When Javier Milei was sworn in on December 10, 2023, Argentina was not merely a struggling economy. It was an economy exhausted by its own model. Annual inflation exceeded 200%, the national currency was systematically shunned by the public, and the fiscal deficit had become a structural constant. The state was spending beyond its means, and the gap was increasingly covered through monetary financing—fueling the very phenomenon authorities claimed they were trying to contain: inflation.
In this context, the term “miracle” should not be read as a rhetorical flourish, but as a description of the speed with which a seemingly entrenched trajectory was reversed. In his first year in office, Argentina shifted from chronic deficit to a primary budget surplus—a rare development in the country’s recent economic history, and all the more significant given a politically tense environment and a fragile economy.
The Inherited Economy: A System Living off Inflation
To understand the scale of the change, it is essential to start with the baseline. Under the administration of Alberto Fernández, Argentina operated under a regime of persistent deficit. Public spending had risen steadily, subsidies for energy and transportation had become close to universal, and the administrative apparatus had expanded beyond what the economy could sustainably support.
Financing the deficit through monetary expansion created a vicious cycle. The central bank intervened to support the budget, the money supply grew, and inflation accelerated. As prices climbed, the government responded with price controls and additional regulations—distorting markets and discouraging investment. The peso lost credibility, and de facto dollarization became the norm.
Before Milei’s inauguration, poverty rates exceeded 40%, the middle class was being steadily eroded by the loss of purchasing power, confidence in institutions was minimal, and access to external financing depended on repeated promises of reform that never materialized.
A Paradigm Shift
The change introduced by Milei was not merely a shift in degree, but in fundamentals. His diagnosis was that Argentina’s problem was not a lack of state intervention, but its excess. Inflation was no longer framed as an external or temporary shock, but as the predictable outcome of sustained fiscal and monetary expansion.
In the first months of his term, the new administration adopted a strategy of rapid adjustment. Public spending was reduced, numerous subsidies were eliminated or scaled back, and ministries were reorganized. Exchange-rate adjustments had an immediate impact on prices, but they also removed some of the distortions created by the previous system of multiple exchange rates.
The cumulative effect of these measures altered the fiscal dynamics. For the first time in many years, Argentina recorded a primary budget surplus. From a macroeconomic perspective, the result sent a clear signal: the era of permanent deficit had been interrupted.
Surplus as an Anchor of Credibility
In emerging economies with a history of instability, fiscal credibility is a scarce resource. The surplus achieved in the first year in office is not merely an accounting outcome; it is a message to financial markets and investors that the rules of the game have changed.
Budget stabilization helped moderate monetary pressures and enabled a relative consolidation of reserves. Although inflation remained high in annual terms, monthly inflation began to slow. Investor confidence improved, and risk premia on Argentine debt eased.
This evolution is not accidental. Argentina’s recent history—including the reform period of the 1990s under Carlos Menem—demonstrated that monetary stability without fiscal discipline is inherently fragile. The difference today is that surplus has become a central objective, not an incidental outcome.
Political Cost and Realism
The reform did not come without costs. Reductions in subsidies and public-sector restructuring generated protests and social tensions. It is, however, critical to underline that high poverty levels were not created by the new policies; they were accumulated over years of inflation and stagnation.
The prior model produced a constant and diffuse decline in living standards. The current adjustment has concentrated costs within a shorter interval, with the stated objective of restoring structural balance. The political choice was between slow deterioration and rapid correction.
Politically, Milei took the risk of direct confrontation with traditional power structures, including labor unions and segments of the administrative apparatus. The legislative package known as Ley Bases provided a framework for liberalizing and simplifying regulations in an economy historically characterized by rigidity.
Ideological Dimensions and Regional Impact
The fiscal success achieved in the first year extends beyond Argentina’s borders. In a region where economic populism has dominated entire cycles, rapid budget consolidation represents a significant departure. The model promoted by Milei is grounded in fiscal conservatism and a reduced role for the state in the economy.
If the current stabilization is maintained and translated into sustained growth, Argentina could become a case study for other economies facing similar challenges. At the same time, vulnerability to external shocks and domestic social pressures remains a factor that could shape both the pace and durability of reform.
The term “the miracle of Milei” is not an unfounded metaphor. In his first year in office, Argentina moved from chronic deficit to a primary budget surplus in an environment marked by runaway inflation and institutional distrust. The shift does not automatically guarantee prosperity, but it represents a clear break from the previous paradigm.
It remains to be seen whether the surplus will be consolidated over the medium term, and whether fiscal stabilization will translate into durable investment and sustained economic growth. What is certain is that Argentina no longer operates exclusively under the logic of permanent deficit—and that fact alone explains why the word “miracle” has entered the public debate.
