For nearly two years, President Javier Milei of Argentina seemed on the verge of an economic miracle, riding a wave of national optimism.
This self-proclaimed radical libertarian implemented stringent financial measures, successfully curbing runaway inflation and drastically cutting the nation’s swollen budget. Despite the harsh impact these reforms had on millions, his popularity endured, fueled by the hope that he could finally break Argentina’s cycle of chronic economic crises.
However, in recent weeks, a severe economic meltdown gripped Argentina. Investors began a panicked sell-off of the peso and other Argentine assets, sparking widespread fear of a potential default on the nation’s massive international debts. In a dramatic turn, former President Trump extended a significant $20 billion bailout to his South American counterpart, offering a crucial lifeline.
The U.S. Treasury quickly intervened, declaring its readiness to take “whatever steps are necessary” to prevent market turmoil from derailing Milei’s economic program. Treasury Secretary Scott Bessent praised Milei, stating he “is restoring economic stability after decades of Argentine mismanagement.”
This remarkable display of American solidarity has, for the moment, eased market anxieties and renewed confidence in Milei’s bold economic strategy. This financial assistance could also be vital for Milei’s political standing, especially as an upcoming legislative election will serve as the first significant public referendum on his economic reforms.
Argentina’s ongoing crisis underscores the immense difficulty of resolving its deep-seated economic issues, which stem from decades of unchecked spending and poor governance. It also suggests that Milei’s radical solutions might be pushing the patience of everyday Argentines, as his austerity measures continue to erode incomes and inflate living costs.
Elected in 2023, President Milei promised a drastic overhaul of public spending and a complete transformation of Argentina’s economy. He has indeed made significant strides toward several of these ambitious goals.
Under his leadership, monthly inflation, once at a staggering 12.8 percent, has dropped to under 2 percent. Through mass layoffs of government employees and severe cuts across sectors like welfare and research, Milei has streamlined the bureaucracy and, for the first time in over a decade, achieved a balanced budget.
“He has accomplished more than many anticipated,” observed Alejandro Werner, a former International Monetary Fund official. “While I might have pursued different methods, sometimes a certain zealousness is required to truly instigate change, and he has certainly done that.”
Despite these efforts, Milei’s ambitious gamble that his policies would spark economic growth has not yet materialized, and the hardship caused by his spending cuts is already a grim reality for millions.
With rising job losses and declining consumer spending, Argentina’s economy has decelerated in recent months, fueling recessionary fears. Almost a third of the population now lives in poverty, as drastic cuts to transportation, food, and medication subsidies make daily survival increasingly difficult.
Economists point out that in his haste to tackle Argentina’s inflation and excessive spending, Milei has made critical errors that now jeopardize his entire agenda.
Central to his strategy was dismantling government supports that had artificially sustained the peso for years. Milei swiftly devalued the currency early in his term, then implemented policies to align it with international exchange rates.
However, experts highlight Milei’s failure to accumulate sufficient foreign currency reserves—essential for Argentina’s central bank to defend and stabilize the peso during frenzied selling periods, such as the one seen this month.
In recent weeks, Argentina’s central bank has intervened, selling its limited reserves to prevent a peso collapse, raising concerns about the nation’s ability to repay its international loans—a debt default being a recurring theme in its history.
Milei’s political standing has also been undermined by corruption scandals involving his sister, Karina Milei, widely considered his closest and most influential advisor. Furthermore, his party suffered a surprising defeat in a significant provincial election this month, and a resistant Congress has challenged his budget proposals.
Experts suggest that Milei’s political influence might be diminishing, and he could face an uphill battle to secure sufficient support in the upcoming legislative elections. A strong performance by his party is critical for him to advance his proposed reforms and further spending cuts.
Indeed, growing frustration among ordinary Argentines with Milei’s economic policies is evident. Thousands have demonstrated against spending cuts, and an AtlasIntel poll this month revealed that approximately 54 percent of Argentines disapprove of his leadership—a notable increase from 44 percent in June.
“Austerity is a bitter pill to swallow,” commented Andrei Roman, CEO of AtlasIntel. “Eventually, people grow weary of waiting, feeling increasingly impoverished, and they seek a way out.”
Upon his election, Milei attributed Argentina’s economic troubles to decades of reckless spending by corrupt politicians, cautioning that conditions would likely worsen before improving. While his initial promises resonated with Argentines yearning for change, public resolve now appears to be faltering.
For Leonardo Gabriel Ramírez, a 27-year-old liquor store clerk in Buenos Aires, Milei’s policies aren’t entirely negative, but he feels their burden disproportionately affects the poor. “My grandmother can’t afford her medicine,” Ramírez stated. “It seems all they do is benefit the wealthiest.”
Trump’s unconventional move to rescue Argentina, despite his usual ‘America First’ stance, further solidifies the unusual alliance between the American president and his most fervent South American supporter.
Milei has openly admired Trump, echoing his critiques of ‘woke leftists’ and aligning with his foreign policy stances, often to the surprise of others. He was the first global leader to visit Trump post-U.S. election, famously dancing at Mar-a-Lago and proclaiming to the attendees, “Today, the world is a much better place.”
Trump, in reciprocation, has lauded Milei as his “favorite president,” commending his efforts to “Make Argentina Great Again.”
America’s intervention comes amidst a broader geopolitical contest with China for influence in Latin America, particularly as the U.S. seeks access to strategic minerals like lithium, abundant in Argentina and vital for the global shift to green energy.
However, Trump’s endorsement might also bring political liabilities for Milei, given the deep-seated distrust many Argentines harbor towards the United States, a legacy of decades of American intervention in the region.
Currently, the U.S. rescue package offers Milei a temporary reprieve. However, as Werner of the I.M.F. cautioned, “no amount of U.S. firepower will be sufficient” unless Milei recalibrates his approach towards sustainable long-term economic stability. He emphasized that “this financial package needs to be tied to changes in policy.”