Clouds on the Horizon for Milei, Argentina’s Libertarian Wonderkid

In December 2023, Argentina’s libertarian firebrand president Javier Milei took office with a chainsaw in hand and promises to slash the state. Today, inflation is down and the IMF is on board for his project—but poverty, protests and a corruption scandal are testing his pledge to break with the past.

Milei took the presidency with a mixture of grandiose promises to dollarize the economy and shutter the central bank, and blistering honesty about the austerity he was proposing. Famously, he campaigned with a chainsaw, because his public sector cuts would be about hacking, not pruning.

Cuts to the caste or for the people?

After decades of Peronist rule, Milei was promising an abrupt change away from statist ideology to a small-state model where, in his view, private enterprise and the invisible hand of the market would solve society’s problems.

Milei promised these cuts would fall squarely upon the state—in his telling, a bloated and corrupt institution of elites he dubs la casta, or “the caste”—while everyday working people would be spared. However, the reality has been quite different.

The first half of 2024 was marked by a brutal inflationary spiral and recession, as Argentina’s economy absorbed the changes. Inflation peaked at 289 % in April 2024. Poverty was estimated at between 55 and 57 %—the latter a 20-year high—and the increases to child welfare weren’t enough to stop poverty from reaching seven in 10 Argentine children. Pensions have also been allowed to liquefy. Older adults protest every Wednesday outside Congress, and are routinely met with police brutality.

The situation has improved since that initial turbulent period. Inflation trended steadily downwards to 37 % in July, the most recent data available. Poverty was down to 38 % by the second half of 2024. And Argentina has run a fiscal surplus for the first time in 16 years.

Decelerating inflation rates and fiscal stability, however, take a toll on the welfare regime, which seems to suffer under these short-term gains. Social safety policies which usually compensate for unemployment or poverty, crumble under the austerity measures, leading to a widening gap in the access to participation in society and consequently causing further social division. This is reflected in recent data of the Transformation Index BTI 2026*, where the scores for Socioeconomic barriers and Social safety nets each dropped from 6 to 5 out of 10 possible points, while the Equal opportunity score fell from 7 to 6 points.

The IMF and currency controls

For the first year and a half of Milei’s presidency, business leaders and investors had one question on their lips: When would the government lift currency controls? This web of restrictions on how Argentines could use the US-Dollar gave rise to a flotilla of exchange rates, and caused a major headache for anyone doing business.

In April 2025, they got their answer. In a lengthy announcement, Economy Minister Luis Caputo and Central Bank President Santiago Bausili explained that Argentina would unwind the controls, the peso would float freely between wide bands, and the government would not intervene in the exchange market unless it passed the upper or lower limit. In the immediate aftermath, the World Bank and the IMF both announced financial injections to supports Argentina’s economic reform program.

In October 2025, half of the deputies and a third of senators will be renewed in the national mid-term elections. Milei has a tiny minority in Congress and depends on support from friendly opposition. A process which has recently involved vetoing anything he deems spendy, since it’s harder to achieve the two-thirds majorities needed to overturn a presidential veto than the absolute majorities needed to pass laws in the first place. He hopes to strengthen his hand in these elections, allowing him to govern with greater ease.

Corruption scandals and early-warning signs

However, much of his electoral appeal depends on a stable economy—and therefore, a stable dollar. The government has been loath to buy dollars to nourish its reserves for fear of pushing the price up, but this means its foreign reserves are still running on fumes.

This has proved a devil’s bargain: exporters do not want to sell because of the disadvantageous exchange rate, while Argentines, empowered by the lack of currency controls and the super peso, a currency which has significantly appreciated against the dollar as the reference currency, are bleeding the country’s coffers by holidaying abroad. After a period of restive market sessions, the government announced that it would intervene directly in the foreign exchange market.

But the development that could yet prove lethal lies closer to home. In late August, leaked audio said that senior officials including Milei’s sister, Karina, who serves in the specially-created role of secretary general of the presidency, had been charging bribes in exchange for contracts with the state disability agency. The news broke at a time when Milei was fighting Congress tooth and nail to block a bill increasing funding for people with disabilities, arguing that there was no money for it. For the first time since he took office, Congress overturned his veto.

The corruption scandal soon made itself felt at the polls. On September 7, voters in Buenos Aires Province—Argentina’s largest electoral district, with almost 40 percent of the voter roll—went to the ballot boxes in local elections where the opposition coasted a victory over Milei with 47 % and a 13-point lead.

What happens in the Buenos Aires outskirts, traditionally a Peronist stronghold, can’t be generalized to the rest of the country. But one thing remains clear for Milei’s reform agenda: a voyage that looked like plain sailing back in April could run into storm clouds on the horizon.

*DISCLAIMER: The final reports underscoring the numerical figures referring to the BTI 2026 mentioned above will be published in early 2026.

First published by Global South World.