Milei Chainsaw Nets Argentina First Surplus in Over a Decade

President Javier Milei made good on his promise to deliver a fiscal surplus in his first year, achieving a feat not seen in over a decade in Argentina’s deficit-prone economy.

Author of the article:

Bloomberg News

Manuela Tobias

Published Jan 17, 2025  •  2 minute read

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(Bloomberg) — President Javier Milei made good on his promise to deliver a fiscal surplus in his first year, achieving a feat not seen in over a decade in Argentina’s deficit-prone economy.

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“Today’s fiscal result must be understood as a landmark in our history,” Economy Minister Luis Caputo posted on X. “There is no more deficit in Argentina.”

South America’s second-largest economy posted a surplus equivalent to 1.8% of gross domestic product, and 0.3% after accounting for interest payments in 2024, according to Caputo. The last time the country achieved such a feat was during the country’s commodities boom.

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Since taking office just over a year ago, Milei halted nearly all public works and transfers to the nation’s provinces, slashed pension expenditures and public salaries, weaned the country off generous energy and transport subsidies and hacked away at more than 30,000 government jobs. Milei achieved the drastic cuts with slim minorities in both houses of Congress and even vetoed two bills passed by wide margins that would have increased spending on pensions and higher education last year.

“Despite the political pushback, they’ve maintained their credibility by doing the tough choices on fiscal. So that’s their ace in their hands,” said Stuart Sclater-Booth, a portfolio Manager for emerging-market debt at Stone Harbor Investment Partners.

Milei boasted of his commitment to austerity throughout the presidential election while often brandishing a chainsaw, but most surprising has been Argentines’ resolute support for him in spite of the brutal measures. The libertarian’s approval rating remained near 50% in December, according to LatAm Pulse, a survey conducted by AtlasIntel for Bloomberg News, and optimism about the economy’s future continues to grow.

Thanks in large parts to his budget cuts and ensuing macroeconomic stability, Milei was able to bring down annual inflation from near 300% to 118% in December. While his shock therapy deepened a recession in the first half of the year, Argentina’s economy grew in the third quarter. The International Monetary Fund expects Argentina to grow 5% in 2025.

—With assistance from Kevin Simauchi.

(Adds chart and investor quote in fifth paragraph.)

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