[ISAFIS Newsletter #12] The Wildest Economic Gamble Unfolds in Argentina’s Shock Therapy

Written by: Natalie Grace Sierra Adi Staff of Research and Development

Image 1. Javier Milei delivers his first presidential speech from the steps of Congress.
Source:  Luis Robayo/AFP

“There is no alternative to shock treatment,”

Argentine President Javier Milei declared in his inauguration speech in December 2023, signaling the start of what he promised would be an uncompromising economic reform (Seddon & Watson, 2023). In the months that followed, the economist-turned-politician president immediately began implementing a package of measures often described as the most radical fiscal overhaul in Argentina’s modern history. His program combined rapid state spending cuts, a reduction in public-sector employment, a removal of subsidies, and the liberalization of markets that had been tightly regulated for decades. Milei repeatedly stressed that the goal was to eradicate Argentina’s chronic fiscal deficit and stabilize an economy that has been trapped in cycles of inflation and debt for generations (RNZ, 2023).

The early results were headline-worthy. Government data showed that by January 2025, Argentina had recorded a monthly inflation rate of 2.2 percent down from nearly 300 percent at the height of the 2024 hyperinflation crisis (Reuters, 2025; BAT, 2025a). The fiscal deficit, which had persisted for more than a century, was eliminated within months of Milei’s reforms taking effect. For international observers, this was almost unprecedented in speed and scope, receiving both praise from free-market advocates and skepticism from those concerned about the long-term sustainability of such adjustments. The International Monetary Fund (IMF) projected that Argentina’s GDP could grow approximately 5% in 2025 as business confidence and investment begin to recover. (IMF, 2025b; World Bank, 2025).

Yet, the sudden policy has caused many Argentinians to pay a heavy price.

Behind the Numbers
Javier Milei’s austerity drive is what economists describe as one of the most abrupt fiscal corrections in recent memory. Quintessentially, the rapid rollout of austerity measures triggered widespread job losses: between November 2023 and March 2025, private-sector employment fell by 115,000 and state-sector jobs by 50,000 (Gillespie, 2025). The informal sector absorbed much of the displaced labor force, adding roughly 224,000 jobs (Gillespie, 2025).

Public outrage has not been muted. In April 2024, hundreds of thousands of students, professors, and workers took to the streets across Buenos Aires and other cities to protest sweeping budget cuts to public universities, which threatened closures and severely undercut educators’ pay (VOA News, 2024). Banks have also reported a rise in financial strain among consumers: overdue credit card balances reached 2.8% in March 2025 and personal loan defaults ticked to 4.1%, marking the most severe credit deterioration in nearly a decade (BAT, 2025b). Informal reports reveal wage earners are still struggling even with inflation retreating. One teacher, earning approximately USD 450 per month, said, “I don’t have any money left by the 15th of the month,” summarizing a reality that numbers alone cannot capture (Misculin, 2025).

Although Argentina’s fiscal books have been balanced for the first time in over a century, private investors remain wary, keeping the country locked out of international markets. In April 2025, the IMF approved a $20 billion loan program, sending $12 billion immediately (IMF, 2025a). The rest will come only if Argentina meets certain conditions. Additionally, exports that could further increase Argentina’s growth are on hold, as major copper mining projects are stalled because the government isn’t spending enough on infrastructure (Sigal, 2025).

Conclusion
As Argentina approaches midterm elections in October, Milei’s coalition must retain support to continue his reforms. Failure to do so may result in a policy reversal. If wages and social support don’t improve soon, the fragile balance between budget cuts and political stability could fall apart. Milei’s ideas of dollarizing the economy and abolishing the central bank remain among the most radical proposals, stirring a debate well beyond Argentina. For admirers, they’re a libertarian blueprint, while critics call them a risky bet with long-term consequences.

For countries considering an economic reform, Argentina offers both inspiration and caution. The country’s current path is an ongoing test of how far a democratic system can pursue “extreme liberalization” without collapsing. Its result could inspire reformers in the Global South or stand as a warning about the dangers of quick fixes. If successful, Milei will be credited with rewriting the rules; if not, he will be remembered as the man behind the wildest economic gamble that broke Argentina.

References
Buenos Aires Times. (2025a, February 13). Inflation slowed to 2.2% in January – lowest rate in four-and-a-half years. https://www.batimes.com.ar/news/economy/inflation-slowed-to-22-in-january-lowest-rate-in-xxx-years.phtml 

Buenos Aires Times. (2025b, June 4). Milei’s cuts are making credit harder to collect in Argentina. https://www.batimes.com.ar/news/economy/bounced-cheques-soar-to-five-year-high-under-mileis-austerity.phtml

Financial Times. (2025, August 8). Lessons and limits from Milei’s shock therapy.https://www.ft.com/content/8af38ca8-474f-47a8-b1e2-1040e7002d71

Gillespie, P. (2025, July 8). “Milei’s approval rating holds as Argentines worry more about jobs”. Buenos Aires Times. https://www.batimes.com.ar/news/argentina/mileis-approval-rating-holds-as-argentines-worry-more-about-jobs.phtml 

International Monetary Fund. (2025b, August). ARGENTINA. https://www.imf.org/-/media/Files/Publications/CR/2025/English/1argea2025003-source-pdf.ashx

International Monetary Fund. (2025a, April 11), IMF Executive Board Approves 48-month US$20 billion Extended Arrangement for Argentina. https://www.imf.org/en/News/Articles/2025/04/12/pr25101-argentina-imf-executive-board-approves-48-month-usd20-billion-extended-arrangement#:~:text=The%20IMF%20Executive%20Board%20approved,of%20about%20US%242%20billion. 

Misculin, N. & Grimberg, C. (2023, December 11). Economic shock unavoidable, new Argentine president Javier Milei warns. RNZ. https://www.rnz.co.nz/news/world/504455/economic-shock-unavoidable-new-argentine-president-javier-milei-warns

Misculin, N. (2025, May 5). In Milei’s Argentina ‘economic miracle’, not everyone’s a winner. MarketScreener. https://www.marketscreener.com/quote/index/MERVAL-BUENOS-AIRES-2354430/news/In-Milei-s-Argentina-economic-miracle-not-everyone-s-a-winner-49824857/ 

Nessi, H. (2025, February 14). Argentina inflation hits five-year low in win for Milei. Reuters. https://www.reuters.com/world/americas/argentina-inflation-rate-seen-hitting-milei-era-low-2025-02-13/

Seddon, S. & Watson, K. (2023). Javier Milei: New president tells Argentina ‘shock treatment’ looms. BBC. https://www.bbc.com/news/world-latin-america-67678276 

Sigal, L. (2025, August 8). Argentina’s copper dreams need infrastructure – but who will build it?. Reuters. https://www.reuters.com/business/energy/argentinas-copper-dreams-need-infrastructure-who-will-build-it-2025-08-08/ 

VOA News. (2024, April 24). Thousands gather in Buenos Aires to protest higher education budget cuts. https://www.voanews.com/a/thousands-gather-in-buenos-aires-to-protest-higher-education-budget-cuts/7582820.html 

World Bank. (2025, January). Latin America and The Caribbean. https://thedocs.worldbank.org/en/doc/c50bc3c87bc2666b9e5fa6699b0b2849-0050012025/related/GEP-Jan-2025-Analysis-LAC.pdf