The government of Javier Milei in Argentina has completed its first year. Among its economic achievements are a significant decrease in inflation and an adjustment of public accounts, transitioning from a substantial budget deficit to a surplus, alongside deregulation reforms and a stable exchange rate. However, these progresses came at a cost: wages and pensions fell sharply, there was a rapid abrupt change in relative prices, high inflation in U.S. dollar terms, and an economic contraction [1][2]. According to the World Economic Outlook, Argentina GDP is expected to decline by more than 3% in 2024. However, data from the third quarter indicates that the economy has started to rebound [3][4].
In terms of foreign relations, Milei maintains a cautious and respectful relationship with the Biden administration, avoiding direct criticism of the Democrats while strongly supporting Trump. Regardless of whether it’s Biden or Trump, Milei’s administration is completely aligned with U.S. foreign policy, marking a 180-degree shift from the previous administration. Milei sought and established a friendship with Trump, which could yield benefits.
In 2018, following a financial crisis, Argentina received a loan from the International Monetary Fund (IMF) for $55 billion, of which $44 billion was disbursed. At that time, President Trump assisted in the approval of this credit, which exceeded pre-established quotas. Currently, Argentina and the IMF are negotiating a new agreement that could include fresh funds, which the administration could use to liberalize capital controls [5]. Milei’s administration has no qualms about negotiating with the IMF, as his fiscal objectives are much more aggressive, and he has demonstrated the ability to deliver results. However, challenges may arise due to differing perspectives on managing exchange rate policy.
Trump could pressure the IMF, through U.S. votes on the board, as he did in 2018, to provide more funds to Argentina or facilitate agreements in case of confrontations. This relationship could also be useful if Argentina faces financial turbulence, and Milei might even consider asking for assistance from the U.S. Treasury, similar to what Mexico did in 1994. With Trump controlling both chambers of Congress, this could be a possibility, although Argentina is not as important to the U.S. as Mexico.
On the surface, Trump and Milei seem ideologically aligned, but they diverge in their economic thinking. Both strongly criticize leftist economic ideas, but while Milei positions himself as a fundamentalist of free markets, Trump has shown strong support for tariffs.
This contradiction may not create significant drama, especially since Trump’s affinity for tariffs may be more of a tool for international policy rather than a means to change the economy.
Milei has expressed a desire to establish a free trade agreement with the U.S. [6] Despite differences in foreign trade perspectives, Trump could play a crucial role in facilitating or hindering this process. If such an agreement is achieved, it would be historic for Argentina and could potentially threaten the Mercosur (economic and political bloc formed by Argentina, Brazil, Paraguay, Uruguay, and Bolivia). However, trade agreements of this magnitude require extensive planning, negotiation, legislation and implementation, which usually take years.
Foreign investment is another factor that could enhance Argentina’s prospects, but it is arriving slowly and, for now, mostly in the form of announcements. The U.S. is not China in the sense that investments come from private companies rather than the state. While the U.S. could encourage American businesses to invest in Argentina, given the country’s track record, it is not on the radar of many investors. Trump could advise his friends to invest, but not much more than that. One potential ally for Milei is Elon Musk. Now a close friend of Trump, Musk could make significant investments in Argentina that might inspire others to follow suit.
Investment decisions are long-term choices. While Argentina seeks stability and the liberalization of capital controls, companies still struggle to repatriate profits. If Milei normalizes this process, there are no guarantees that the next administration won’t reverse these changes.
Milei’s main rival in the 2027 elections could be Axel Kicillof, the current governor of Buenos Aires, who holds vastly different economic views. For instance, while the national administration seeks to privatize, sell, or liquidate Aerolíneas Argentinas (the state-owned airline), Kicillof has stated that the Buenos Aires Province will not allow this [7] Even if Milei succeeds in establishing a market-friendly regulatory framework, he cannot guarantee the persistence of these conditions over time.
A risk in the relationship with Trump is Milei’s approach toward China. He has shifted from calling it a “communist dictatorship” to stating that relations with China are “excellent,” noting that the Chinese “only ask not to be disturbed.” [8][9] In July, Argentina’s central bank extended a currency swap with China for $5 billion. If China offers something substantial, will Milei be able to accept it without angering Trump?
Much of Argentina’s future depends on domestic developments and whether Milei’s plan transforms into a sustainable economic, political, and social framework. The foundations, a year into his government, are public finance control and low inflation—factors unrelated to Trump or to Milei’s positioning as a right-wing world leader. For a developing nation that desperately needs to grow at high rates and seeks macroeconomic stability, having a president with a good relationship with the leader of the world’s largest economy is a positive factor. It could help, but it will not necessarily be a game changer.
REFERENCES
[1] La Nación, Cinco variables claves que explican la economía del primer año de Milei, December 9, 2024.
[2] El Economista, Un año de Javier Milei: se perdieron 261.000 puestos de trabajo y el salario cayó 3,7%, December 9, 2024.
[3] International Monetary Fund, World Economic Outlook: Policy Pivot, Rising Threats, October 2024.
[4] Instituto Nacional de Estadísticas y Censos, Cuentas nacionales Vol. 8, n° 26, Informe de avance de nivel de actividad, Tercer Trimestre de 2024, December 16, 2024.
https://www.indec.gob.ar/uploads/informesdeprensa/pib_12_24BE4AAD8CFB.pdf
[5] La Nación, Milei se acerca al FMI y habilita un intervencionismo light, December 12, 2024
https://www.lanacion.com.ar/economia/milei-se-acerca-al-fmi-y-habilita-un-intervencionismo-light-nid12122024/
[6] Casa Rosada, Discurso del Presidente Javier Milei en cadena nacional por el año de gestión, December 10, 2024.
[7] Gobierno de la Provincia de Buenos Aires, Argentina, Kicillof: “Si intentan privatizar Aerolíneas, trabajaremos junto a las provincias y los trabajadores para evitar su desguace”, December 9, 2024.
[8] LaPolíticaOnline, Milei con Tucker Carlson: “No voy a hacer negocios con China y con ningún país comunista”, September 14, 2023.
https://www.lapoliticaonline.com/politica/miei-con-carlson-tucker-no-voy-a-hacer-negocios-con-china-y-con-ningun-pais-comunista/
[9] DW, Argentina: ahora Milei sí quiere negociar con China, Octobre 24, 2024.
https://www.dw.com/es/argentina-ahora-milei-sí-quiere-negociar-con-china/a-70593244.
