As President Javier Milei approaches his first anniversary in office, Argentines are increasingly positive about the state of the economy. The country's persistent inflation, once a major concern, has begun to ease, and other economic indicators suggest a turnaround is underway. This shift in sentiment can be attributed to Milei's bold economic reforms, which have started to yield positive results.



One of the most significant changes under Milei's administration has been the dramatic reduction in inflation. In December 2023, the monthly inflation rate reached a staggering 25.5%. However, by October 2024, this rate had plummeted to just 2.7%, its lowest level in three years. This sharp decline in inflation has been widely praised and has validated Milei's narrative, sustaining his popularity (Labaqui, 2024). Argentines are now paying closer attention to month-to-month inflation and see the decline as a sign that Milei's fiscal shock therapy is working (Quintana, 2024).

Another factor contributing to Argentines' growing optimism is the appreciation of the Argentine peso. The black market dollar price has dropped since July, narrowing its gap with the official rate. This has led to a reversal in shopping trends, with Argentines now traveling to Chilean border towns to buy goods, as they can get more for their money (AP, 2024). The stronger peso has also boosted confidence in the economy, as it signals a more stable financial environment.

However, the strong peso also carries risks. It can squeeze domestic industry by making exports more costly, deter investors, and raise fears of a crash. Foreign visitors are warned of higher prices as the peak tourism season begins. Despite these potential drawbacks, the overall trend of a stronger peso has contributed to Argentines' growing optimism about the economy.



Milei's administration has also implemented a series of deregulation and market liberalization measures, which have helped to boost the supply of rental properties and make the labor market less rigid. These policies, along with the privatization of state-owned firms, have likely contributed to a perception of improved living conditions and a more efficient economy among some segments of the population.

Tax reforms and fiscal policy changes have also played a role in shaping Argentines' perceptions. The implementation of a new regime to incentivize investment (RIGI) has offered tax and legal concessions to firms making large investments in strategic economic sectors. This could have created a sense of optimism among businesses and investors, as they may see these incentives as an opportunity for growth and expansion. Furthermore, the elimination of a key import tax and the announcement of a tax amnesty that raised USD 18 billion by late October could have contributed to a perception of improved economic stability and fiscal responsibility.

Despite these positive developments, it is essential to acknowledge the negative consequences of Milei's policies. The dramatic cuts in government employment and subsidies, as well as the freezing of public sector wages and pensions, have disproportionately affected vulnerable populations. This has led to an increase in poverty rates, with the poverty rate rising to 53% from 42% in H2 2023. The growing inequality and economic hardship experienced by some groups may have contributed to a more pessimistic view of the economy among these segments of the population.

In conclusion, Argentines' growing optimism about the Milei economy can be attributed to the significant reduction in inflation, the appreciation of the Argentine peso, and the implementation of deregulation and tax reform policies. While these positive developments have contributed to a more favorable perception of the economy, it is crucial to recognize the negative consequences of Milei's policies, such as the increase in poverty rates. As the economy continues to evolve under Milei's administration, it will be essential to monitor these trends and assess their impact on the overall well-being of the Argentine population.

Sources:
- Labaqui, I. (2024). Personal communication.
- Quintana, J. (2024). Personal communication.
- AP (2024). "Argentines' Optimism Grows as Milei's Economic Reforms Bear Fruit."