Sweeping reforms by Argentina’s president Javier Milei have been welcomed by international investors due to a new incentives regime and early signs of recovery in the Latin American economy renowned for instability.

After years of deficits, the self-described ‘anarcho-capitalist’ was elected on a promise to take a “chainsaw” to Argentina’s state. His austerity policies have led to consecutive monthly primary government budget surpluses since January 2024. 

“It was crucial to end the fiscal deficit,” president Milei said on a recent episode of Lex Fridman’s podcast, who claimed his government has undertaken “the largest structural reform in history” within six months of being in office.

Annual inflation fell to 193% in October — this is still high by international standards, but is down from 211% when Mr Milei took office in December 2023, according to Central Bank of Argentina figures. Monthly inflation plummeted from 25% to 2% over the same period. BBVA Research forecasts that Argentina’s economy will grow by as much as 6% in 2025.

“The economic stabilisation under [the] Milei administration, anchored by drastic fiscal consolidation through aggressive cuts in government spending, has rekindled investor interest,” says Diego Chameides, chief economist at Banco Galicia, a private bank in Argentina. An ambitious agenda of deregulation and microeconomic reforms have also signalled that Argentina is moving towards a more private sector-led economy, he adds.

The JP Morgan risk benchmark for Argentina, which assesses the possibility of the country defaulting on its debt, fell to 746 basis points — a level not seen since March 2019. A new incentive regime for large investments, called RIGI, has also offered 30-year tax, trade and foreign-exchange benefits for projects with at least $200m of investment in forestry, tourism, infrastructure, mining, technology, oil, gas and other designated strategic sectors.

Since the law came into force in July, several large foreign direct investment (FDI) plans have been announced, including mining giant BHP and Canada’s Lundin Mining’s $3.25bn buyout of copper miner Filo Corporations, in a sign that is allaying concerns about capital controls that has dissuaded investors due to their inability to repatriate profits made in Argentina.

President Milei has made headlines for his populist rhetoric on culture-war issues like “wokeness” and seemingly cosy relationship with US president-elect Donald Trump and billionaire Elon Musk. But with Argentina’s economic indicators moving in the right direction, investors are cautiously optimistic that Argentina is on track for an economic renaissance after years of instability.

A prominent Argentine investor and banker, who asked to remain anonymous, tells fDi that Mr Milei has “taken a more pragmatic approach” than expected during his “emotional” election campaign. “It is a miracle what Milei’s team has done with reducing the chronic fiscal deficit. Many investors have trust in him, but we still need to see the people support him in the 2025 midterm elections,” they explained.

However, a major sticking point remains the country’s capital controls, known as Cepo, which currently limit the purchase of foreign currency in the country to $200 a month. Mr Milei has pledged to remove the restrictions, but has given no definitive date as to when he will lift them.

Ramiro Alem, CEO of InverTur, which promotes investment in Argentina’s tourism industry, says these controls are the last hurdle to be overcome to convince more international investors to commit to the country. “Inflation is not the issue, it is the inability for dividends repatriation,” he says. “But RIGI, together with other benefits for investors, creates a vehicle [for this to happen].” 

“The early indicators suggest that Milei’s government is on the right track … though the road ahead is not without challenges,” says Ricardo Gameroff, Buenos Aires-based managing partner at accountancy firm Kreston BA Argentina.  

“Structural reforms, particularly in currency markets, are crucial for long-term stability, but they must be implemented carefully to avoid reigniting inflation or triggering public unrest,” he added.

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