Shock Therapy
Devalue, cut, deregulate — all at once. The economic gamble of the presidency.
The doctrine
Shock therapy — rapid, front-loaded adjustment instead of gradual reform — is the oldest debate in economic transitions (the 1990s post-communist reforms are the classic case). Milei’s version, designed with Economy Minister Luis Caputo, rested on a sequence: devalue the peso to a realistic level, slash public spending to kill the deficit, stop printing money, and deregulate — betting that credibility earned fast would bring inflation down faster than pain accumulated.
December 2023: the launch
- Devaluation: on 12 December 2023 the official peso rate moved from ~366 to ~800 per dollar — a 54% devaluation — with a 2%-monthly crawl thereafter.
- “No hay plata”: the inaugural address (10 December 2023) announced that adjustment would fall on the state, not (in the government’s telling) on the private sector.
- The fiscal anchor: the government committed to sustained fiscal surplus — no deficit, no money-printing — enforced by Economy Ministry fiat.
The cuts
Spending fell across the board: public-works projects frozen mid-construction, discretionary transfers to provinces slashed, energy and transport subsidies cut (utility bills rose sharply), public-sector hiring frozen and payrolls trimmed, and social programs tightened. The government reported a financial fiscal surplus for 2024 — the first in over a decade and a half.
The results (through September 2026)
| Measure | Outcome |
|---|---|
| Annual inflation | 289.4% (Apr 2024) → 33.5% (Aug 2026), INDEC |
| Poverty | 52.9% (H1 2024) → 28.2% (H2 2025) → 32.3% (H1 2026), INDEC |
| Unemployment | 7.8% (Q1 2026), INDEC |
| Manufacturing | −4.9% y/y (Jul 2026); down in 10 of 12 months, INDEC |
| Fiscal balance | Surplus reported 2024; anchor maintained into 2026 |
Supporters’ reading
The program worked: inflation was broken without the hyperinflationary explosion many predicted, the fiscal hole was closed, and by late 2025 voters ratified the course at the ballot box (see Public Record). The pain of 2024 was the entry fee; the gains of 2025–2026 are the return.
Critics’ reading
The program’s costs were borne by the poorest (the 2024 poverty spike), formal employment stagnated, industry contracted under an overvalued peso and open imports, and the surplus relied partly on delayed payments and frozen investment rather than durable reform. Disinflation through demand destruction, critics argue, is not the same as a healthy economy. Attributions: UCA’s Social Debt Observatory, opposition economists, union-linked analysts.
The open question
As of September 2026 the experiment is mid-course: inflation down dramatically, poverty uncomfortably high, growth forecasts optimistic, reserves still thin. Whether shock therapy produces a durable boom or a brittle stabilization is the live debate of Argentine economics — recorded here with both sides, updated as data arrives.
Source notes
- INDEC CPI, poverty (EPH), industrial production, and labor-market releases, 2023–2026.
- IMF program documents (EFF, April 2025) and review statements.
- Policy details from Economy Ministry announcements and cited press reporting.