How sustainable is Javier Milei’s economic strategy for Argentina, and is it truly paving the way to 0% inflation or just creating new challenges? Is Milei’s drive to 0% inflation driving his country nowhere? 

  As any Argentinian will tell you, capital controls – restrictions on foreign currency transactions (cepos) – are normal. As we reach the premier Milei’s first birthday in office, the libertarian anarchy all seems somewhat familiar.  

 Milei’s achievements in a country of social discordia can be clearly seen. Statistical inflation has fallen to materially calmer levels. His emergency decree and omnibus law (ley bases) has reduced the national budget by reducing the size and wages of the public sector, removing social benefits and subsidies, and pausing almost all public infrastructure projects. All undertaken with the soundbite ‘no hay plata’ (“there is no money”). July’s foreign direct investment promotion and incentive system has dropped Argentina’s perceived investment risk on international markets to almost the level of the positive years of the more moderate leader Mauricio Macri.  

However, when speaking at the NYSE in September, Milei expressly stated that cepos could not be lifted until inflation had fallen to 0% – a target neither the Fed nor the ECB pursue. The liberalization of tenancy laws has tripled the rent for many, GDP is expected to fall by close to 4% this year, signalling a severe recession, and the official unemployment rate sits at 8% (likely closer to 20% if you include the informal wage sector). With the ongoing capital controls looking set to stay for at least the medium term, and the overvaluation of the Argentine Peso showing no signs of abating, wealthy Argentinians continue the tradition of investing hundreds of billions of US Dollars offshore, either in neighbouring Uruguay or longer-term structuring in the Caribbean. 

Budgetary discipline is a key prerequisite for IMF debt restructuring. However, at some point you must pay the bill. As Milei asks for contributions to service the IMF debt, the response from many that live in Argentina, and those that have smartly invested offshore, may well be a shrug of the shoulders and ‘no hay plata’.