Milei Faces Economic Crossroads: Slow Devaluation and Peso Woes Complicate Argentina’s Recovery
Argentina’s Pesos in a Bind: Milei’s Troubled Balancing Act
When Javier Milei stormed into power, he made it clear: Argentina’s chaotic economy wasn’t going to be fixed overnight, but big changes were coming. His promise of dollarization—swapping out pesos for US dollars—grabbed global headlines, especially with inflation sky-high and the nation’s finances in ruins.
Fast forward to 2024, and the story’s taken a few sharp turns. Milei’s government tamped down annual inflation from a brutal 211% in 2023 to a still-crazy 118% a year later. That’s no small feat. The toolbox? Hardcore budget discipline and a strategic—some might say cautious—approach to devaluing the peso. Instead of letting the currency tumble or switching local bucks for greenbacks as promised, Milei kicked things off with a massive 54% adjustment to the official exchange rate in December 2023.
But after that big shock, the changes slowed. Monthly devaluations slogged along at 2% through much of 2024, and by early 2025, the pace slid even further, down to just 1% per month. The problem? Prices in Argentina haven’t slowed down to match. Inflation is running over 2% each month—so the peso is actually getting stronger against the dollar even as shoppers see their buying power shrink.
The Risks of Moving Too Slowly
Here’s the rub: An overvalued peso might sound good—who wouldn’t want a currency that holds up?—but in Argentina’s case, it’s starting to bite. The slower depreciation means Argentine exports look more expensive abroad, making it even tougher for local businesses to compete. And with imports cheaper, the trade balance takes a hit. Investors, seeing these mismatches and ongoing currency controls, are keeping their distance. Fresh capital—the stuff Milei desperately needs to spark jobs and growth—just isn’t flowing in like he’d hoped.
Everyone remembers the last time things moved too quickly. Back in 2015, Mauricio Macri went with rapid-fire reforms, ditching currency controls in a matter of weeks. The result? Capital gushed out, the peso nosedived by 25%, and everything got messier. Milei’s approach—slow and steady—was meant to avoid that repeat. But the pendulum might have swung too far the other way. The peso’s artificially strong position is forecasted to get worse in 2025, piling on more pressure and draining Argentina’s international competitiveness.
To make things trickier, Milei’s team keeps saying currency controls will go—eventually. Yet there’s no date, no real road map. Businesses trying to plan for the future, exporters looking for deals, and families worried about savings are all left waiting, guessing, and second-guessing. Uncertainty becomes just another cost in a country where stability has always been in short supply.
Milei deserves credit for cleaning up some government finances, and for at least getting inflation headed in the right direction. But so long as those dense layers of exchange rate restrictions and taxes stick around, Argentina’s economy stays cut off from the world. The longer the peso’s value doesn’t reflect reality and capital controls stay in place, the harder it will be for workers and businesses to catch a real break. The challenge now? Deciding when and how to finally rip off the bandage before the wound gets worse.