ARGENTINA: Milei’s Chainsaw Economic Model and The Illusion of Recovery

Freddie Ponton
21st Century Wire

On paper, Argentina is healing. Inflation has slowed dramatically, the fiscal accounts are balanced, and the government celebrates what it calls an economic ‘reactivation’ after decades of supposed mismanagement. In official speeches and sympathetic editorials abroad, President Javier Milei is hailed as the radical surgeon who finally dared to cut deep enough. The chainsaw worked, and the patient is said to have survived. But on the streets, in shuttered factories, in supermarkets where carts roll half empty, the story sounds very different. Consumption has collapsed to historic lows. Nearly half of households are scrambling to survive through side jobs, debt, or the quiet liquidation of savings. Formal employment is shrinking. Construction sites are frozen mid-pour. And two years after Milei took office, Argentina’s economy is producing little more than it did before he arrived. In this report, we are putting Milei’s economic model under the microscope.

According to a report from Martín Rapetti, the economic director of Equilibra, an economic analysis centre in Argentina, economic activity has been effectively stagnant since the beginning of 2025, with output levels nearly identical to those of the third quarter of 2023, before Milei assumed power. After a historic collapse during the first phase of adjustment in 2024, the economy rebounded temporarily, albeit mechanically—and then suddenly stopped.

In reality, what has been marketed as “reactivation” by Milei’s spin doctors, is little more than a partial rebound from a self-inflicted shock followed by paralysis.

Recent official data analysed by Reuters underscores just how fragile Milei’s so-called recovery really is. In November 2025, Argentina’s economic activity contracted, marking the first monthly decline in months, with manufacturing, commerce, fishing, and construction all posting losses, a reminder that even the macro indicators used to sell stability remain volatile and easily reversible.

Still, the gap between the official narrative and lived reality is not a misunderstanding. Rather, it is the logical outcome of Milei’s economic model—a project engineered to stabilise macroeconomic variables and reassure creditors, while leaving the majority of the population suspended in permanent adjustment.

A Model Designed for Winners

Beneath aggregate stagnation lies a far more revealing pattern. Of the 55 productive sectors that make up the Argentine economy, only 19 expanded under the current administration, while 36 contracted, according to Equilibra’s sectoral analysis.

This divergence is not random. The sectors that grew are tightly clustered: financial intermediation, agribusiness, energy, the knowledge economy, and public utilities that benefited from aggressive tariff restructuring. These activities share a defining trait: they are insulated from the purchasing power of Argentine households. They earn dollars, capture rents, or adjust prices administratively.

The sectors that shrank tell the opposite story. Construction collapsed after the government froze public works. Tourism weakened as domestic travellers disappeared. Mass consumption stagnated as real incomes failed to recover. And most decisively, the heart of Argentina’s manufacturing base, and its industries producing tradable goods that compete with imports, was hollowed out.

READ MORE: The Capitalist Mafia’s Playground: How Milei is Rewriting Argentina for Foreign Profits

Of the 26 tradable-goods sectors in the economy, only six expanded. The remaining 20 contracted, accounting for more than half of the total economic decline. In 16 of those 20 sectors, domestic production lost market share directly to imports, as shown by Equilibra’s analysis of more than 1.6 million import records.

REPORT: Disaggregated projection of economic sectors by Equilibra – Translated from Spanish to English (Source: Equilibra)
Anticipo-de-Actividad-Noviembre-2025.es.en

This dynamic is no longer abstract. In January 2026, Argentina received its first large shipment of more than 5,800 Chinese electric vehicles, imported duty-free under Milei’s new liberalised import regime, a move praised by officials as modernisation, and denounced by domestic manufacturers as a blueprint for deindustrialisation.

In most cases, domestic output did not merely grow more slowly than imports; it fell outright while imports surged. Production declines of 15 to 20 per cent coexist with double-digit import growth. This is not creative destruction. It is plain productive erosion.

Consumption, Work, and the Social Cost of Shock Therapy

If there is one variable that unites all available evidence, it is the collapse of domestic consumption. Data compiled by Instituto Argentina Grande show that supermarket consumption is at historic lows and fell in 23 of Argentina’s 24 provinces.

REPORT: Argentine Economy Report – January 23 – Translated from Spanish to English (Source: Instituto Argentiba Grande)
230126-iag-quedecimossobreeconomia.es.en

Behind those figures are households under strain. Nearly 48% report having to deploy additional strategies just to make ends meet, taking informal jobs, selling assets, reducing food intake, or accumulating debt. This is not a marginal phenomenon. Consumption is the backbone of Argentina’s economic and social life. When it collapses, everything built around it, including commerce, services, small manufacturing, and employment, collapses with it.

The labour market tells the same story. Between 2023 and 2025, more than 222,000 formal jobs were lost, according to IAG. Construction, one of the most labour-intensive sectors and a traditional bridge between macro recovery and household income, has shown no improvement since Milei took office.

The government points to falling poverty rates as proof of success. But Equilibra’s report Por Qué Bajó Tanto La Pobreza Oficial De Indec? (Why Did The Official Poverty Rate From Indec December Drop So Much?) shows that the sharp official decline is driven largely by statistical effects, including an outdated consumption basket and improved income reporting in household surveys.

REPORT: Why Did The Official Poverty Rate From Indec December Drop So Much? Translated from Spanish to English (Source: Equilibra)
251229-Por-que-bajo-tanto-la-pobreza.es.en

Once corrected, poverty does fall, but only modestly, and to levels comparable with earlier periods. More importantly, the decline coexists with collapsing consumption, job losses, and widespread household stress. From an analytical point of view, poverty reduction without consumption recovery is not social progress. It is just a mirage.

When Growth Fails, the Country Is Put on the Market

What is happening to Argentina’s productive fabric is inseparable from what is happening to its territory. As domestic industry contracts and consumption withers, the government has increasingly turned outward, treating land, water, forests, and subsoil not as collective assets to be stewarded, but as commodities to be monetised.

One of the clearest expressions of this logic was the dismantling of the 2011 Land Law, which limited foreign ownership of rural land and protected areas of strategic importance such as water basins. Milei’s government eliminated those restrictions by decree in early 2024, arguing they obstructed investment. Even before the repeal, more than 13 million hectares of Argentine land were already in foreign hands.

Environmental policy has followed the same path. Budget cuts of up to 77 per cent have hollowed out protections for native forests, glaciers, and fire-prevention systems. “Under Milei’s government, Argentina faces its biggest environmental challenges in 2025,” wrote investigative journalist Emilia Delfino for Mongabay.  For indigenous and rural communities, the consequences are immediate. Legal frameworks that once slowed evictions or recognised ancestral land claims have been weakened, intensifying conflicts in regions targeted for mining, agribusiness, or tourism.

This shift in resources is frequently justified as realism. Argentina needs to make the most of its assets. However, realism poses a more challenging inquiry. For whom should those assets be exploited, and for how long?

Stabilisation Without a Future

Even as these tensions deepen at home, Milei has taken his message abroad. In January 2026, he appeared at the World Economic Forum in Davos, pitching Argentina as radically deregulated and open for business, courting global CEOs and investors while defending shock therapy as a moral necessity.

The contrast could not be sharper. While Argentina is marketed internationally as a success story, growth forecasts are quietly being revised downward. The OECD recently cut its outlook for Argentina’s 2026 growth, citing weak domestic demand and limited industrial recovery. Javier Milei did what he promised. He crushed inflation, balanced the fiscal accounts, liberalised trade, and shrank the state.

What he did not do, and what his model was never designed to do, was rebuild domestic demand, protect productive capacity, or ensure that recovery reached the majority. Argentina today is more orderly, more unequal, and more fragile. It works for exporters, financiers, and regulated monopolies. It does not work for workers, small producers, or households living off peso incomes.

In September 2025, a Times article confirmed that the inflation was nearing 200 per cent. Those who had savings in the local currency, the peso, were witnessing its value decline daily. Milei assured, through a polished social media campaign showcasing his signature chainsaw, that liberating the market from nearly all constraints would benefit everyone. Javier Milei is not the “beacon of hope” that Elon Musk describes, nor is he the “hero” that Trump claims; he is a shock‑therapist president who stabilises the economy for financiers and exporters while gutting jobs, consumption, and local industry, leaving ordinary Argentines to pay the price.

Will Trump take on his new geostrategic ally as a welfare case, with Ukraine-style bailouts, and regular cash injections for ‘maintenance’—in order to keep the regime from collapsing?

Stabilisation without development is not a transition; it is a destination, and for millions of Argentines watching their jobs disappear, their consumption shrink, and their land placed on the market, it feels like a dead end. Whatever the case, the current formula is clear unsustainable. 

READ MORE: Patagonia Under Siege: How Fires, Foreign Capital, and the Isaac Accords Are Reshaping Argentina’s Last Frontier

READ MORE ARGENTINA NEWS AT: 21st Century Wire Argentina Files

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21st Century Wire is an alternative news agency designed to enlighten, inform and educate readers about world events which are not always covered in the mainstream media.

Source: https://21stcenturywire.com/2026/01/26/argentina-mileis-chainsaw-economic-model-and-the-illusion-of-recover/