Has Javier Milei Cured Argentina’s Economy?

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Argentina’s boisterous president has succeeded in implementing key parts of his economic agenda, but a full recovery is still a way off.

Having gained a working majority in the Argentinian Congress and with it, passage of a key labor reform bill, President Javier Milei now looks to move forward with an aggressive program of selling off state-owned enterprises. Although the business community overall welcomes these measures, friction has arisen with Argentina’s struggling industrial sector as Milei turns a deaf ear to its pleas for subsidies and tariffs. A true believer in his libertarian ideology, he seems determined to press on with his program, and for now at least, he has sufficient support from the Argentinian public to do so.

Javier Milei’s Anti-Inflation Drive

During his first two years in office, Milei focused on bringing down inflation. He has achieved partial but significant success, using tough spending cuts to wrestle it down from 219.9 percent in December 2024 to 41.3 percent in December 2025, at the inevitable cost of a painful recession and high unemployment. Fortunately, over the past year, Argentina has begun to see economic recovery, with GDP growth of 4.5 percent; nonetheless, many are still feeling the pain. 

At one point, it appeared that Milei would pay a political price for his self-proclaimed “chainsaw” approach to government spending when his supporters did poorly in the September legislative elections in the populous Buenos Aires province. Some prophesied the beginning of the end of his reform drive, and the peso began to wobble in currency markets.

But Milei got a boost from the Trump administration when the US Treasury provided short-term support for the peso through a currency swap arrangement. He then roared back politically in late October, with a strong showing in mid-term congressional elections, which gave him the opportunity to construct a working majority, consisting of his own party, La Libertad Avanza (“Liberty Advances”), together with other conservative and centrist groups as well as legislators beholden to Argentina’s powerful provincial governors.

A Big Win for Argentinian Labor Reform

Milei has moved swiftly to take advantage of the more favorable political environment, obtaining passage of a market-friendly labor reform, something that once would have seemed impossible, given the unique power Argentina’s labor unions had long held. However, amid the long-term decay of Argentina’s economy, the unions have lost strength, and many Argentinians view them as self-interested bureaucracies largely dedicated to preserving the political and financial interests of their leaders.

The principal elements of the labor reform include a recalculation downward of the amount that employers have to pay in order to lay off workers, the creation of separate funds to pay for such compensation (comparable to unemployment insurance in the United States), greater flexibility regarding maximum daily working hours and required vacation periods (while maintaining the overall guaranteed levels), the creation of a six month probation period before newly hired workers gain full labor rights, tax incentives for employers to regularize informal workers, and limits on strikes in essential services such as transportation and hospital care.

Beyond its impact in loosening labor markets, this legislation has deeper significance. Obtaining labor reform had been one of Milei’s goals since he was first elected. Its passage signals to investors that his government is capable of effecting permanent changes beyond what it has been able to accomplish under the temporary emergency powers it was granted after his election. It is thus evidence of the “social and political support for Argentina’s ambitious reform program” for which the International Monetary Fund has pressed.

The passage of the labor reform indicates that Milei and his team have learned how to do the necessary “sausage-making” to get bills through Congress. Unquestionably, a price was paid, especially to gain the support of legislators tied to powerful regional governors, including even some from the opposition Peronists. Unrelated tax changes included in the bill that would have hurt provincial governments were dropped, as were efforts to limit contributions to union-managed health and welfare funds. 

But overall, this was an important victory. A one-day general strike mounted by the unions, which failed to impede passage, underscored their weakness. The top Peronist opposition leaders, former President Cristina Kirchner (now under house arrest following her conviction on corruption charges) and Buenos Aires provincial Governor Axel Kicillof, displayed their inability to control elements within their own party that supported the strike.

Argentina’s Privatization Push Accelerates

Milei has made it clear that the new labor law is only the beginning of his plans for restructuring Argentina’s economy. With a full-time minister dedicated to “deregulation and state transformation,” MIT-educated Federico Sturzenegger, Milei looks to privatize a range of state-owned enterprises. One sale, that of metallurgical firm IMPSA, has been successfully concluded. Next up are Argentina’s principal freight rail carrier, the water and sewage company which serves the city of Buenos Aires, the national postal service, a coal mining firm, and the operator of Argentina’s two nuclear power plants (although in this case, current legislation only allows for partial privatization).

As Milei embarks upon this effort, he will need to avoid the errors of the past. Carlos Menem, the president who served from 1989 to 1999, undertook his own extensive privatization program, which, however, was marred by credible allegations of widespread corruption. This created political space for the re-nationalization of previously privatized entities under Peronist Presidents Nestor and Cristina Kirchner, including air carrier Aerolíneas Argentinas and oil and gas producer YPF.

Moving ahead with the re-privatization of these two marquee enterprises will be a challenge for Milei. Aerolíneas Argentinas, long a money loser, has had a remarkable turnaround. In 2025, it did not require any state subsidies for the first time since it was re-nationalized in 2008. Although it would be a logical candidate for a sale, it is excluded from the privatizations permitted under the emergency legislation passed at the beginning of Milei’s term, and congressional approval will be required. 

And the re-privatization of the state’s majority share in YPF, another of Milei’s longtime goals, would not only require congressional approval but also the approval of the oil-producing provinces, which are entitled to a share of its revenues. Privatizing YPF is also complicated by a messy case in US federal courts over the lack of transparency in how Cristina Kirchner’s administration handled the re-nationalization of YPF in 2012.

While Argentina’s private sector has been generally supportive of Milei’s budget cuts and labor reforms, key sectors resent his other policies. These include his tariff reductions on both consumer goods and industrial inputs, implemented piecemeal over the last two years, as well as his refusal to bail out failing firms—a policy characteristic of the Kirchner presidencies.

Javier Milei Picks a Fight with Big Business

Thus, Milei, perhaps the most private sector-minded of any Argentinian president, has become embroiled in a fight with some leading lights of the business community. It began when Paolo Rocca, head of steelmaking, construction, and engineering giant Techint, complained when his company lost out to an Indian firm in a bid to provide tubing for a gas pipeline from the Vaca Muerta fields to the coast (the first time it had ever lost such a tender domestically) and threatened to mount an anti-dumping case,

Sturzenegger was unimpressed by his complaint,asserting that not giving the contract to the low bidder would be “bad business for companies and the country.” Milei then joined the polemics, dismissing Rocca as “Mr. Scrap Metal” (Don Chatarrín). Friction with the private sector increased when tire manufacturer FATE announced it was shutting its plant because it could not compete with imports arriving under low tariffs; Milei was unsympathetic, calling demands for help “cheap nationalism…to rob decent Argentines.” The head of the Argentine Industrial Union, the trade association of the manufacturing sector, responded, saying “without industry there is no nation” and demanding “respect,” while pointing to the sharp declines in production that the sector has suffered. 

If Argentina’s manufacturers, whom Milei views as coddled by decades of protectionism and subsidies, have gotten the back of his hand, he has been much more supportive of the agricultural and natural resource sectors. Agriculture has benefited from the sharp reductions in hated export taxes on soybeans, corn, wheat, and barley, which were characteristic of the Kirchner era. Milei has said he seeks their complete elimination (although this will not be easy, given his competing goal of maintaining fiscal balance). 

In his recent speech before Congress, he spoke of an eventual doubling of Argentina’s agricultural output to 300 million metric tons per year. Whether or not this can ever be met remains to be seen. Yet Argentina’s banks, with government encouragement, are increasing their agricultural lending; the sector also benefits from favorable weather following periods of drought.

Argentina’s natural resource sector is also benefiting from government policies. Oil production, led by the Vaca Muerta fields, has increased dramatically, from 494,000 barrels per day of production in 2015 to 861,000 in 2025, with further increases expected. This sector has benefited from the Large Investment Incentive Regime (Spanish initials: RIGI), a 30-year program enacted early in the Milei administration that provides stability in customs duties, access to the currency, and taxes, including a reduced income tax rate. 

The Milei administration is now turning its attention to the mining sector, which has long underperformed despite Argentina sharing the vast Andes mountain range with Chile, a long leader in mineral production. Benefiting from RIGI incentives and Milei’s other reforms, Australian major BHP, together with a Canadian partner, is moving forward with the Vicuña copper, gold, and silver mine, which could ultimately entail an investment of up to $18 billion. Milei is pushing for a revision of Argentina’s Glaciers Act, which restricts mining operations in sensitive areas. His proposed replacement has already passed the Senate despite environmentalist objections.

Javier Milei’s Libertarian Vision

With his labor law passed and his privatization plans moving forward, Milei is looking to implement to the maximum degree possible his aim of creating a stripped-down state in a society where markets decide the winners and losers. He sees agriculture and natural resources as efficient sectors that will drive growth and need to be encouraged. At the same time, Argentina’s industry will have to sink or swim, and cannot expect tariffs or subsidies to save it from competition. 

For now, at least, Milei has a clear path as the mid-term elections have allowed him to build a coalition to pass more legislation. While he retains his propensity for bombast and insult, he and his team have seemingly learned the art of getting bills through a fragmented Congress. And Milei is enormously aided by the fact that the Peronists are divided and disinclined to produce any plausible alternative to his policies, hoping merely to pick up the pieces should he fail. Meanwhile, while Milei’s popularity is middling at best, he far outstrips his most likely Peronist opponent, Kicillof, as attention begins to turn to his likely campaign for reelection in 2027.

This does not mean that all is rosy for Milei. Argentina has enjoyed reasonable growth in 2025, but it still has a long way to go. The industrial sector, which he leaves to its own devices, remains mired in recession and has yet to create new jobs. Much of job growth thus far has been in the informal sector. Macroeconomic stability remains fragile, as concerns persist about an overvalued peso, the anchor of his anti-inflation drive. 

Inflation, although well down from its shocking heights, remains high by global standards, and further reductions will depend not only on restraining spending but also on the eventual success of his microeconomic reforms. Meanwhile, although investors are closely following Milei’s reforms, they have yet to make big bets on Argentina, except in a few sectors. 

And in recent weeks, Milei has had to deal with fallout from two scandals. His chief of staff, Manuel Adorni, has faced allegations of conflicts of interest stemming from bringing his wife on Milei’s last trip to Washington, as well as his handling of public tenders. Prosecutors are also scrutinizing Milei’s own links with the promoters of a failed cryptocurrency venture.

It is unclear whether these issues will become more than mere irritations for Milei. But for now, he remains in the driver’s seat. His efforts to remake Argentina’s economy are in line with the libertarian vision that animated his campaign, though tempered by political realities and the enormity of the task before him. But in a country where, for decades, the art of governing has been little more than crisis management, he is unique among leaders for having a consistent vision. For the time being, at least, Argentinians seem to be going along with it. 

About the Author: Richard Sanders

Richard M. Sanders is a senior fellow, Western Hemisphere, at the Center for the National Interest. A former member of the Senior Foreign Service of the Department of State, he served as economic counselor at the US Embassy in Venezuela, 2002–05, and as deputy chief of mission at the US Embassy in Nicaragua, 2007–10.

© The National Interest