Argentina’s President Javier Milei has implemented radical free-market economic reforms that have sharply divided Argentine society, while simultaneously winning strong support from former US President Donald Trump, who has pledged substantial financial aid ahead of critical midterm elections.
Milei rose to power in December 2023 on a promise to take a “chainsaw” to Argentina’s bloated state, symbolically wielding the tool at rallies to represent his intent to slash ministries, subsidies, and what he called “la casta” – the political elite. His campaign resonated with voters frustrated by hyperinflation exceeding 200% annually and widespread poverty affecting 40% of the population, driven by years of high public spending, money printing, and massive debt to the IMF. The dramatic imagery and unorthodox style, including past stunts like smashing a piñata of the Central Bank, captured public attention and underscored his commitment to drastic change.
Upon taking office, Milei enacted sweeping austerity measures, including a 50% devaluation of the peso, halving government ministries from over 20 to just a dozen, cutting tens of thousands of public jobs, and removing subsidies that had kept energy and transport prices artificially low. These actions led to Argentina’s first fiscal surplus in 14 years and a dramatic drop in inflation from triple digits to around 36%, earning praise from international investors and political figures like UK Conservative leader Kemi Badenoch, who called it a “template” for future governments. Economists supporting Milei, such as Ramiro Castiñeira, argue that such drastic steps were essential to restore credibility after years of economic mismanagement.
However, the reforms have come at a high social cost, triggering heated protests across the country where police used tear gas, rubber bullets, and water cannons. Critics argue that the burden has fallen disproportionately on ordinary Argentines, with rising unemployment, shuttered factories, and weakened public services such as healthcare and education. For instance, tea farmer Ygor Sobol in Misiones province reported being forced to lay off all employees and can no longer afford basic plantation maintenance due to deregulation that slashed crop prices below production costs, illustrating the human toll of the economic shift.
The textile industry has also suffered, with chairman Luciano Galfione of Fundacion Pro Tejer noting “daily” closures and job losses, attributing it to Milei’s tariff cuts that created an uneven playing field against imports from countries with lower labor standards. Meanwhile, rising costs of utilities and essentials have reduced disposable income, further dampening domestic demand and exacerbating economic hardships for many families. Left-wing economist Mercedes D’Alessandro contends that the adjustments have targeted the working classes rather than the wealthy elites Milei originally criticized, fueling public discontent.
Internationally, Milei found a key ally in Donald Trump, who described him as “my favorite president” and recently hosted him at the White House. The US has advanced a $20 billion currency swap, backed by the IMF, to stabilize Argentina’s currency and support Milei’s reforms, a move that has divided some of Trump’s traditional supporters given his “America first” agenda. Trump explicitly linked this assistance to the outcome of the October 26 midterm elections, warning that if Milei’s coalition loses, the US will not “waste our time” being generous, highlighting the high political stakes and the interplay between domestic policies and foreign relations.
This creates a paradox: while Milei’s policies have achieved macroeconomic stability and won international acclaim, they have eroded his domestic political support, spooking markets and threatening to unravel his economic gains. The midterm elections are seen as a crucial referendum, with opponents like Buenos Aires Governor Axel Kicillof touted as a future presidential candidate advocating for a return to welfare state policies. Investors are closely watching whether political instability could trigger a sell-off of Argentine bonds or currency, undoing the progress made in taming inflation and reducing the deficit.
Looking ahead, the sustainability of Milei’s model is uncertain. Supporters like economist Miguel Boggiano believe it will eventually alleviate poverty and enable lower taxes, fostering long-term growth and investment. In contrast, critics like Alan Cibils warn that reduced inflation may not be sustained, and a potential financial crisis—especially with $20 billion in debt due next year—could reverse all gains. The elections will determine whether Argentina continues on this radical path or shifts course, with global observers watching to see if Milei’s experiment becomes a model for other nations or a cautionary tale about the limits of economic shock therapy without broad public backing.