19-07-2025
It's time the world woke up and noticed the Argentinian miracle
Okay, it is still only on a par with Egypt and Suriname. But the credit ratings agency Moody's this week gave Argentina its second upgrade since its radical libertarian president Javier Milei took power.
It is yet more evidence of the dramatic improvement in the country's fortunes. Growth has accelerated, inflation is coming under control, rents are falling and its debts are steadily becoming more manageable.
The dire warnings from the economic establishment that Milei's bold experiment in slashing the burden of the state have been proved woefully wide of the mark.
The only question now is this: when will the rest of the world wake up to the Argentinian miracle?
While France scraps bank holidays to keep the bond markets happy, while the Chancellor Rachel Reeves struggles to fill the latest 'black hole' in the nation's books, and while even the United States bond market frets about the independence of the Federal Reserve, one country – and a very unlikely one as well – is getting upgraded.
Moody's this week bumped up Argentina, a nation that for 50 years has been characterised by bailouts and mismanagement, from Caa3 to Caa1. It cited 'the extensive liberalisation of exchange and (to a lesser extent) capital controls' for the improving outlook.
Sure, it is still technically rated as 'junk' – after all, this is a country with nine debt defaults, including the largest in IMF history, over the last 200 years. But the direction of travel is clearly right.
That is just one indicator among many. The economy overall is expected to expand by 5.7pc this year despite the huge cuts to public spending and the 'chainsaw' applied to government employment by the president.
Inflation came down to a monthly rate of 1.6pc last month, which may not exactly count as Swiss-style stability, but is a lot lower than the 200pc-plus it was running at when Milei took office.
The IMF has rolled over the massive loan it extended to the country under the previous administration. Rents, a major problem with housing unaffordable to many people, have fallen by 40pc over the last year after the government scrapped all rent controls, bringing a flood of properties on to the market.
Bond prices are rising, with the government able to borrow money on the global markets again.
Sure, there are plenty of challenges ahead. Poverty is widespread, and there are still relatively few new industries, although its shale oil and gas sector is starting to boom, with Vista Energy reporting a 57pc increase in output this year, and forecasting it will double over the next 24 months.
One point is surely clear, however: in the 18 months since Milei took office, Argentina's economy has been transformed.
It has been achieved by radically slashing the size of the state. Promising a 'shock therapy' for the economy, the government has laid off more than 50,000 public sector workers, closed or merged more than 100 state departments and agencies, frozen public infrastructure projects, cut energy and transport subsidies, and even returned the state budget to a surplus.
Milei has not followed through on all his promises. Argentina has not switched to the dollar as its official currency, as he pledged it would, and doesn't look likely to any time soon (although come to think of it, on current trends its peso may be a better bet than the American currency).
But he has gone further and faster in deregulating the economy than any politician in modern times.
The improvements in its performance are a stark contrast to the catastrophe that was forecast, and probably quietly hoped for, by a majority of the Left-leaning economic establishment.
On taking office, 103 prominent economists, including France's Thomas Piketty, wrote a public letter warning that 'apparently simple solutions may be appealing, they are likely to cause more devastation in the real world'. It hasn't happened. Instead, Argentina is steadily recovering from decades of mismanagement.
The real question is this: when will the rest of the world wake up and notice?
The bulk of the policy-making and financial establishment still inhabits a mental universe where government spending is what drives growth, where regulation is seen as the key to innovation, where 'national champions' are expected to lead new industries, while industrial strategies will pick the winners of the future, and the only role for the private sector is a 'partner' for the finance ministry.
We see that in the UK, with the National Wealth Fund getting billions in funding even though no one knows what it will actually do, and with GB Energy getting even more for the green transition.
We see it across the European Union, with endless regulations that are bizarrely designed to promote competitiveness, and with the Commission in Brussels only this week proposing a turnover tax on every business of any significant size within the bloc.
We even see it in the US, with Donald Trump, hardly an economic liberal, imposing tariffs to try to reshape the economy instead of leaving it to the market to decide where companies should invest.
And we see it most of all in China, with industries from autos to aerospace to artificial intelligence receiving huge state support to conquer the world.
Argentina under Javier Milei is the only major country taking a different path. Perhaps because subsidies, controls and protectionism have turned it into a basket-case, it was ready to try the alternative.
The results are now clear. In reality, open, free markets and a smaller state are the only way to restore growth, and Milei is proving it all over again.
