Argentina, Two Years Later: Javier Milei’s Historic Course Correction
Two years after taking office, President Milei presents an impressive record: falling inflation, restored public finances, and an economy that is growing again.
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On December 10, 2025, it will be two years since Javier Milei assumed the presidency of Argentina. To gauge the magnitude of the changes since then, it is worth recalling the starting point: a country trapped in annual inflation of 160 percent, a discredited currency, an exchange-rate system fractured by dozens of capital controls and a state on the verge of insolvency. A pre-hyperinflationary situation. Milei came to power promising first macroeconomic stabilization and, later, economic liberalization. Two years on, the data allow us to evaluate to what extent he has delivered.
The first achievement—and perhaps the most evident—is the collapse of inflation. As noted, in November 2023 the year-over-year rate exceeded 160 percent and was still climbing. Today it hovers around 30 percent and continues to fall. This is not a mere statistical adjustment: it is the recovery of the currency’s value, a basic requirement for reviving the real economy and restoring the ability of households and firms to plan.
The second major indicator is the country’s risk premium, that is, the extra yield Argentina must pay to borrow on international markets relative to comparable U.S. debt. At the end of 2023, this premium exceeded 2,500 basis points, implying interest rates 25 percentage points higher than in the United States. It reflected a state widely perceived as insolvent. Today that premium is around 600 basis points. Such a drastic reduction can only be explained by the improvement in public accounts.
Closely related is the disappearance of the exchange-rate gap, one of the most characteristic symptoms of Argentina’s economic deterioration. Until 2023 two currency markets coexisted: an official one, heavily rationed, and a parallel one where the dollar traded at almost three times the official price. This distortion was the product of capital controls and absolute distrust in the peso. Today the gap has fallen to zero. Exchange-rate liberalization and monetary stabilization have made it possible to unify the market without provoking a massive flight to the dollar.
The fourth achievement is essential: fiscal clean-up. In 2023 Argentina ran a fiscal deficit of more than 4 percent of GDP and a quasi-fiscal deficit close to 10 percent of GDP, generated by the constant issuance of pesos to pay interest on the Central Bank’s debt. Today neither exists. Without deficits and without endogenous money creation, inflation stops feeding on itself and the peso regains credibility.
With stabilization underway, the economy has entered a recovery phase. GDP in the second quarter of 2025 is 4 percent higher than in the last quarter of 2023. Month by month, economic activity in September 2025 exceeds that of November 2023 by 5 percent (already adjusting for seasonality). It is unusual for an economy to grow during such a deep fiscal adjustment: it suggests that institutional normalization has more than offset the contractionary impact.
In the labor market, the adjustment has not harmed employment. On the contrary: there are 330,000 more people employed than two years ago. In the private sector, employment has increased by 667,000 workers, while public-sector employment has fallen by 367,000. For the first time in a long while, Argentina is creating net jobs in the productive sector and reducing an inflated and inefficient state payroll.
«For the first time in a long while, Argentina is creating net jobs in the productive sector and reducing an inflated and inefficient state payroll»
Macroeconomic improvement is also evident in social indicators. Before Milei took office, poverty exceeded 41 percent of the population (and would have been much higher had incipient hyperinflation exploded). Today it is about to fall below 30 percent. An 11-percentage-point drop in just two years, far from being incompatible with adjustment, is its direct consequence: when inflation disappears, real incomes stop eroding and begin to grow again.
And contrary to many predictions, inequality has not increased. In fact, the available data point to a slight downward trend. Reducing poverty automatically narrows the gap between those with the least and everyone else: inequality is corrected from the bottom, not from the top.
«Reducing poverty automatically narrows the gap between those with the least and everyone else: inequality is corrected from the bottom, not from the top.»
The tenth and final achievement is the one that explains all the others: the forceful reduction in the size of the State. Central government spending has fallen from 21.3 percent of GDP in 2023 to 16.5 percent in 2025, its lowest level since 2008. A fiscal consolidation of five percentage points of GDP in two years is something rarely seen in history—and even less so without an economic collapse. But it was indispensable for leaving behind chronic deficits and structural inflation.
A state that spends less stops accumulating debt. A state that stops accumulating debt reduces its risk premium. A lower risk premium stabilizes the exchange rate. And a stable exchange rate makes it possible to deflate the economy without capital controls. This causal chain is the backbone of Milei’s strategy, and the data show that it has worked.
In two years, the Argentine president has achieved far more than halting a quasi-hyperinflationary spiral: he has laid the groundwork for rebuilding a country devastated by decades of economic mismanagement. But he has also raised expectations. He has not limited himself to promising stability; he has promised to turn Argentina into the freest and most prosperous country on the planet.
To reach that goal, the path is clear: deepen spending cuts, lower taxes, privatize state-owned enterprises and dismantle the regulatory thicket that continues to strangle activity. Less state, more market and more freedom.
If Argentina perseveres, in another two years it may finally be said that the country has left its long decline behind. And that economic freedom is beginning to show—there as well—its capacity to lift nations out of the poverty trap.
