Javier Milei is a figure in Argentine politics whose unorthodox approaches and charismatic leadership style have attracted attention. Since assuming the presidency in 2023, he has continued to surprise both supporters and critics with his radical reforms, particularly in the economic sphere. Milei’s so-called “shock therapy” policies focused on containing inflation, balancing the budget and restoring investor confidence. However, despite the positive short-term results of these reforms, questions remain about their long-term impact and sustainability.
One of the first reforms Milei implemented after assuming the presidency was the devaluation of the Argentine peso and drastic cuts in public spending. Although these steps initially led to economic turmoil and price hikes, they soon began to yield positive results. By the end of 2024, the monthly inflation rate had fallen from 20 percent to less than 3 percent, while Argentina posted an annual budget surplus for the first time since 2009.[1] In addition, the value of Argentine bonds has increased by more than 100 percent in international markets, indicating that investor confidence has been restored.
While the short-term success of economic reforms may have created a favorable impression for foreign investors, the sustainability of this success depends on the social balance of the reforms. Argentina’s previous economic crises have shown that the long-term benefits of market-friendly policies are limited when their impact on the population is ignored. The question of whether Milei’s reforms have learned from these mistakes will be a critical element in assessing his leadership.
These achievements were not limited to macroeconomic indicators. Price stabilization in people’s daily lives and the normalization of trade made the reforms more acceptable to the public. However, the sustainability of this popular support is directly linked to the impact of social spending cuts on low-income groups. Rising living costs and social injustice may increase reactions to Milei’s policies in the future. Especially in rural and poorer areas, the effects of cuts in social spending are felt more acutely. If unrest in these areas increases, Argentina’s social balance could be seriously shaken.
The success of Argentina’s economic reforms depends heavily on the relationship with the IMF. Milei is trying to secure a new loan from the IMF for Argentina, which has 22 failed bailout programs in the past. However, this is not an easy process; in order to secure a new loan, the IMF expects concrete steps from the Milei administration to ensure economic discipline. Its close relationship with US President Donald Trump could be an important advantage in this process. Given Trump’s influence on the IMF, this relationship could increase Milei’s chances of getting a loan. However, the key question is whether Milei can maintain popular support while fulfilling the IMF’s demands. IMF programs often include stringent fiscal policies, and the impact of these policies on social spending may call into question the legitimacy of the reforms in the eyes of the public.
Plans to free float the peso are one of the biggest challenges facing the Milei administration. In the past, the free floating of the peso has led to deep crises in the Argentine economy. It is therefore crucial that the process is carefully managed. If this process is managed successfully, the Argentine economy could become more attuned to market dynamics and enter a period of steady growth. However, possible mismanagement, such as the rapid depreciation of the peso, could plunge the country back into high inflation and economic chaos.
While these reforms have improved economic indicators, they have put significant pressure on low-income groups due to cuts in social expenditures. These cuts have caused widespread social unrest and increased the backlash against the reforms. Increasing social tensions could make it harder for Milei to maintain popular support and threaten the sustainability of reforms. In addition, cuts in basic areas such as education and health could weaken human capital in the long run, which could have a negative impact on Argentina’s economic development.
The by-elections in 2025 will be a critical juncture for Milei. The public’s reaction to economic reforms will determine the outcome of these elections and play a decisive role in the future of Milei’s policies. Therefore, the Milei administration needs to take steps to strengthen popular support ahead of the elections. A review of social assistance programs, especially those targeting low-income groups, could increase this support.
Milei’s speeches in Davos and his visibility at the global level have made him not only a local but also an international figure. In 2024, his speech in Davos introduced Milei’s economic vision to the world, attracting the attention of investors. While this has boosted Argentina’s credibility in international markets, reforms need to be implemented consistently for this confidence to be long-lasting. In addition, the market-friendly policies that it has introduced at Davos could boost not only investor confidence but also the potential for regional cooperation. Argentina’s stronger trade ties with neighboring countries such as Brazil and Chile are an important factor that could support the success of the reforms.
The sustainability of reforms is directly linked not only to economic indicators, but also to the welfare of the population and how social balances are managed. If Milei succeeds in tackling these multidimensional challenges, the Argentine economy could recover from its chronic problems and become stronger internationally. But if not, the short-term successes of the reforms could give way to deeper economic and social problems.
As a result, under Milei’s leadership, Argentina has entered a period of economic transformation. While shock therapy has been effective in the short term, the sustainability of these policies must be carefully managed. Time will tell whether Milei’s policies will go down in history as a success story or the beginning of a new crisis. In the meantime, whether Milei’s radical policies are truly an “economic revolution” or a long-term risk depends on the alignment of the social and economic dimensions of the reforms.
[1] “INDEC Reveals Argentina’s 2024 Inflation Rate: 117.8%.” Buenos Aires Times, https://batimes.com.ar/news/economy/indec-reveals-argentinas-2024-inflation-rate-1178.phtml, (Accessed Date: 01.26.2025).
