Economic Performance Under Milei
- In the first two years of President Milei’s administration, Argentina recorded 6.6% GDP growth from December 2023 to December 2024 and 3.5% growth the following year despite political turbulence.
- The economy is now on track for approximately 1% quarterly growth, potentially delivering 20% cumulative expansion by the end of Milei’s first term after 15 years of stagnation.
- 400,000 new jobs were created while labor force participation rose and unemployment fell, consistent with 200,000 annual new labor market entrants.
- Inflation and poverty rates have declined as direct results of fiscal consolidation and reduced monetary emission.
The Case for Anticipated Stabilization
- Drawing from his doctoral work on “Delayed Stabilization,” Sturzenegger explains that traditional theory assumed stabilizations were postponed because they were costly.
- Milei and Economy Minister Caputo demonstrated the opposite: stabilization delivers immediate benefits by cutting public spending, lowering the tax burden, and eliminating the need for money printing.
- This approach not only reduced inflation and poverty but proved politically robust, delivering a landslide victory in October’s elections.
- The administration has shown that stabilization should be pursued early rather than delayed.
Deregulation Philosophy: Elimination Over Simplification
- Economic freedom rests on three pillars: fiscal solidity, deregulation, and strong property rights; weak public finances or excessive regulation inevitably erode property rights.
- Milei’s directive is clear: never simplify a regulation before first asking whether it should exist at all.
- Most regulations are not designed by benevolent central planners but by interested parties seeking to create privileges and rents using state power.
- The government has eliminated 65,000 public positions—20% of central administration and state-owned enterprises—without any measurable decline in service quality, revealing massive prior inefficiency.
Breaking the Bermuda Triangle of Blocking Agents
- Argentina remained trapped in a status-quo society dominated by three blocking agents: powerful unions, crony capitalists, and the Peronist Party.
- Sustainability of reforms requires weakening these agents rather than hoping for voluntary change.
- The single-paper ballot law dramatically reduced electoral fraud, cutting the Peronist Party’s structural electoral power, as evidenced by unexpected defeats in former strongholds.
- Labor reform prioritizing firm-level bargaining over national union agreements undermines union power over time.
- Opening the economy, removing barriers, and fostering competition erode the economic rents that sustain crony capitalism.
- These political-economy effects complement the technical benefits of deregulation and explain why reforms are more sustainable than previous attempts.
Striking Examples of Regulatory Absurdity and Results
- Satellite internet was banned until Milei’s tenth day in office; today nearly three million Argentines, especially in remote areas, use Starlink with zero fiscal cost and improved national connectivity.
- Elimination of rental controls—based on the false premise that tenants are systematically weaker than landlords—led to a 30% drop in rental prices.
- The yerba mate regulatory board, which had turned a competitive industry into a de facto monopoly, was dismantled; prices halved, production reached records, and exports boomed after decades of stagnation.
- Small-aircraft airline deregulation enabled 1.2 million passengers to fly commercially from towns previously unreachable by air.
- Bitren trucks cut logistics costs by 40%; importation of used capital goods now allows companies to acquire equipment at one-sixth to one-tenth previous prices.
- Fruit export regulations were reduced from 2.5 kg to 50 grams of paperwork, enabling the first watermelon exports from Chaco to Uruguay after a decade of bureaucratic blockage.
Property Rights, Intellectual Property, and Innovation
- Strong property rights are foundational; their absence prevents Argentines from benefiting from their own innovations.
- Brazilian farmers triple soybean yields using Argentine-developed seeds that cannot be sold domestically due to missing IP protection.
- Similar productivity gaps exist in cotton and other crops; joining the Patent Cooperation Treaty (PCT) and reforming seed laws will allow global patenting and domestic commercialization.
- CONICET scientists currently must patent abroad at high cost; domestic patents offer no global protection, discouraging innovation.
- These changes, alongside broader deregulation, are expected to be the most significant boost to Argentina’s scientific and technological sector in 50 years.
Resistance from the Status Quo and Bureaucracy
- The most surprising obstacle has been the fierce resistance of vested interests even after losing regulatory rents worth billions.
- Some world-class Argentine entrepreneurs have been slow to embrace competition, preferring protected domestic markets over global integration.
- Bureaucracy repeatedly recreates barriers; one example involved a legally sanctioned bribery scheme for truck certification that was eliminated only to reappear through unofficial channels.
- Deregulation itself is the most effective anti-corruption policy because it removes the regulatory roots of rent-seeking and bribery.
- President Milei’s immediate public support via social media neutralizes opposition campaigns and allows the deregulation team to advance relentlessly.
Milei’s Leadership and Long-Term Sustainability
- The cultural battle for freedom ideas has shifted public opinion, especially among those under 35 who give Milei 75% support.
- Two million Argentines emigrated in the decade before Milei, creating widespread recognition that only radical change could reverse decline.
- Milei acts as an effective CEO: he empowers ministers, maintains clear red lines (especially against higher spending), and clears political obstacles so the team can execute.
- By dismantling the legal architecture of privileges established in the late 1960s and diluting the power of blocking agents, the reforms aim to make liberalization irreversible.
- The ultimate goal is not for government to create prosperity but to remove itself from the way so that free Argentines can generate extraordinary results.
Conclusion: The Ministry of Happiness
- All these efforts support fiscal stability and lower inflation by attacking the structural causes of high prices and economic sclerosis.
- The reforms reflect a coherent philosophy: reduce state interference, protect genuine property rights, and let individuals create value