Nobody can accuse Argentine President Javier Milei of being too cautious. Since taking office Dec. 10, Milei has launched a flurry of initiatives to implement his pro-market agenda. Some of his most outlandish campaign promises, such as dollarizing the economy and shutting down the Central Bank, are off the table, at least for now. But Milei’s pragmatic turn has its limits. His decision to push through a massive package of reforms all at once, his attacks against lawmakers whose votes he needs and his insensitivity toward the social costs of his policies risk alienating key supporters and dooming his administration.
Milei and the small cadre of advisers he trusts see his electoral victory in November—when he trounced the Peronist candidate, then-Economy Minister Sergio Massa, 56 percent to 44 percent in the second-round runoff—as a blank check to transform Argentina’s economic structure according to his libertarian philosophy. Days after Milei’s inauguration, Economy Minister Luis Caputo announced a drastic cut to public spending to quickly balance the fiscal deficit, which stands at 5 percent of GDP. He also devalued the peso by 50 percent to narrow the gap between the official and the black-market exchange rates and alleviate pressure on the Central Bank’s depleted reserves.
In the long term, Milei argues that cutting subsidies and removing price controls will eliminate distortions, normalize the economy and allow him to stop printing money to finance the Treasury. In the short run, however, his policies are accelerating already skyrocketing inflation and aggravating the country’s recession. Prices rose by 25 percent in December and by a whopping 211 percent in 2023. The International Monetary Fund expects a contraction of 2.5 percent of GDP this year, similar to the drop in 2023.
Milei came to power rallying against the “political caste,” which he sees as the source of the country’s problems. As president, he has maintained this zero-sum view of politics, framed as a battle with a corrupt political elite determined to defend their privileges and impede the virtuous functioning of the free market. Consistent with that framing, his first move upon taking office was to bypass Congress by including several reforms in a massive executive decree that, among other things, limits the power of labor unions, deregulates vast swaths of the economy and restricts the right to strike and protest.
The decree was followed by a mammoth legislative package with further reforms, including privatizing all state-owned companies, limiting increases in state pensions, eliminating price controls, increasing export taxes on all products and granting Milei broad emergency powers to legislate by decree until the end of his term in 2027.
All told, the decree contains 366 articles and the omnibus bill 664, encompassing a wide array of topics, from the important (fiscal measures) to the debatable (an electoral reform) to the ridiculous (guidelines for how judges should dress during trials). Some articles seem tailor-made to benefit particular private corporations in strategic sectors such as oil production and health care.
The government’s strategy seems to be to present all its reforms at once to overload the political system and pressure lawmakers into obedience while Milei’s popularity is still high and the memory of his victory still fresh. Rather than prioritize the most pressing reforms and negotiate with other parties, both allies and opponents, Milei expects Congress to pass his initiatives quickly and without changes.
At the same time, however, Milei has accused lawmakers who have doubts about his program of being “useful idiots” and wanting bribes in exchange for support. He also blamed lawmakers for the economic consequences of any delay. Even some parties that agree with the spirit of the reforms—such as PRO, the center-right party of former President Mauricio Macri that Milei has tapped to fill key roles in his administration, and the centrist UCR—resent these attacks against Congress as well as Milei’s attempt to concentrate power.
It is not new for Argentine presidents to disregard the opposition and pretend to be the embodiment of the people. Milei’s problem is that he lacks the experience, political acumen and legislative support to back up his tough talk.
It is not new for Argentine presidents to disregard the opposition and pretend to be the embodiment of the people. Milei’s problem is that he lacks the experience, political acumen and legislative support to back up his tough talk. Several commentators in Argentina have compared Milei to former President Carlos Menem, a Peronist who converted to neoliberalism and implemented pro-market structural reforms during his two terms in office from 1989 to 1999. These observers point out that Milei is attempting Menemism without Menem—that is, Milei wants to radically change the economic structure of the country without his predecessor’s political savvy, charisma and capacity to fragment and co-opt potential opposition.
To be sure, Milei’s electoral victory was indeed overwhelming, sending shockwaves throughout the country’s discredited political establishment. What’s more, the opposition has no clear leaders, and the Argentine people seem to be willing to endure painful reforms for a while. The country’s largest labor union has announced a general strike for Jan. 24, but most political and social actors will prefer to wait until Milei’s popularity wanes before moving against him. And both houses of Congress would have to vote against Milei’s executive decree to overturn it, which right now is unlikely.
But the president could find his initial honeymoon period, if it can be called one, short-lived. Judges have already suspended parts of Milei’s executive decree, especially its labor reforms, and a wave of lawsuits is coming. The central issue is whether the conditions of urgency and necessity under which the Constitution authorizes the president to bypass Congress have been met. A prolonged and uncertain judicial struggle is inevitable.
More ominous than Milei’s political shortcomings are his authoritarian tendencies. The government’s chief legal adviser recently wrote that those opposing Milei’s executive decree failed to accept that the Argentine Constitution granted the president powers analogous to a king, an outrageous fabrication. And in defending the reforms, Milei’s supporters—including many economists among them—have shown great arrogance and aggressiveness not only against staunch ideological opponents, but also against anyone who expresses doubts about the content and pace of the reforms.
The president also seems insensitive to the social effect of his measures, insisting that if spending cuts cause a greater recession than expected, then he will need to cut spending even more until he closes the deficit. According to Milei, this pain is needed to cure Argentina of its statist disease, and the fact that Argentines voted for him shows their willingness to pay that price. That might be true, but other presidents before him have mistakenly thought that their win signaled a deep ideological shift in the Argentine population.
Milei might believe he was elected to uproot the state and redesign Argentine society according to a libertarian embrace of free-market rules, but the origins of his surprising victory are much narrower than that. Argentines voted for him because they wanted lower inflation and a functioning economy and were furious with the failure of traditional elites to provide either. So far, Milei’s government has presented an ambitious, if chaotic, agenda of structural reforms, but not a clear plan to restore basic macroeconomic stability. Removing price distortions and eliminating the deficit are important, but absent a coherent strategy to set inflation expectations, protect the poorest and strengthen the peso, they risk fueling ever-higher inflation and an economic depression.
Of course, Milei has only been at the helm a few weeks, and there is a chance that he knows exactly what he is doing. Under this scenario, some version of the government’s reforms will get congressional approval, and the economy will take off once the shackles of excessive state intervention have been broken. Milei will then seize the ideal moment to launch a more encompassing stabilization plan—perhaps even dollarization itself—that will stop inflation in its tracks once the more painful but inevitable reforms have taken effect. It is also true that Milei has inherited an economic disaster that will take time to reverse.
Another possible scenario is that Milei is completely out of his depth, isolated from reality and willing to trample the rule of law and risk economic catastrophe in the pursuit of a febrile libertarian illusion. After Milei’s bizarre speech at the World Economic Forum in Davos, Switzerland, on Jan. 17—during which he accused global elites of being coopted by socialism—this option should not be discarded. In any case, it won’t be long before Argentina and the world find out the answer.
Bruno Binetti is a nonresident fellow at the Inter-American Dialogue and a doctoral candidate at the London School of Economics. You can follow him on Twitter at @binettibruno.