The Washington Post, Argentina’s “Renaissance” and the Milei Mirage

A recent Washington Post editorial, “Argentina’s renaissance continues,” offers a nearly perfect example of the Milei success story now circulating in the financial press. According to this view, inflation has fallen mostly as the result of the fiscal adjustment, exports are rising, as a result of market confidence, and Moody’s, Fitch and S&P have upgraded Argentina’s debt. The latter in and of itself shows that markets approve, and what else would you need, really? From this, the editorial concludes that Milei’s free-market reforms are working, that life is improving for Argentines, and that the country offers a model for other stagnant economies.

The problem is not that these developments are invented, but that the editorial provides the wrong explanation for them. Inflation fell primarily because the government slowed the rate of currency depreciation after Milei’s initial maxi-devaluation had pushed monthly inflation to roughly 25 percent and caused a collapse in real wages. Fiscal austerity contributed by producing a deep recession, weakening employment and reducing wage demands, but balancing the budget was not the central anti-inflationary mechanism. Exchange-rate stabilization reduced inflation, and austerity produced the contraction.

The same confusion appears in the discussion of the fiscal surplus. Argentina’s fundamental constraint is not the government’s ability to balance a budget denominated in pesos, but its capacity to obtain the foreign currency needed to pay external debts and finance essential imports. Milei inherited a heavily indebted economy with few reserves and has remained dependent on support from the IMF, China (the swap in 2024) and the United States (last year). A fiscal surplus may reassure creditors, but it does not create dollars, expand productive capacity or resolve the external constraint. Indeed, cuts in public investment may weaken precisely the productive capabilities Argentina needs in the longer run.

Nor did Milei create the export recovery, which is entirely related to foreign markets. Agricultural exports benefited from the end of the drought, while increased energy production reflects investments in Vaca Muerta and related infrastructure made before he came to office. Recession also reduced imports, mechanically improving the trade balance. The Post therefore credits free-market reform with the effects of favorable weather, previous investment, state-supported energy development and depressed domestic demand.

Credit-rating upgrades indicate that bondholders now believe they face a lower perceived risk of default.  That might or not be true (hint, probably not, and markets often make mistakes). They do not demonstrate that Argentine workers are better off or that a sustainable development model has emerged. The real questions concern wages, employment, poverty, public services, investment and the capacity to earn foreign exchange without repeated dependence on external borrowing. Milei may have achieved a politically important stabilization, but it remains fragile and externally dependent. What the Post calls a renaissance looks much more like another familiar Argentine cycle of austerity, financial enthusiasm and growing foreign obligations.