Milei Inherits an Economically Devastated Argentina

Argentina’s second round of presidential elections produced a surprising—and substantial—victory for the right-wing populist Javier Milei. But the libertarian economist, who has promised a radical shakeup of the Argentine economy, has a grim task ahead. Ordinary life is increasingly painful. With year-on-year inflation exceeding 124 percent this September and more than 40 percent of the population living in poverty, the economic and social challenges that the next president will have to face are stronger than ever.

When President Alberto Fernández took office, Argentina was already in a long-term crisis, with inflation running at 55 percent and a third of the population living in poverty. His government sparked an even bigger crisis. A multitude of economic problems, from the need to refinance the public debt to the high domestic deficit—caused in part by the government’s large spending on energy subsidies and social assistance—have pushed Argentina into a situation that seems practically insurmountable.

“This is happening because of many years of mistakes,” said Marcelo Elizondo, the president of the Argentine chapter of the International Society for Performance Improvement, a leading nonprofit dedicated to increasing productivity and performance in the workplace, and an academic expert on international economics. “For 20 years, we have seen a huge expansion of public spending; lots of subsidies to individuals, companies, and social organizations; international isolationism and protectionism; and very little macroeconomic sustainability,” Elizondo added. These “mistakes” have produced runaway inflation and public debt that exceeds $400 billion.

Even something as simple as daily shopping has become painfully uncertain. “At the supermarket they don’t show prices anymore because they are always changing, so you can’t even plan and manage your money when shopping,” said Leo Geluda, an independent businessman who imports products from abroad. For people like Geluda, who depend entirely on access to foreign products, it is increasingly difficult to feed his family.

The uncertainty is driving out big companies: More than 20 of the largest global firms, including airlines, supermarket chains, and technology companies, have left the country, leaving thousands of people unemployed. Meanwhile the high participation of the state in the economy—with negative laws imposed on companies without any consultation—adds to a lack of confidence among businesses.

Although the unemployment rate in the country is 6.2 percent, almost half of the existing jobs are in the informal sector. 27.3 percent of the workers are paid off the books, without any kind of protection or benefits, and another 22 percent are self-employed. Many lack qualifications and are forced into precarious work to earn a living, such as selling food on the streets or performing what are known as “changas”—informal tasks assigned on a daily basis without any possibility of continuity or regularization.

“The Argentine of five years ago could say that he had an idea of the future,” said Fernando Moiguer, an economist and founder of the strategic consulting firm Moiguer who led the study “Las 3 Argentinas,” which analyzes the impact of the crisis on different levels of Argentina’s society. “Today, regardless of social class, that is no longer the case,” he added.

Argentina’s most vulnerable can’t access basic commodities, but the impact goes beyond that. The country’s child poverty rate is already 56 percent and growing. “Children are coming to school less because parents are less and less involved in their activities, as they have to work more,” said María Sofía Meijide, a professor in the Department of Political Science and International Relations at the Universidad Católica Argentina and operations manager of the Cre-Ser Foundation, which works to support children in poverty.

The two final candidates put forward starkly different socioeconomic plans. Milei proposed eliminating the country’s Central Bank and dramatic cuts in fiscal spending. Sergio Masa, the current administration’s economic minister, advocated the state maintaining much of its control of the economy and working towards fiscal stability. Milei’s radicalism proved more appealing than Masa’s answer of more of the same.

“The incoming government is going to find itself with an economy in recession, a very high inflation rate, and a very bad expectations problem,” Elzondo said. That could lead to tough fiscal decisions which might provoke social resistance in a country with a history of unionization. “The government has two ways of handling social conflicts. Either it negotiates and offers goods and services or it represses them,” said Facundo Cruz, a political scientist at the Universidad Argentina de la Empresa.