Trump’s economic stimulus plan is still uncertain whether it is reliable or not, but Trump’s reform medicine for Argentina’s decentralization has begun to show results.

In 2023, Millet became the President of Argentina with a series of radical reforms. As soon as he took office, he announced the abolition of the peso and the implementation of comprehensive dollarization; Lift price controls and allow the market to fully unleash itself; Even cut government subsidies and cut 9 out of 18 ministries.
At that time, people were generally not optimistic about Javier Milei‘s approach, believing that it was both simple and crude, and very easy to restart the national system. However, after a year of turmoil, Argentina not only did not collapse, but miraculously walked off the operating table.
You should know that in recent years, the Argentine peso has been like worthless paper, and people have basically no sense of inflation.
The inflation rate in Argentina in 2022 was 95%, which surged to 143% last year, reaching a new high in nearly 30 years. However, in October of this year, Argentina’s inflation rate plummeted to 2.7%, the lowest level in nearly three years.
I don’t know if Trump and Benpu were inspired by the Argentine split, but the US Department of Efficiency has also prioritized the dismissal of civil servants, which indirectly proves that Javier Milei‘s reforms have indeed had a cost reducing and efficiency increasing effect on the government.

So the question arises, can Argentina’s economic difficulties really be solved with a single dose of strong medicine?
As is well known, the problem of deflation varies, but the reasons for inflation are always the same. Argentina’s nightmare of inflation is a long-term addiction to printing money.
In the past few decades, the Argentine government has faced varying degrees of financial crises every year, and the high-level solution has been very simple, which is to print money to recover blood and defeat one inflation with another.
Let’s take 2020 as an example. At that time, due to the impact of mask disease, Argentina also learned from the United States and started a crazy money printing model. In one year, the supply of pesos in the market almost doubled, successfully easing economic pressure.
But the problem is that the United States printing money can export inflation globally, while Argentina printing money can only self digest high inflation.
The inflation rate in Argentina reached 36.1% in 2020, rose to 50.9% in 2021, and then skyrocketed to triple digits. The peso depreciated by 54% against the US dollar, and prices skyrocketed by 100% within a week. The main job of supermarket employees is to change labels because product prices are constantly changing. Lao Bai’s efforts to spend money cannot keep up with the crazy rise in prices.

Against such a magical backdrop, Argentines voted with their feet to elect a heavy metal in the economics field, and Millet successfully began his presidential career.
Don’t be fooled by Javier Milei‘s punk reforms, but according to his logic, since the common people don’t believe in the peso and believe in the US dollar, we should completely abolish the peso as a garbage and use the US dollar as the new legal currency; Since the deficit is the root cause of inflation, then cut government subsidies and forcibly balance the fiscal budget.
To some people, this may seem like a headache and a cure for the problem, but the problem is that Javier Milei‘s comprehensive dollarization policy is like sharing both hands, leaving the fate of the country to the Federal Reserve.
Although the US dollar can indeed stabilize the market and slow down the depreciation rate of the peso in the short term, capital is willing to re-enter the Argentine market with confidence.
But in the long run, once there is an economic crisis or a shortage of the US dollar, the Argentine government will not be able to print money to restore its currency, which means voluntarily giving up its currency autonomy, let alone any future development.
Abandoning the peso and using the US dollar is equivalent to turning sudden death into cancer. Although it can still persist, it ultimately treats the symptoms rather than the root cause.
In addition, in order to cooperate with currency reform, Millet has significantly reduced government subsidies, especially in the energy and transportation sectors. He thinks these subsidies will only make the government’s books look worse, and it’s time to stop this practice of drinking poison to quench thirst.
In the past, when prices in Argentina skyrocketed, at least the government subsidized electricity and gasoline prices, giving the people at least a psychological buffer.
Now, President Millet has cut basic living allowances across the board, causing considerable dissatisfaction among the lower classes of society. Protests and marches have become the new norm in Buenos Aires.
Some friends may be about to say that despite the pains brought by the storm of reform, Javier Milei‘s “strong medicine” has indeed seen results. Argentina’s inflation rate has dropped to the lowest level in three years, and the confidence of funds in the market has also rebounded.
However, this effect is more about market expectations rather than a real improvement in economic fundamentals.
In the first half of this year, Argentina achieved its first fiscal surplus since 2008, despite the government’s efforts to tighten its belt.
But the GDP shrank by 2.6% in the first quarter and 4.9% in the second quarter, and has been negative for five consecutive quarters. The unemployment rate has risen to 7.7%, the poverty rate has increased by 10%, and although the agricultural sector has performed strongly, other industries such as construction, manufacturing, and retail have generally declined by more than 15%.
The data shows that Argentina’s inflation has been resolved, but economic growth remains weak. If Javier Milei cannot restore the economy in a short period of time, the effectiveness of the reform will eventually be backfired by the dissatisfaction of the people.
Millet’s reforms are fierce, but it is currently difficult to determine whether it is the darkness before dawn or another abyss. Because Argentinians nowadays have long been accustomed to using the US dollar to buy large goods, and the peso only buys daily necessities, the inflation rate can only be said to be diminishing the function of the peso, but it does not mean that Argentinians’ lives have improved.
Moreover, Argentina’s predicament is not only about inflation, but also long-term fiscal deficits, a revolving economic reform plan, and a habitual debt burden of bankruptcy.
Argentina has never lacked economic geniuses. In the past few decades, every new president has overthrown almost all the economic policies of their previous leaders, always hoping to rescue the country from magic with one of their divine hands.
But what was the outcome?
Argentina is either experiencing inflation or deflation, and funds in the market are like a mental illness, never knowing what they really want.
In 2022, Argentina announced a price control policy that restricts the prices of daily necessities to cope with inflation. After just three months of implementation, the new government announced the abolition of this policy as soon as it took office, and market prices immediately rebounded, even exceeding the previous rate of price increases.
This policy change of left and right competition also makes enterprises afraid to expand, and ordinary people afraid to consume. The market is either in panic or on the path of panic.
Although Javier Milei has given hope to the people, Argentina’s future is still full of uncertainty.
If he can withstand the pressure, continue to promote structural reforms, and handle the dissatisfaction in society, then I think Argentina really has a chance to get rid of the nightmare of inflation, and its economic development can also come to life.
But if Javier Milei cannot withstand the pressure and is forced to make concessions, Argentina will only enter a vicious cycle again, repeating the inflation patterns and political turmoil of the past few decades.
It can be said that Javier Milei has bet on Argentina’s future. Will his reforms become a good solution to save the country or another failed attempt?
It depends on how long the policy can last, and it also depends on how long Argentinians can endure.