Argentina’s Shocking Policies and A Year of Changes

Lead One year into President Javier Milei’s bold economic changes, Argentina confronts the harsh truth꞉ that achieving fiscal balance has caused serious social harm. Inflation decreases, but poverty and unemployment rise sharply. This situation leaves people in Argentina unsure about their future.

A Year of Extreme Changes

Javier Milei took office as Argentina’s president on December 10, 2023. He promised fast and significant changes to solve the country’s economic troubles. He quickly introduced new rules, which seriously changed how the government spends money and handles its currency.

Within weeks, the government achieved a fiscal surplus, reversing a primary deficit of 2.9% of GDP in 2023 to a primary surplus of 1.8% and an overall surplus of 0.5% by October 2024. These gains were achieved through what Milei himself described as an “unprecedented” fiscal adjustment.

Public spending was slashed by 29% in real terms, with deep cuts to infrastructure projects, energy and transportation subsidies, pensions, social programs, and public sector salaries. Monetary policy also underwent radical changes, as the Central Bank halted money printing to fund government expenses and worked to rebuild reserves.

Financial markets celebrated the immediate impact. Inflation rates showed clear improvement. After a sharp devaluation, monthly inflation fell from 25.5% in December 2023 to 2.7% in October 2024. Annual inflation remained high, at 193%. The rise over the year was 107%.

Critics argue that these reforms hurt the country’s most vulnerable people. They believe the changes affected them unevenly.

The Price of Austerity

Milei’s policies have delivered fiscal stability but caused a severe contraction in Argentina’s real economy. Between January and September 2024, overall economic activity fell by 3.1%, with key industries struggling to recover.

Construction, heavily reliant on public investment, saw a staggering 29.5% decline, while industrial production dropped by 12.7%, driven by collapsing domestic demand. The labor market also bore the brunt of these changes, shedding 242,000 formal salaried positions by August 2024.

In response, many workers turned to self-employment or informal labor. Registered self-employment grew by 194,000, while informal employment surged to 36.4%. This change shows rising uncertainty in the job market. Many families have lost steady pay and benefits.

Argentina’s community has suffered greatly from this. Poverty rose to 52.9% in early 2024, the highest since 2003. Extreme poverty climbed to 18.1%. Over just six months, 5.4 million additional people fell below the poverty line in a country of 46.2 million.

Economic inequality has deepened, with the middle class shrinking and the number of “nearly poor” individuals whose incomes barely exceed subsistence levels rising sharply.

The Human Cost

The rapid implementation of Milei’s reforms has drawn sharp criticism for exacerbating existing inequalities. Observers note that the burden of austerity has fallen hardest on Argentina’s most vulnerable citizens, leaving many without adequate support to weather the economic storm.

Slashed subsidies and social programs have strained millions of households. Families report difficulties meeting basic needs. Inflation reduces purchasing power, and essentials like food, transportation, and healthcare become increasingly too expensive.

The government’s focus on fiscal discipline attracts accusations of ignoring social duties. Labor unions and advocacy groups have organized protests against the cuts, arguing that these policies prioritize numbers over people.

“Milei’s approach has completely changed Argentina’s income distribution,” one analyst noted. Society is now divided into three groups. There is a small and fragile middle class. There is also a growing poor or nearly poor population. Meanwhile, an elite largely avoids these changes.

Critics argue that the reforms have worsened inequality and exclusion, particularly impacting the middle class. The middle class is being squeezed out of economic stability, and they are struggling. This situation calls for empathy and understanding from all sectors of society.

What Lies Ahead

Javier Milei begins his second year as president. Argentina remains very divided about its policies. Supporters say the fiscal surplus and lower inflation are crucial for long-term stability. They believe these changes, though painful now, are necessary.

Critics, however, think the social and economic costs are too high. Unemployment has risen, formal jobs have decreased, and poverty rates have skyrocketed. Many people find it hard to survive. These problems could destroy any positive results of fiscal reform. These problems are indeed severe.

Milei’s reforms depend on tackling social challenges while keeping economic progress. For many Argentinians, this is about more than policy. It’s about a vision for a fair and sustainable future. Vision is important.

Also read: Argentina Eases Courier Import Limits to Boost Price Competition

In Milei’s first year, Argentina saw dramatic changes. The government balanced fiscal stability with social and economic pain. The nation now adapts to this new reality. The ongoing debate over Milei’s legacy and future direction engages all sectors of society, highlighting the importance of their voices in shaping the country’s future.