BUENOS AIRES – Late last month, Argentinian President Javier Milei uploaded a characteristically odd photo on social media. It showed him posing with his cabinet behind a golden chainsaw – a callback to the campaign prop Milei wielded at rallies to punctuate his support for spending cuts. An accompanying caption read: “The best government in history.” That bravado may still prove premature but, for now, Milei’s supporters say he has delivered on at least some of his promises – even if many Argentinians are suffering the consequences.
In his first year of his presidency, Milei’s commitment to a draconian fiscal adjustment has begun to change a country that was prone to economic stagnation and runaway inflation, driven by years of wild money-printing that paid for government deficits. A self-described anarcho-capitalist, Milei revved-up his chainsaw immediately upon taking office, quickly moving to slash spending, eliminate government ministries and fire hundreds of bureaucrats.
In tandem, pensions and public salaries were held down, cutting their real value, and public infrastructure projects were scrapped. The cost-cutting resulted in a fiscal surplus in Milei’s first full month in office back in January, and in every month since, a nearly unprecedented streak in recent Argentinian history. Overall, Milei has reduced government spending by 30 percent relative to last year. The president’s contempt for the administrative state has been winning Milei influential admirers outside of Argentina, especially among United States President-elect Donald Trump’s ascendant circle. The victor of last month’s US election has repeatedly praised Milei, calling him his “favourite president”. Both Elon Musk and Vivek Ramaswamy, the Trump acolytes tasked with downsizing the US federal government, have spoken well of Milei’s austerity measures, with Ramaswamy advocating for “Milei-style cuts, on steroids”.
Domestically, Milei’s reforms have produced the holy grail of Argentinian politics: falling inflation. When Milei was elected in 2023, Argentina had the world’s highest annual inflation rate in the world: 211 percent. Prices were rising month-on-month by 13 percent, spiking to 25 percent in December 2023 – after Milei became president – following a huge currency devaluation by his government. But monthly inflation is now at 2.4 percent, according to data for November, the lowest in more than four years.
“Inflation was the big phenomenon that voters really cared about,” said Federico Robles, programme coordinator of the Wilson Center’s Latin America programme in Washington, DC. “This is a government that came in and said they were going to solve inflation, and no other issue was going to matter as much as that.” Another positive indicator: Argentina’s central bank has started bringing in billions in new foreign currency reserves, thanks in part to a tightened monetary regime and a tax amnesty scheme that incentivised Argentinians to bring dollar savings back into the banking system. Still, despite the recent influx, overall reserves remain in the red. The country’s renewed macroeconomic stability is changing Argentina’s perception in the markets. The country-risk index, an influential measure of the risk of default from JP Morgan, has tumbled from about 2,000 when Milei took office to roughly 750 at the beginning of the month, its lowest level in five years. (Al Jazeera/AP)
