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........

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