue. 
• Argentina's Emerging Market Bond Index (EMBI), which is JPMorgan's index for measuring debt risk, dropped to a five-year low in October. 
• December 16, 2024 Addendum: I had to add this because this milestone made me excited: Argentina's economy exited a severe recession in the third quarter of this year. 
• If Gallup polling that came out this week is indicative of anything, it is that Argentineans are more hopeful of the state of the economy. 

Postscript. Not everything has been smooth sailing for Milei. In addition to such political obstacles as trade unions and Peronist politicians who prefer the status quo, there has been an increase of the poverty rate, which has reached over 50 percent under Milei. This could very well be part of the short-term pain the Argentineans have to endure to untangle the disaster of Peronist economic policy. If the calculations from the Universidad Católica Argentina are correct, then the poverty in Argentina is already decreasing (see below).

Whether the citizens of Argentina can hang on long enough will have sway over the political feasibility over Milei's plans for the second year. Hopefully for Argentina, Trump's political affinity with Milei could accelerate negotiations with the International Monetary Fund and result in a more generous support package, thereby making the short-term poverty spike more tolerable.

That being said, I think it has been a good first year for Argentina. Milei inherited rampant government debt, a high poverty rate, and an annual inflation rate exceeding 200 percent. Milei is getting a handle on government spending, which was one of his major campaign promises. Improved monetary and fiscal policy have lowered inflation, at least by standards in recent Argentinean history. In spite of the increased poverty, wages are beginning to rebound and Milei still remains popular in Argentina. 

Would I like to see Milei do something about dollarization or capital controls? Yes. Furthermore, it is also true that Argentina's tariff rates and overall taxation rate remain high, not to mention Milei being unable to privatize any of the state-owned businesses. It will be more difficult for Milei to achieve his plans for Argentina to become an economic powerhouse once more if he does not address some of these fundamentals soon. But I also know that Rome was not built in a day and that we should not make perfect the enemy of good. I think that if Milei is able to stay on course, 2025 will look even better for Argentina than 2024. If successful, he can provide a mighty case study for how much of a positive impact deregulation, lower taxes, and less government can have on millions of lives. 

¡Viva la libertad, carajo!