How Javier Milei led an economic revolution in Argentina

The histories of the UK and Argentina are closely linked, with the relationship often marked by irony. The staff bar at the British embassy in Buenos Aires (BA) is called The Hand of God, and Argentina’s president Javier Milei cites Margaret Thatcher as his hero. He claims that the British leader, responsible for the controversial sinking of the ARA General Belgrano during the 1982 Falklands War, has been inspirational to the economic revolution he initiated in 2023.

Indeed, on the issue of the Falklands, Milei has said that he sees a future where the Malvinenses vote with their feet to join Argentina’s future success. However, over the past year, that future seemed increasingly in peril as the “Milei Revolution” faltered, just as the UK most needed it as an inspirational route out of its stagnant economy trapped by government overreach. Despite a series of setbacks, Milei unexpectedly recovered to win the critical midterm elections. The 26 October midterms were the first national referendum on Milei’s painful but necessary economic shock therapy. After two years of deep spending cuts and fiscal adjustment, the vote was a critical test of the public’s willingness to endure hardship for the promise of political stability and economic growth.

It would either validate Milei’s radical mandate or signal the beginning of the end for his ambitious project. The unexpected outcome represented a stark repudiation of the consensus view. Following allegations of corruption targeting the president’s sister and general secretary, Karina, and disastrous provincial election results just six weeks earlier, it began to appear as if Argentina might once again snatch defeat from the jaws of victory. On 7 September, Milei’s La Libertad Avanza (LLA) party was trounced in the significant BA Province, leading to widespread speculation that Milei’s support was collapsing.

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How Javier Milei overturned the odds

However, just six weeks later on the national stage, the LLA roared back with a victory that shattered most expectations. The man with the chainsaw and a unique economic vision for his country had again overturned the odds. In the more significant national poll, the LLA secured 41% of the vote. Theories for the dramatic turnaround ranged from a galvanised anti-Peronist voter base following the provincial poll to an unproven but widely circulated claim in pro-Milei circles that a more secure national voting system had eliminated a million fraudulent provincial votes. Others accused the US of buying Milei’s victory with a strategically timed financial intervention in the days before the ballot.

Regardless, financial markets, which had braced for the worst and sold off after the September results, exploded. There followed a melt-up in the Argentine peso as investors priced in the new reality: Milei’s reform agenda had received widespread endorsement and a runway extension that could lead to an all-important second term. The currency leapt by more than 8% versus the dollar. Long-dated sovereign dollar bonds rose 20%; bank stocks rocketed, with the share price of Grupo Financiero Galicia, the country’s largest listed bank, gaining 130% from its mid-September low.

Although the LLA remained a minority force in both houses, the election shifted the balance of power. By more than doubling its representation, Milei’s party critically strengthened his political authority. Holding more than one-third of Congressional seats, the LLA can now prevent the opposition from mustering the two-thirds supermajority needed to override a presidential veto. As investors celebrated Milei’s strengthened political position, the real test is how the new arithmetic in Congress can translate market euphoria into tangible success. Despite reaching this key political milestone, the path to lasting economic recovery remains far from clear. Politics is always uncertain; Argentine politics is, by a factor, more so.

Milei's bold experiment

Argentinians have lived through a high-stakes experiment in fiscal discipline and deregulation. For investors looking on, there has been a remarkable macroeconomic stabilisation with plummeting inflation amid early signs of robust economic growth. However, for people on the ground, it has come at a profound cost, which they cannot endure indefinitely. The clock is ticking, but Milei has added valuable extra time. His success matters beyond Argentina.

Milei’s overarching achievement so far has been to strangle the hyperinflation that threatened to consume the nation in 2023. He inherited an economy on the brink of collapse, with an annualised inflation rate of 15,000%, a fiscal deficit equivalent to 15% of GDP, and no borrowing capacity. His response was immediate and uncompromising.

In the words of his British political hero, there was no alternative. Milei slashed public spending, cutting the number of government ministries by more than half and laying off tens of thousands of public workers. By March 2024, Argentina recorded its first fiscal surplus in a generation. The effect on prices was dramatic. Reported monthly inflation plummeted from 25% in December 2023 to just 2.4% by the time I visited BA in November 2024.

However, the cost of living in BA was not as cheap as you might expect; the peso had strengthened. Yet an early decree repealing stringent rent control laws had a swift impact on the housing market. Real rental prices fell by 30%, while supply tripled. My Airbnb, a newly built flat in a nice part of town, worked out to about £60 a night.

But ripping off policy plasters always has negative consequences, and the removal of long-standing subsidies for public transport and energy revealed the extent of Argentines’ dependency. A friend who has lived in BA for many years reported that his monthly electricity bill increased from $8 to $32 over a few months. Not too much of a problem for a British expat, but Argentina’s poverty rate, an absolute measure of survival, jumped to 57% – although it declined to 46% later in 2024 and to 32% in the first half of 2025.

Amid the fiscal contraction and economic restructuring, unemployment jumped to a four-year high of 8% in early 2025. But this measure only tells part of the picture. Significantly, informal measures of underemployment increased in Argentina’s vast grey economy, where over 40% of people work undocumented. Such indicators threatened to derail the entire project, creating an opportunity for Milei’s opponents in September’s provincial elections. Fighting inflation involved defending an overvalued peso, and this policy was costing Argentina an increasing share of its scarce currency reserves. Argentina’s financial position started to fray, and doubts about the Milei plan multiplied.

A lifeline from Donald Trump

It was at this point that the White House provided a critical financial backstop in the form of a US Treasury-backed $20 billion swap line, followed by a similarly sized, bank-financed package – stabilising market sentiment and granting Argentina access to scarce dollars.

The prime motive for any refinancing is open to interpretation. One person’s bailout is another man’s prudent liquidity boost to tide things over to secure growth. Donald Trump’s peso intervention was no exception: US Treasury secretary Scott Bessent indicated that underwriting Argentina’s access to dollar reserves was a rational act that protected America’s share of the International Monetary Fund’s outstanding $45 billion loan to Argentina. He went on TV to claim the US had made a profit on the trade. As a former global hedge fund manager, he found it difficult to hide his satisfied grin.

However, whether financially savvy or not, with the US Department of State currently re-enacting the 1823 Monroe Doctrine in Venezuela, support for Argentina is as strategically sensible as it is economically rational. With the world fracturing into key spheres of influence, Argentina’s alternative was to increase its exposure to China’s Belt and Road initiative for the long-term prize: access to Argentina’s vast, untapped natural resources, including shale oil, rare earth elements and its significant agricultural output.

Despite a backlash from the US farming lobby, which claimed that Argentina’s farmers were receiving better treatment from Trump than American soybean growers and cattle ranchers, the US administration’s support for Milei was ultimately strategically vital. Expectations are that Milei will undertake a reset of his policy agenda and delivery. Critically, Milei plans to push labour, pension and tax reforms. The government argues that more flexible labour laws would make it easier for companies to put informal workers on the books, granting them access to benefits and increasing pension payments. But such measures will undoubtedly provoke further union opposition and strike action, which in Argentina often extends to political violence. The struggle for the Milei Revolution is not over.

Furthermore, alongside his full agenda of domestic reforms, Milei must also address his key external problem: the peso. In particular, he must morph his managed peso bands into a more fully fledged floating exchange rate. If anything signifies the success of the Milei Revolution, it is his ability to land this hard-to-control plane in a world of economic turbulence.

Once in the category of currencies reserved for the Zimbabwean dollar and the Venezuelan bolívar, the Argentine peso would, by standing unaided in the global currency market, signal Argentina’s final recovery like nothing else. This landmark achievement is a prerequisite for Milei to return Argentina to the ranks of the world’s top economies.

And why does this matter to the UK? The UK’s out-of-control fiscal position and government overreach are taking us towards the same ultimate endgame that Argentina has experienced over decades. The particulars of our economies and politics differ; however, the UK is currently on a path that, sooner or later, makes a Milei-style reset unavoidable.

How far down this ruinous road must the UK travel before voters can handle such hard truths? And who will deliver this message to an electorate that chooses not to listen? It has taken 80 years of Peronist dysfunction for Argentina to reach its point of no alternative. The lesson from the Argentine experience is that the longer it’s left, the more painful the required adjustments will be. Even now, for Argentinians, the path remains uncertain – and is still painful. But with Milei, they have a man honest enough to tell them the truth and survive. The UK might not be so fortunate.

Jeremy McKeown is market strategist at Dowgate Wealth and writes the blog HyperNormalTimes on Substack.

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