The Argentina economy in 2024, was is something that the whole world watched and continues to watch the consequences of. Some economists say there are 4 types of economies: developed economies, developing economies, the Japanese economy, and the Argentine economy. The reason Japan and Argentina have their own categories is that for decades, they have operated outside of the norms for what is considered normal economic management. 2024 was one of the most monumental years in Argentinian economic history, and 2025 should be another consequential year. So why was 2024 so important, and why do the policies of Javier Milei differ so much from their predecessors? And what do these reforms mean for 2025? Let’s break down why 2024 was such a crucial year for the Argentine economy and what the subsequent years might have in store.e.
What happened to the Argentina economy in 2024?
2024 marked the most ambitious reset of Argentina’s economic system in decades. Milei inherited a nation grappling with near-hyperinflation, currency controls, and waning investor confidence.
Milei’s 3-part economic plan
- Fiscal consolidation to eliminate the primary deficit
- Currency devaluation to restore competitiveness
- Deregulation to attract private capital and stimulate exports
While painful in the short term, the reforms restored some macro stability and signaled to markets that Argentina is serious about re-entering the global economic order.
Understanding Argentina’s recent economic history
To understand why 2024 mattered, it’s super important to understand Argentina’s volatile historical relationship with debt, currency regimes, and market liberalization. The country has been going up and down in a cycle of boom and bust, really since the Peronist reforms and nationalization of the 1930s. However, it’s important to understand the most recent history of Argentina to get a good idea of where the economy was beforehand and how the policies of 2024 impact it.
2001 IMF devaluation
By the late 1990s, Argentina was locked into a rigid 1:1 peg between the peso and the U.S. dollar, a system known as the convertibility plan. While initially successful in curbing hyperinflation, the peg became unsustainable amid deflation, a rigid labor market, and external shocks like the Brazilian devaluation in 1999.
In 2001, the economic model collapsed. Argentina defaulted on $93 billion in sovereign debt, the largest default in modern history at the time, and abandoned the dollar peg. Capital flight accelerated, the banking system froze, and GDP contracted sharply. The IMF’s role during this crisis led to long-term skepticism toward multilateral institutions among Argentine policymakers and the public.
2001 onwards
In 2001, Nestor Kirchner was able to negotiate a deal with the IMF, that made them take almost a 70% discount on their existing debt holdings. This not only made Nestor Kirchner a star, springboarding the Kirchner dynasty that lasted decades, but also resulted in wiping Argentina’s debt slate clean relatively clean. That laid the table for a subsequent economic boom. Successive administrations pursued an import-substitution model characterized by capital controls, state-led industrial policy, and rising public subsidies. Nationalizations (such as YPF in 2012), price freezes, and export taxes became key tools of macroeconomic management.
2018 debt crisis (Macri administration)
In 2015, President Mauricio Macri campaigned on reintegrating Argentina into the global financial system. He lifted capital controls, floated the peso, and sought to normalize relations with investors. However, market optimism was short-lived. Persistent fiscal deficits, inflation, and a growing current account imbalance eroded investor confidence by 2018.
In June of that year, Macri’s government reached a $50 billion Stand-By Arrangement (SBA) with the IMF, later increased to $57 billion, the largest in the institution’s history. The goal was to stabilize the economy through fiscal consolidation and inflation targeting. But the program faced political and market turbulence. Capital fled, the peso depreciated sharply, and interest rates soared. Only four of the twelve IMF reviews were completed. The agreement became politically toxic and was suspended in 2019, as Argentina returned to capital controls and monetary financing. The failed IMF deal cast a long shadow over future reform attempts, contributing to skepticism that swept Javier Milei into office on a platform of “anarcho-capitalism’ and, promising a major reform of state involvement in the economy.
2024: Milea’s changes and beyond
When Javier Milei took office in December 2023, his mandate was clear: dismantle the old system, restore confidence, and stop the fiscal bleeding. A libertarian economist and outspoken media figure, Milei campaigned on bold reforms, promising to “chainsaw” Argentina’s bloated state and end decades of economic mismanagement. In 2024, Milei pushed for shock therapy, slashing subsidies, devaluing the peso, removing price controls, and openly proposing full dollarization. Investors immediately took notice: Argentina is undergoing a major structural reset.
Milei’s first 100 days set a new tone for Argentina’s economic trajectory, one that markets are now evaluating with cautious optimism.
1. Fiscal reform: Return to primary surplus
One of Milei’s first major moves was an aggressive fiscal adjustment aimed at eliminating Argentina’s chronic primary deficit. His administration implemented deep cuts to public spending, including energy and transport subsidies, and suspended infrastructure projects that lacked private funding.
The goal was clear: stop financing deficits through central bank money printing, a major driver of Argentina’s inflation spiral. By early 2025, Argentina had recorded a primary fiscal surplus of approximately $575 million, a significant turnaround from a deficit the month prior. This shift signaled to markets that fiscal discipline was no longer theoretical. While the political cost is yet to be seen, the rapid fiscal adjustment laid the groundwork for restoring macroeconomic order and rebuilding credibility with creditors and institutional investors.
2. Currency realignment: Peso devaluation
In one of its boldest early moves, the Milei administration allowed a sharp devaluation of the official exchange rate in December 2023. The Argentine peso was adjusted from 365 to 800 per U.S. dollar, more than a 50% drop overnight. The goal: eliminate years of artificial overvaluation, restore competitiveness for exporters, and begin closing the massive gap between the official rate and the parallel “blue-chip” swap rate used in financial markets.
By reducing the misalignment, the Central Bank created clearer pricing signals for investors and exporters, while reducing pressure on foreign reserves. While the devaluation triggered a short-term inflationary shock, it also restored credibility in Argentina’s willingness to confront distortions head-on, an important signal to currency and fixed-income investors.
3. Deregulation and free pricing
In tandem with currency liberalization, the Milei administration began a sweeping effort to deregulate domestic markets. Price controls on food, fuel, transportation, and public utilities were lifted, many of which had been in place for years as a way to artificially contain inflation. For investors, this deregulation marked a structural shift away from interventionist policy toward a rules-based, market-friendly framework that had been missing from Argentina’s economy for over a decade.
What happened in 2024 that will encourage investment?
Investors want one thing above all: a stable environment in which to invest and obtain a profit while easily being able to facilitate capital extraction once you turn a profit. In 2024, Argentina, long viewed as a high-risk frontier economy, made measurable progress on all three fronts.
The Milei administration’s aggressive reform push sent a clear message to global markets: Argentina is ready to re-engage. While many reforms are still in their early stages, the signals so far have been strong enough to prompt a notable shift in investor sentiment. But how do we know there is a shift and what exactly it entails? Below are some data points to consider.
Rising confidence in sovereign bonds
Argentina’s restructured sovereign bonds, once trading at distressed levels, rallied in early 2024. The restoration of a primary fiscal surplus and renewed engagement with the International Monetary Fund (IMF) helped reduce risk premiums.Bond yields, which had spiked during periods of monetary financing and fiscal instability, began to retreat across key maturities, suggesting a growing belief in Argentina’s return to fiscal orthodoxy.
| Bond | Yield (Dec 2023) | Yield (March 2024) | Change |
|---|---|---|---|
| Bonar 2030 | 26.3% | 20.1% | -6.2 pts |
| Global 2041 | 24.8% | 18.9% | -5.9 pts |
This rally reflects more than just a technical bounce, it’s a signal that Argentina’s reforms are being priced in. Investors are beginning to reassess sovereign risk, especially if inflation continues to slow and IMF relations remain constructive.
MERVAL rally and sectoral optimism
The Buenos Aires stock exchange’s benchmark index, MERVAL, posted strong gains in Q1 2024, outperforming most Latin American peers. Investor enthusiasm was especially pronounced in sectors poised to benefit from deregulation and normalization:
- Energy: Subsidy reductions and free pricing mechanisms reopened profit margins and revived capital expenditure plans.
- Banking: As inflation expectations fell and the peso stabilized, local banks saw improving asset quality and better net interest margins.
- Agriculture: One of Argentina’s most competitive sectors, agriculture gained from the liberalized currency regime and improved export conditions.
Foreign investors also began to revisit Argentina’s ADRs (American Depositary Receipts), which had traded at deep discounts. The re-rating of select companies reflects expectations that deregulation and a favorable export climate could lead to earnings upside.
Argentina’s economy in 2025
As 2025 unfolds, Argentina enters a critical phase in its economic reset. With the initial shock of Milei’s reforms behind it, the focus now shifts to stabilization: bringing inflation under control, sustaining fiscal discipline, and unlocking the flow of capital back into the country. Early indicators suggest cautious optimism, but structural risks remain on the radar.
Inflation normalization on the horizon
Inflation in Argentina is projected to decelerate in 2025, marking a departure from the hyperinflationary environment of previous years. The International Monetary Fund (IMF) estimates an average inflation rate of 62.7% for the year. This represents a substantial decrease from the 140% inflation rate recorded in 2024. The moderation in inflation is attributed to stringent fiscal policies, including significant reductions in public spending and subsidies, aimed at curbing monetary expansion.
Capital inflows returning cautiously
Argentina’s capital and financial account recorded a surplus of $1.19 billion in the third quarter of 2024, indicating a cautious return of capital inflows. This positive shift is largely attributed to the government’s commitment to fiscal discipline and structural reforms, which have bolstered investor confidence. The administration’s adherence to IMF benchmarks and efforts to stabilize the economy have been pivotal in attracting both portfolio investments and foreign direct investment (FDI). While FDI remains below historical peaks, the upward trend suggests a gradual restoration of investor trust. Continued implementation of pro-market policies and transparent economic governance is expected to further enhance Argentina’s appeal to international investors.
Is there anything in 2025 that could adversely affect the economy?
There are still headwinds facing the Argentine economy in 2025, even with the progress gained in 2024. Milei still governs without a majority in Congress. While his early momentum has been strong, reform fatigue could set in, especially if political opposition consolidates. Investors may begin to price in delays or dilution of more ambitious measures like tax reform, labor flexibility, or further privatizations. Currency pressures are also a concern. While dollarization remains a longer-term goal, Argentina’s central bank reserves are still thin by international standards. A stronger dollar or a commodity slowdown could test external buffers and reopen conversations about capital controls, even if only temporarily.
There is also the risk of something called inflation inertia. If fiscal consolidation weakens or the government backtracks on utility price liberalization, inflation expectations could re-anchor above target, undermining both monetary credibility and real returns for bondholders.
Here’s a look at the main macro risks on the 2025 radar:
| Risk Factor | Likelihood | Impact |
|---|---|---|
| Legislative gridlock | Medium | Moderate – With no congressional majority, key structural reforms (labor, tax, privatization) may face delays or require dilution, slowing momentum. |
| Capital controls reintroduced | Low | High – A dip in reserves or sharp FX volatility could prompt the return of restrictions, undermining market confidence and complicating inflows. |
| Inflation remains above 100% | Medium | High – Persistent inflation would erode real returns, affect debt pricing, and challenge the Central Bank’s credibility, especially if subsidies return. |
FAQ
What is the status of Argentina’s relationship with the IMF in 2025?
Argentina’s relationship with the IMF has stabilized under Milei, with the government recommitting to fiscal targets and transparency benchmarks. While past agreements faltered, the new engagement is framed as a technical partnership rather than a rescue. Discussions around debt rollover and new funding tranches continue, but the tone has shifted from confrontation to cooperation. Investors see this as a positive anchor for future credit access and external validation.
Has Argentina made progress on rebuilding its foreign reserves?
Despite improved capital flows and fiscal consolidation, Argentina’s foreign reserves remain thin relative to historical norms. The Central Bank has limited room for large-scale interventions or to support a full dollarization strategy. That said, improved trade balances and the elimination of parallel FX markets have helped reduce pressure. Continued reserve accumulation will be critical to sustaining market confidence throughout 2025.
Article Sources ▾
- International Monetary Fund – Argentina and the IMF
- Congressional Research Service – Argentina’s Economic Crisis and Default
- U.S. Congress Joint Economic Committee – Argentina’s Economic Crisis: Causes and Cures
- Fundación Ambiente y Recursos Naturales – State of Affairs in Argentina and the IMF Agreement: Views from Civil Society
