Anyone traveling through this remarkable country in recent months quickly senses an atmosphere oscillating between feverish anticipation and exhausted resignation. The long shadows of the past – hyperinflation, economic crises, political fragmentation – hang like a permanent fog over a state that once counted among the most promising economies in the world. Today, Argentina appears trapped in a historical in-between. The mistakes of the past weigh too heavily to allow a simple return to the old system, yet the country lacks the resilience and cohesion required to step confidently into a new era. The election of libertarian economist Javier Milei has not ended this state of suspension. It has merely reordered it. The nation is now undergoing a shock therapy whose radicalism is virtually unmatched worldwide and whose consequences will shape Argentina for years to come. For better or for worse. To understand why a significant share of the population supports this political experiment, one must examine the economic baseline with sober clarity, regardless of one’s political view of Milei. The structural overextension of the state has been documented for years. According to the World Bank, public subsidies and transfers at times exceeded ten percent of GDP, while chronic budget deficits were repeatedly financed through short-term money creation by the central bank. Since 2018, the International Monetary Fund has described Argentina as a country in a “chronic structural crisis,” marked by excessive regulation, low productivity, and a long-eroded foundation of economic confidence. And even if critics portray the World Bank as an instrument of hyper-liberal market ideology, its core findings about Argentina’s fiscal and economic structure cannot simply be dismissed. The underlying patterns are too clear and consistently confirmed by other international institutions and independent economists.
When Milei took office in December 2023, the situation was dire. Annual inflation, according to Argentina’s National Institute of Statistics and Census (INDEC), had exceeded 211 percent. One of the highest rates in the world. The peso was losing value at breakneck speed, and the central bank recorded more than a dozen parallel exchange rates fueling informal markets and deterring investors. The Organisation for Economic Co-operation and Development (OECD) estimated that between 2017 and 2023, the real purchasing power of the middle class had fallen by more than one-quarter. International lenders, including the IMF, warned of dwindling foreign exchange reserves, which by late 2023 had fallen to their lowest level in years. In this atmosphere of gradual social unraveling, Milei appeared to many as a last resort. His promise to break with the past resonated less out of ideological conviction than out of a widespread sense that Argentina could no longer endure another turn in the same vicious circle. His reform agenda has been correspondingly uncompromising. The state has been drastically downsized, and according to the “Ley Ómnibus,” the government’s central reform package, more than 300 state programs are to be reorganized or eliminated. The government argues that this harsh restructuring is necessary to restore confidence among international markets. An assessment echoed by the Financial Times and the Economist Intelligence Unit. But here begins the issue that may shape Argentina’s future more profoundly than any fiscal measure. The social cost of this shock therapy. The poverty rate was already high before Milei’s reforms – INDEC estimated it at more than 40 percent by mid-2023 – and it has continued to rise. According to the Economic Commission for Latin America and the Caribbean (CEPAL), a regional UN body, the poorest households bear the heaviest burden of rising food and energy prices. A significant share of the population, especially the middle class and the poorest households, possesses neither savings nor access to stable foreign currency. For these groups, any reduction in state support translates immediately into deeper insecurity. At this point, a crucial question arises, one that has been largely absent from Argentina’s political debate: How can a reform project of this magnitude succeed without leaving behind the bottom third of society, those who have long been most affected by economic upheaval? International development organizations such as UNDP and the World Bank have repeatedly emphasized that a state’s stability cannot be measured solely by macroeconomic indicators but must also reflect the living conditions of those with the least resources. A functioning state is not defined by the well-being of the top income quintiles but by the resilience of those for whom economic shocks pose existential threats. If these groups are not included, even the most rational reform may succeed economically while failing socially. Sustainable transformation therefore requires mechanisms to stabilize the most vulnerable. Not only for humanitarian reasons but as a fundamental prerequisite for political viability.
And it is precisely in such spaces of social vulnerability that criminal structures flourish. The International Crisis Group reported in 2022 and 2023 that institutional weakness has significantly strengthened the influence of drug gangs in Rosario. The UN Office on Drugs and Crime (UNODC) likewise warns that economic shocks in countries with high informality and weak local administration can rapidly fuel violence and organized crime. Argentina’s third-largest city, located along the Paraná River, is already a hub of the Latin American cocaine trade. According to Reuters, it recorded more homicides per capita in 2023 than several Central American cities long associated with severe gang violence. From this alarming trend emerges a central insight: stabilizing an economy cannot be accomplished through austerity and deregulation alone. It also requires strengthening the state institutions that guarantee security, order, and trust. So far, Milei’s focus appears to lie almost exclusively on the fiscal dimension. Yet governments that intensify social hardship without simultaneously enhancing institutional capacity risk eroding their own authority.
This is particularly evident in the fight against corruption. According to Transparency International, Argentina has remained stuck in the lower middle tier of the Corruption Perceptions Index. The World Justice Project’s Rule of Law Index consistently ranks the country as having weak judicial and administrative enforcement. Many of these problems stem directly from conditions within the civil service. Low salaries, political interference, and a lack of professional development. Studies by the Inter-American Development Bank show that low public-sector wages in Latin America correlate strongly with corruption risk. Expecting integrity from public servants requires providing the material and organizational conditions that make such integrity possible. Professional recruitment, competitive compensation, and clear career pathways are essential to building a culture of responsibility. Equally indispensable is removing and prosecuting those who abuse their positions. Only then can a public administration develop that truly earns public trust.
Here the question becomes whether Argentina can transition toward new political and economic stability. A society asked to accept deep spending cuts must have confidence that burdens are shared fairly and that institutions act with integrity. Where corruption goes unpunished, bureaucracy remains ineffective, and security deteriorates, even the most necessary reforms will be met with resistance. Milei’s economic program can only succeed if accompanied by comprehensive institutional renewal and a strengthening of the state. In this sense, the country resembles a high-stakes wager, its outcome uncertain, its risks considerable. Does economic rationality alone suffice to create social stability? How much fiscal restraint can a fragile society withstand? And what role can a state play that has been both overextended and inefficient for decades? Despite these unresolved questions, one point remains clear. Profound reforms are necessary if the country is to halt its long decline.
The answers to these questions will determine whether Argentina finds a pathway out of its historic fragmentation or whether the most radical economic experiment of our time becomes a cautionary tale. The outcome is uncertain. But one thing is clear: a future built solely on fiscal discipline – without social stability, institutional renewal, and a credible, corruption-resistant public administration – will not endure. Only a combination of economic realism and state modernization can guide Argentina out of the limbo into which it has repeatedly fallen over past decades. And lurking at the margins of all these reform debates is organized crime. Ready to exploit any vacuum that emerges in the shadow of this sweeping transformation. Should Milei fail to strengthen institutional stability and security alongside economic reform, Argentina could face challenges similar to those encountered by other South and Central American nations in their struggles with powerful cartels. Developments that Buenos Aires long viewed as problems of the “others.”