Almost two years ago, the enthusiasm of the 56 percent of Argentine voters who called for “Freedom” when electing Javier Milei as President of Argentina seemed unstoppable. The pace of change also seemed unstoppable. Expectations were enormous for a government that had restored hope to an Argentina plagued by annual inflation exceeding 210 percent and a poverty rate of over 50 percent. A libertarian president took office to rescue the country from a new populist crisis.
The Argentina Milei Received
It is difficult to briefly describe the devastated country President Milei found upon taking office. Beyond the aforementioned inflation rate, an increasingly indebted Central Bank, and a public spending level of 44 percent (currently close to 35 percent), a country where 7 out of 10 children were poor, and where 7 out of 10 young people would choose to emigrate if they had the opportunity. At a glance, this was the legacy of the populism of the Kirchnerist governments.
Currently, President Milei’s greatest achievement, as perceived by the public, has been and is the reduction of the inflation rate from more than 210 percent annually to 33.6 percent by August 2025. With the drop in inflation, the economic reality of Argentines “calmed down” for ordinary citizens, and we began to look ahead, to plan, to implement dreams, escaping the perverse previous situation, one of mere defense and survival.
The elimination of regulations was also a huge achievement, although it was less visible to people with more technical training. Another important achievement was the partial end of what we call the “money trap,” which allows the international circulation of personal money, but not yet that of companies. The impossibility of taking money invested in the Argentine economy out of the country is, without a doubt, a major disincentive to foreign investment in the country.
Ideology or Interests?
But — in contrast to the hope generated by the charismatic leader Javier Milei, and the global impact of his image and message — his political power upon taking office faced significant restrictions, both at the parliamentary level (he only holds 15 percent of Representatives and 10 percent of Senators), and at the provincial governments (0 percent of governors) and municipal governments (three out of every 1,100 municipalities). This situation gives us an idea of the challenges of implementing profound reforms, which — evidently — affect the interests of powerful sectors that live off the federal government’s money.
One of the major differences between the current president and the previous president who managed to implement market-oriented reforms (Carlos Menem, president between 1989 and 1999), is that the latter (despite having taken office with hyperinflation of more than 5000 percent annually) enjoyed majorities in the House of Representatives and the Senate, and enjoyed the political support of more than half of the governors from his party.
The rigidity of possible reforms is high. Even today, and despite good intentions, 21 million Argentines (out of a total of 46 million) continue to receive salaries or payments from the Federal Government every month. This persists due to the government’s difficulties in reducing the four million public employees in a country where six million people work in the formal sector. This also stems from the legal impossibility of eliminating the four million (out of a total of eight million) “non-contributory pensions” that were given away by populist parties. And so on.
It is not easy for a president to change the reality of a country like Argentina. It is not enough to 1) win an election. It is also necessary to 2) have the right ideas, and 3) have the capacity to implement the right ideas.
Politics Without Romance
Since the beginning of 2025, the Milei administration has faced increasing challenges. It has combined its significant achievements in reducing inflation with exchange rate and financial system measures that maintain a relatively cheap foreign currency for citizens. Argentina is now an expensive country in terms of dollars (at least compared to other Latin American countries), impacting competitiveness. The Big Mac Index reflects this.
Although some achievements — despite the limited power in parliament and state governments — have been significant, the influence of the state has not been strongly perceived by a portion of the population. As noted, the number of people receiving funds from the national government (federal government, provinces, and counties) has not significantly decreased. Faced with minimal international reserves, the government received a loan of more than $20 billion from the IMF in April 2025, which provided temporary breathing space and allowed it to buy time.
At the same time, the elimination of subsidies in some areas meant a greater burden on services such as electricity, natural gas, water, and transportation (bus, subway, train) in the budgets of lower-income sectors, generating unrest. This also led to a decline in activity in the least competitive sectors of the economy (industry), which — paradoxically — are those that generate the most employment.
Lacking a parliamentary majority has made it difficult for the government to approve sweeping reforms (tax cuts, labor deregulation, and the pension system), key to changing the economy’s major incentives.
We are currently experiencing complex times. The government has lost a symbolically key legislative election in the Province of Buenos Aires (40 percent of the population) and faces national parliamentary elections toward the end of October. In this context, country risk has increased from 800 basis points to almost 1,400 basis points, and the dollar has risen from 1,350 pesos to 1,500 pesos in just a few days (even with intervention by the Ministry of Economy to lower it).
The challenge of reversing the fate of a state like Argentina, captured for decades, is enormous. Misguided ideologies may be a justification for redistributive populism, but the specific interests of rent-seeking groups — in James Buchanan’s terms — seem to strongly explain the resistance to change. As Mancur Olson taught us, paradoxically, the economically least competitive sectors are often the strongest at defending their privileges.
The case of Argentina also prompts us to reflect on the redistributive incentives implicit in majoritarian democracies.
