In today’s paradoxical world where economies grow but incomes shrink and where the birth rate plunges but an ageing population still increases, the Javier Milei administration is something of a paradigm. The latest growth figures for February from INDEC national statistics bureau show the economy to be 2.6 percent down from the previous month with an annual contraction of 2.1 percent, but this glum start to the year has not prevented both international organisations and local consultants in estimates earlier this month from still tipping Argentina to be a regional leader with 2026 growth topping three percent.
As in any drastic renovation, the transformation sought by Milei runs into a delicate balance between the upward thrust of the new being created and the downward pull of the old being destroyed – clearly a negative balance in recent weeks, according to the INDEC data. Over half a century ago the British Conservative Prime Minister Edward Heath termed such teething troubles the “problems of success.” Ironically enough, after the historic achievement of bringing Britain into the then European Economic Community, Heath was doomed to failure by mining via the three-day week for electricity caused by the coal strike (thus making him something of a Mauricio Macri-type precursor of Margaret Thatcher) whereas mining is a lifeline for Milei. The latest INDEC data show mining and quarries to be the leading growth sector, falling just shy of double-digit expansion at 9.9 percent and outstripping even this country’s traditional strength of agriculture (up 8.4 percent). Yet February’s economy still ends up in the red with manufacturing industry down 8.7 percent and commerce seven percent – smaller percentages but bigger chunks of the economy and above all the workforce.
For some time now the figures for economic growth have presented a complex picture of winners and losers with a current reality of stagflation versus forecasts of long-term growth. The political fallout from this transformation remains uncertain. Mining and agriculture as the leading sectors concentrating the growth clearly point to an inland shift of the wealth and since this nation’s media and opinion leaders are very much centred in the capital, they are naturally inclined to a negative view. The fact that the manufacturing industry and commerce losing out to an open economy are very much more labour-intensive and hence with many more voters would also seem to make the new model electorally vulnerable. Yet against the conventional wisdom that all elections are decided in Greater Buenos Aires, that urban sprawl numerically accounts for 47 of the 257 deputies and two of the 72 senators while the inland provinces elect 162 deputies and 66 senators.
The big problem for both manufacturing industry and commerce is that their main enemy is not so much Milei as the speed of technological change – perhaps their only chance of survival would be absurd levels of protection at the expense of the consumer and the indifferent success of Donald Trump’s tariffs in repatriating United States industry would seem to suggest that even this is no guarantee. Robots in factories and online shopping (which has more than doubled in the past year in Argentina with online banking rising at a similar pace) doom these sectors. Since the government has zero industrial policy to process these changes, people have no choice but to adjust on their own account and are doing so almost invisibly. The 2022 census already showed the country to have 15 percent more people than in the previous 2010 census but only nine percent more in Greater Buenos Aires, thus showing people to be on the move. More recently, the destruction of over 300,000 registered private-sector jobs under Milei has yet to result in unemployment spiking dramatically with gig workers filling most of the gap.
Yet this solution is far from being a happy ending since it does not feed into long-term growth. Gig workers lead a day-to-day existence with the pension contributions and purchase or inheritance of property typical of the traditional Argentine working-class entirely alien to them – nor do they have conditions to procreate, thus contributing to the plunging birth rate. The government can still count on export-led growth to give them positive numbers at the end of the year but precarious incomes can only lead to continuing shrinkage of consumer markets – something which does not seem to disturb Milei unduly with his phobia for inflation but frustrating the consumer could outweigh any electoral kudos from taming prices. In a word, it’s complicated.
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