Amid growing controversy and shifting political dynamics, President Javier Milei’s economic experiment in Argentina has entered a critical phase. In recent days, Milei’s government has made headlines for shutting down the Financial Information Unit (UIF), which was investigating a major cryptocurrency-linked corruption scandal — a move that raised alarm among judicial officials and international observers source. At the same time, the governing coalition scored a symbolic but politically significant victory in local elections in Buenos Aires, with pro-Milei candidates outperforming expectations — a result widely interpreted as a sign of continued, if fragile, electoral support source. Still, opposition voices and grassroots organisers have noted record-low turnout and a surge in protest votes, particularly in historically Peronist districts source. With all eyes now on the upcoming national midterm elections in October 2025, many wonder whether Milei’s ultra-libertarian agenda — underpinned by aggressive deregulation, massive public spending cuts, and a potential path toward dollarisation — can endure both politically and economically. To better understand the deeper implications of these reforms and Argentina’s evolving position on the global stage, we spoke with Michael Álvarez Kalverkamp, Director of the Heinrich-Böll-Stiftung’s Buenos Aires office.
Louise Mollenhauer: President Javier Milei’s administration recently reached a new agreement with the International Monetary Fund (IMF) and the World Bank and implemented a series of sweeping economic reforms, including the removal of currency controls and deep public spending cuts. From your perspective, what are the likely implications of these measures for Argentina’s economy and its most vulnerable populations, particularly in the context of the upcoming mid-term elections in October 2025?
Michael Alvarez: In the short term, the new agreement and the rather unusual willingness of the IMF to hand out a huge amount of the money instantly definitely helps the Milei Administration to sustain its course in stabilising the currency exchange rate towards the US dollar and thus supposedly also keeping inflation rates down. Central bank reserves are filled up again, after having experienced a sort of day-by-day trickle loss down to only 24 billion USD in the last months in the attempt to throw US-Dollars into the market to keep the peso strong. This new loan drives the countries total debt with the IMF to a whopping 61 billion USD, and clearly is a political backing for the Milei administration in front of the upcoming midterm elections in October 2025.
For the time being, and already since last year, the overvalued peso has triggered a speculative “carry trade”, where –generally well informed and connected- international and local investors change millions of USD to peso to harvest a more than 30% return in interests, and then change it back to USD just in time, which makes for outstanding profits. As already seen in 2016-2018 under the Macri government, this works as long as the current exchange rate (strong peso, cheap USD) is being backed by market confidence and/or central bank interventions with its USD reserves – but when that turns unsustainable, things can go sour quickly, and lead to a massive USD outflow, peso devaluation and soaring inflation rates at once, as happened in 2018 – which even the IMF might remember. In that case, the amount of the IMF loan might turn to be unpayable.
Besides, a closer look into the economy already reveals a more complicated reality: This administrations deep cuts in spending also in infrastructure has brought down parts of the construction sector, while the combination of a still high tax burden and a strong peso drives the manufacturing sector into a deeper recession, and the agricultural sector into withholding its exports. Under- and unemployment figures are still higher than in 2023, and prices in peso for everything from food to energy and telecom are still rising month by month, in many cases doubling price levels in the EU. Although officially measured poverty rates at 38% have fallen back to 2023 levels after a 51%-peak in the first year of the Milei government, measurement criteria do not necessarily reflect the real impact of exploding costs in housing, services, transportation and healthcare on wages.
The highest burdens fall on pensioners, who have suffered 30% losses and now have to battle with a minimum pension of around 215 Euro: Pension cuts make for almost 20% of the cuts in public spending. All this has put under pressure the traditionally strong middle-classes in Argentina, and although this IMF loan offers stability on the financial side, support for Milei, even if only slowly, has already started to decline in the last months. It has to be seen if the traditionally seductive fantasy of a strong peso -at least until the October 2025 elections- will make for sufficient votes and an own majority for his La Libertad Avanza (LLA) party in both chambers. And, of course, if the only outcome of a potential future crisis after having burnt all USD reserves provided by this loan will be finally a dollarisation of the Argentinian economy, as Milei always wanted.
With Argentina seeking a closer trade relationship with the United States and signalling a shift toward dollarisation, how do you see the role of the European Union evolving in the country’s economic and political landscape? Can the EU still offer a meaningful partnership amid these changes?
There is an undoubtedly close political-ideological alignment of the Milei administration with the Trump administration and other right wing governments in the context of the global ultra-right libertarian networks, which makes for a lot of publicity, rhetorical consonance and also some unusual alliances in specific UN-voting processes. The strongest signal of a US backing so far consisted in US Secretary of the Treasury Scott Bessent recently suggesting there could possibly be in case of a crisis a specific credit line by the US government to support Milei maintaining his course. But a closer trade relationship with the US still has to be seen – for now, Argentina, in spite of the cascade of almost submissive gestures of Milei and his countless trips to the US and CPAC conventions has not gained automatically any preferred trade status within the “new trade logic” of the Trump administration – as the rest of the continent, Argentinian products are being charged a 10% tariff.
Anyway, the Milei government has started negotiations with Washington to seek a reduction, and initial discussions with the United States seem to have centred on "harmonising tariffs" for a basket of around 50 products, as was rumoured in Buenos Aires. An outright free-trade-agreement with the US, as originally promoted by Milei, does not seem to be within range for now. There was –already under the Biden Administration– and is now definitely an increasing interest by US-companies in the mining and fossil sector, which is a geostrategic interest shared by the European Union.
Up to now, the Milei administration has shown a certain grade of pragmatism winning over ideology when it comes to preserve its trade relations – in the case of Brazil or China, and that will certainly be the case with the EU. In that sense, there is a willingness to go ahead with the EU-Mercosur trade agreement, deepen trade and to welcome investments by the EU. But any other form of a more political partnership, specifically concerning climate policies or any other issue of the Agenda 2030, seems to be out of reach with this government at this point. The 180-degree turn by Milei dropping the unconditional support of the Ukraine following strictly the new approach of the Trump administration on Russia’s war against Ukraine may give an idea on how far the ideological alignment with the US government goes.
Nevertheless, Argentina is more than only its current government, and it is of key importance for the EU and its member states not only to develop an offer of fair bilateral trade and economic relations, but also to envision a long-term political partnership based on shared values about democracy, the rule of law and human rights – values strongly and consistently supported by Argentina until recently in the international governance structures since its return to democracy in 1983. Therefore, the EU must deepen ties with a broader spectrum of political forces and the highly diverse democratic civil society - there will be a post-Milei Argentina and Europe’s soft power in these fields will be it’s a real asset for this time to come.
Some international observers view the current reforms as steps toward “normalising” Argentina’s economy. How do you interpret this notion of ‘normalisation’? What are the potential risks or opportunities you see for democratic governance, environmental policy, and civil society in this new economic context?
Undoubtedly, there was an urgent need in bringing down inflation, open up the tight exchange and export-import regimes and address the increasing deficit spending on all levels of governments. In this sense, some of the targets, also in deregulation, may make sense. On the other hand, the government proceeded in an inconsistent and contradictory way to what the president sustained as a candidate – specifically concerning the idea of an additional IMF loan, which he strongly rejected before, and the exchange regime, which many of his former liberal campaign advisors wanted to be completely liberated.
Moreover, there are enough legitimate doubts even with liberal economists if this radical reform program, and the current exchange rate, can be sustained economically and will bear fruits also in the long term, as there are no long-term strategies visible which would accompany this reform process, to overcome a vision of a merely resource- and fossil based, extractivist economy.
Adding huge amounts of debt, ignoring climate change, cutting down on investment in infrastructure, dismantling institutions and any strategic public policy at all, slashing investment in education, universities, science as one of the most outstanding comparative advantages of Argentina does not make too much sense in these times. Moreover, the way this administration pushed through its reform program and decisions by using almost exclusively executive orders and then trying to bend the congress is far from any democratic practice of building broad consensus on key issues.
But the most critical aspect are the constant right-wing ideological fireworks and menacing campaigns on social media against any kind of critical opposition – may that be dissident MPs or senators in congress, critical media and journalists, feminist activists or simply protests on the streets. Threats on the democratic practices and civil liberties have been mounting in Argentina in the last year, from increasingly brutal repression on demonstrations, as for example against pensioners, to complete defunding of the independent and critical civil society, to new initiatives on digital surveillance, or even direct physical attacks on journalists after being targeted by the right-wing libertarian administration and their unofficial troll-army.
In this context, a serious concern for the democratic civil society, especially human rights activists, is the disrespect or dismantling of national legal frameworks and constitutional guaranties by policies as the Special Investments Regime RIGI, which would give corporations unlimited benefits and rights to access natural resources, as well as water and energy. Giving a carte blanche for breaking national laws and the constitution as well as international agreements as –for example- the ILO Convention 169 can only be seen by cynics as a normalisation.
