Milei, Markets, and Mirage: Why Argentina’s “Success” Is Not What It Seems

There is a growing narrative in the international press, and among those who consume it, that Javier Milei has turned Argentina into a success story. Inflation is supposedly down, poverty is falling, growth is rebounding, and the long-standing problems of fiscal excess and state overreach are said to be finally resolved. For some, this is taken as vindication of “free market” principles.

 

But before we rush to declare ideological victory, it is worth pausing. If one is willing to infer from Argentina that markets work, why not infer from Scandinavian welfare states that intervention works just as well? The answer, of course, is that these simplistic conclusions misunderstand how economies actually function. There are no single-policy experiments in macroeconomics, and certainly none that can be reduced to slogans about the "free market” versus “the state.” As I will argue below, the apparent successes of the current Argentine administration are far more fragile, and far more misleading, than commonly portrayed.

Yes, inflation has come down from the extremely high levels reached at the end of the Alberto Fernández administration. But context matters. Those peak inflation rates, above 200% annually, were largely the result of massive exchange rate depreciations, including one induced under pressure from the International Monetary Fund (IMF) during the election of 2023.

Crucially, the current government itself triggered a sharp devaluation at the outset, accelerating monthly inflation from roughly 12% to 25% in December of 2023. The subsequent decline in inflation is not the result of laissez-faire policies, but rather of exchange rate stabilization, made possible by external financing. This includes a swap line with China and a substantial IMF agreement (around $14 billion disbursed), alongside additional support linked to political ties with the United States, again close to the midterm elections last year.

In other words, inflation came down not because markets are free, and fiscal spending was contained -- that caused a slowdown of the economy (more on that below) but because the exchange rate was actively managed with the help of international financing. So much for free markets. Even now, inflation remains around 30% on an annual basis, higher than during much of the period under Cristina Fernández de Kirchner. If this is success, it is a rather modest one.

The claim that Argentina is booming is equally misleading. What is improving is not the domestic economy, but the external sector. After several years of drought that depressed agricultural exports, favorable weather and higher commodity prices, especially for soybeans, have boosted export revenues. Additionally, infrastructure projects initiated under previous administrations, such as energy investments linked to Vaca Muerta, have reduced energy imports and improved the trade balance. None of this has much to do with current policy. It is largely the result of exogenous factors and past investments.

Meanwhile, the domestic economy is stagnant, and this is the direct result of the draconian cuts of government spending, including investment and spending on crucial areas like Research & Development that will hurt growth, and exports in the future. Capacity utilization collapsed in December 2025, when he assumed the government (as can be seen below), as much as real wages did (as I have shown before here).

 

Poverty has indeed declined from its recent peak. But here again, the explanation is more mechanical than structural. Poverty in Argentina is highly sensitive to inflation. The spike in prices, partly triggered by the initial devaluation under the current administration, pushed poverty sharply upward. As inflation stabilized, poverty naturally declined from those elevated levels. This is less an achievement than a reversal of a self-inflicted shock, even if poverty was increasing at the end of the previous government. And it remains higher than it was with Cristina. And it is higher than what his government claims (as is inflation; note that the head of the statistics office resigned for issues with inflation measurement, something that the right always criticized about the Kirchners).

On further note, part of the reduction in extreme poverty is due to the continuation of transfer programs, ironically maintained under pressure from the IMF. Without these policies, indigence would be significantly worse. This underscores a basic point often ignored in market triumphalism, markets do not solve poverty. In any functioning society, that responsibility falls to the state.

 

This is not a story of market-led success. It is a story of short-term stabilization underpinned by external support, which has increased indebtedness significantly,making Argentina by far the biggest debtor to the IMF (see above; the other expansion was with Macri, that had the same economic team; yeah he is also an outsider, wink, wink, say no more), combined with policies that risk undermining long-term productive capacity and the external sustainability of the country's foreign obligations. In other words, Milei makes a crash much more likely.