President Javier Milei’s budget proposal for 2025, having failed to get approved by Congress, has led to his unprecedented decree on December 30, 2024 that the 2023 national budget which passed in Congress in late 2022 will be extended—for the second time—into 2025.
The extension allows the government to allocate additional funds at its discretion throughout the year, prioritizing certain areas while leaving others with stagnant budgets from 2023, approved under former President Alberto Fernández.
The proposed 2025 budget never even made it to the Lower House for a vote, as the government stood firm against amending the bill to accommodate the demands of allied governors who sought increased funding for their provinces.
Argentina’s annual budget is typically revised multiple times a year to address inflationary pressures. However, in 2024, while implementing certain economic reforms, President Milei provided minimal or no increases to key areas such as public universities and the innovation, science, and technology secretariat—an area that had been downgraded from a ministry. This approach of Milei has resulted in widespread poverty, despite improving economic indicators.
In the bustling streets of Buenos Aires, the signs of economic distress are unmistakable. Late at night, a young family scavenges through dumpsters for discarded food, while homeless couples seek refuge in subway stations, their makeshift shelters crafted from cardboard, as reported by The Guardian. In the city's sprawling slums, called villas miseria, children queue for meager meals provided by overburdened charities.
This reflects the profound challenges facing Argentina's most vulnerable populations, even as the economy exits a recession. Under President Milei's administration, a series of stringent cutting down of spending, referred to as austerity measures—dubbed the "chainsaw" campaign—have been implemented with the aim of restoring fiscal balance and revitalizing the economy.
President Milei, during his election campaigns, brandished a chainsaw to drive home the message of slashing government expenditure. The chainsaw has become a key symbol in his political rhetoric, mirrored in a recent social media post where he stood behind a golden chainsaw with his cabinet to reiterate his resolution from the rallies. This approach has helped him rise to greater prominence as the promise signalled hope to a populace anticipating hyperinflation, a likely consequence of unsustainable money printing to pay for government deficits.
The chainsaw campaign has seen public spending be drastically reduced, by 30% relative to 2023 as reported by Al Jazeera, subsidies for energy and transport eliminated, and according to CNN, over 30,000 government employees were laid off.
The number of ministries has been more than halved from 18 to 8, public infrastructure projects virtually stopped, almost all subsidies to local government halted and public sector wages and pensions wages kept constant driving down real value.
With nearly all public works brought to a standstill, Jessica Tocomas’s husband faced difficulties finding construction jobs for the first time in two decades, she shared with The Guardian, highlighting the precarious situation, “It’s been a really hard year. Everything’s up – the food, the buses, the bills – but the salaries are the same.”
Although the campaign has seen Argentina exit a severe recession, it has hit the poor hard.
Statistics reported by The Guardian show that in the first half of 2024, nearly 53% of Argentina's 45 million residents were living in poverty—a two-decade high—compared to 41.7% in the latter half of 2023. Approximately 18% of the population faces extreme poverty, while over six in ten children under the age of 14 are below the poverty line.
In the words of Laila Gomez from Barrio Mugica, an impoverished community that previously stood in support of Milei, in conversation with The Guardian, “The subsidies for gas have been cut, and food prices have increased rapidly. I’ve had to stop eating meat completely, and cut down on the number of meals. Every time I go to the shops I buy less and less.”
Meanwhile, the economic indicators present a more complex picture. In the third quarter of 2024, Argentina's economy expanded by 3.9% compared to the previous quarter, marking the first such growth since entering a technical recession in late 2023, as reported by Reuters.
But on an annual basis, the GDP contracted by 2.1%, signaling the sixth consecutive quarter of decline. While these figures suggest a tentative recovery, the benefits have yet to reach the nation's impoverished communities.
Inflation, a persistent scourge for Argentina, has shown signs of abating. Monthly inflation rates have decreased from 25.5% in December 2023 when Milei took office to 2.7% in October 2024, as reported by CNN. However, the ground realities reflect a dissonant picture with the general populace’s situation to be deteriorating. For example, Gomez’s rent for her one-room home went from 15,000 pesos in December last year to 100,000 this December.
According to Reuters, the annual inflation rate has fallen to 166% but poverty rates exceed 50% and the cost of living remains prohibitively high for many. The austerity measures, while achieving a fiscal surplus for the first time in over a decade, have led to increased unemployment and further strained social safety nets.
While the Milei administration has resulted in worsening living conditions for the everyday Argentinian, the president continues to enjoy the support of many citizens due to overall improved fiscal and financial indicators. As reported by Al Jazeera, pollster Poliarquia states that Milei’s first year as president ended in December 2024 with a 56% approval rate.
Milei’s aggressive cost-cutting measures have yielded notable successes. His administration has achieved a fiscal surplus every month since January 2024, a rare feat in recent Argentine history, while reducing government spending by 30% compared to the previous year as reported by Al Jazeera. Inflation, according to the same source, until recently the highest globally at 211% annually in 2023, has dropped to just 2.4% monthly as of November—the lowest in over four years.
The central bank has also begun replenishing foreign currency reserves in the billions, aided by a tighter monetary regime and a tax amnesty program. Under the program in its first stage, Argentines could bring their foreign currency savings back into the system, with tax-free deposits allowed for amounts up to $100,000. This has given a boost to local banking and pulled dollars into the formal economy.
Additionally, Argentina’s country-risk index, an indication of investor confidence in the economy’s sovereign debt, has fallen from 2,000 in late 2023 to 750 in December 2024, the country’s lowest in five years, according to Al Jazeera. The Merval stock index, meanwhile, has surged nearly 140% in 2024, as reported by CNN. These significant improvements have worked to substantially boost confidence of investors in the Argentine economy.
However, some uncertainty remains despite government efforts to attract foreign investment, including incentives and tax breaks that could bring in up to $50 billion, according to CNN. Both capital controls, which limit foreign currency flow internationally, and an overvalued peso continue to raise concerns, with economists warning that the currency’s overvaluation undermines export competitiveness and long-term growth.
Many investors are hesitant to commit until there is clearer evidence of sustained economic stability and progress on reforms.
President Milei, a libertarian economist and political outsider, rose to prominence with promises to dismantle the "political caste" and implement radical free-market reforms. His administration has garnered support from international figures such as former U.S. President Donald Trump, who has expressed his belief in Milei’s ability to “make Argentina great again," as reported by BBC.
The Argentine president is also pushing for the privatization of several state-owned enterprises. This includes the state’s airline Aerolíneas Argentinas, which was previously privatized but renationalized in 2008—despite significant pushback.
The flagship state airline has laid off 13% of its staff as reported by Reuters in January 2025, among other efforts to trim down, and seeks to function more like a private airline already to attract private investment.
These drastic measures have drawn praise from Elon Musk, who leads the advisory body of the ‘Department of Government Efficiency’ alongside Vivek Ramaswamy. Musk, inspired by Milei’s aggressive cost-cutting approach, aims to replicate similar strategies in the U.S., including massive federal spending cuts, regulatory rollbacks, and agency closures. However, the economic contexts of the two countries differ vastly, with Argentina having been mired in bloated spending and fiscal mismanagement.
Argentina's foreign policy is perhaps even undergoing a significant shift under Milei, with a pivot toward stronger U.S. ties and a rejection of BRICS+ membership. This marks a departure from the more China-aligned stance of the Fernández administration, which deepened Sino-Argentine relations through initiatives like the Belt and Road Initiative and financial support from Beijing.
Milei's administration on the other hand seems to align more with the U.S., with potential seen in their collaboration in clean energy, space exploration, and battling illegal, unreported, and unregulated (IUU) fishing.
During his campaigning days, Milei announced he would not “make deals with communists” in China (or Brazil) as reported by AP News. However, the fragile economic landscape and lingering ties with China may pose challenges to fully realigning Argentina's geopolitical orientation.
Meanwhile, Argentina’s recent monumental free trade agreement with the EU alongside three other states from South America in the Mercosur trade alliance is expected to boost Argentine beef and agricultural exports, proving greatly beneficial to the producers and the economy if or once ratified. This is also in agreement with Milei’s free market principles.
Looking ahead, President Milei seeks to march on with a “deep chainsaw” which entails a deepening of labor and social security reforms, privatization, deregulations and an overall shrinking of the state size.
Critics argue that while fiscal responsibility is essential, the rapid implementation of austerity measures has exacerbated social inequalities. Without adequate social protections, the long-term sustainability of such economic reforms may be compromised. Argentina’s path to sustainable recovery will necessitate a delicate balance between fiscal discipline and social welfare, ensuring that the nation's economic resurgence does not leave its most vulnerable citizens behind.
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Keywords:
2025 Budget Proposal, Chainsaw Campaign Impact, Fiscal Surplus in Argentina, Mercosur-EU Trade Agreement, Poverty Crisis in Argentina, Hyperinflation Recovery, Rising Inequality in Argentina, Milei Privatization Push, Inflation Drop 2024, Argentina Economic Crisis, Public Spending Cuts, Argentina Layoffs, Free Market in Argentina, Stock Market Surge, Soaring Poverty.
