• Javier Milei became Argentina's president a year ago, partly on a pledge to slash the state.
• Elon Musk and Vivek Ramaswamy, co-heads of DOGE, have expressed admiration for Milei's policies.
• While his government brought inflation down, his approaches have also triggered a recession.

When Javier Milei took office on December 10, 2023, the firebrand Argentine president inherited an economy in meltdown. Milei promised to take a "chainsaw" to the state.

Since then, he has presided over sweeping spending cuts, fired tens of thousands of public employees, shut down half the country's 18 ministries, and devalued the peso against the dollar by over 50%. He cut state spending by an estimated 31% in his first 10 months alone.

The measures caught the attention of Elon Musk and Vivek Ramaswamy, the men now charged with a similar task under President-elect Donald Trump.

Last month, Musk said Argentina had made "impressive progress,'" while Ramaswamy said that the US needed "Milei-style cuts on steroids."

Falling inflation

A year into Milei's term in office, BI took a look at the figures.

When Milei took over in December 2023, Argentina's inflation stood at 25.5%, while economic activity had fallen 4.5% year over year.

Argentina's inflation rate dropped to 2.7% this October — the lowest level in three years, according to the predicting market website Kalshi.

Ignacio Labaqui, a senior analyst at Medley Global Advisors, a leading macro policy research service, called this a "success" for Milei.

He said that Milei "managed to bring inflation down faster than expected despite starting his term with a 100% increase in the exchange rate and hiking longtime frozen utilities' tariffs — two measures that have an inflationary impact."

However, Facundo Nejamkis, director of Opina Argentina, a political consultancy firm, told Reuters that Milei's cuts have ignited a "major" recession.

Unemployment up

According to BBVA projections, Argentina's GDP contracted by 3.4% in the first half of 2024, and it is expected to decline by 4% for the full year.

The country's unemployment rate also rose to 7.6% in Q2, up from 6.2% in the same period last year, according to Argentina's statistics agency.

Maria Victoria Murillo, director of the Institute of Latin American Studies at Columbia University, told BI last month that the "deep" recession, while "very painful," has been accepted by Argentinians because inflation was "terrible" and people "do not want to go back."

Meanwhile, according to Argentina's statistics agency, the country's poverty rate rose to 52.9% in the first half of 2024, up from 41.7% in the second half of 2023.

This was the highest rate in 30 years, per a research team at the Observatory of the Argentine Social Debt, which keeps track of key economic indicators.

While acknowledging declining inflation, it said growing poverty was a result of Milei's "shock" economic plan and structural issues, including the devaluation of the peso.

Falling inflation "does not yet translate into a greater capacity for household consumption," it said.

Fiscal balance

There are, however, some signs of recovery.

In the first five months of 2024, Argentina's government achieved a primary fiscal surplus of 1.1% of GDP — its first in 12 years.

This is Milei's "most remarkable achievement," said Labaqui of Medley Global Advisors, who said the fiscal surplus, together with the exchange rate anchor, brought inflation down faster than expected.

BBVA Research, for its part, said that it expects Argentina's GDP to rebound strongly next year, from a 4% deficit in 2024 to 6% in 2025, driven by investments, exports, and private consumption.

Juan Cruz Díaz, managing director at Cefeidas Group, an international advisory firm, told BI that "one year later, it can be argued that the economic landscape has certainly improved, although there is still a long way to go."

He said that Argentina is still expected to end 2024 with an accumulated inflation of 120%, one of the highest in the world, but a sharp decline from 2023's 211%.

"In addition, Milei has promoted a regime to attract large foreign investments in certain sectors of the economy, with some initiatives already underway," he said.

Cruz Díaz added that one of the surprising aspects of the last year has been Milei's ability to "keep his public image relatively stable throughout the year, despite having implemented deep cuts in public spending, along with other measures generally considered unpopular and politically costly, such as the elimination of subsidies for energy and other essential services."

This is something that could be of particular interest to Musk and Ramaswamy, as they look at sweeping federal budget cuts in the US.

Labaqui, for his part, said keeping Argentina's current trajectory will depend on whether Milei's party performs "strongly" in next year's legislative elections.

"Inflation certainly is falling at a faster-than-anticipated pace," he said, "and there is an incipient economic rebound, but there is still a lot to do to bring the economy back on track."

• Elon Musk and Vivek Ramaswamy, co-heads of DOGE, are figuring out how to cut the federal government.
• Both men admire Javier Milei, the Argentine leader elected on a pledge to slash the state.
• Milei closed nine ministries, firing thousands of officials, and the economy is feeling the effects.

About a year ago, standing in front of a whiteboard with a gleam in his eye, Javier Milei started pulling apart Argentina's government.

"Ministry of Culture — Out! Ministry of Environment and Sustainable Development — Out!" he yelled with escalating joy, shredding an org chart of the state.

Soon after, he was elected his nation's president and started to make good on his program of massive spending cuts.

Watching admiringly were Vivek Ramaswamy and Elon Musk, the men now charged with a similar task in the US.

Both men have praised Milei repeatedly, seeing in him a model for their Department of Government Efficiency.

So, how has Milei's hack-and-slash agenda played out? And what could it mean for the federal government?

'Just cut to the chase'

Milei's program was swift and brutal.

Within days of taking office, Milei shut down half of the country's 18 ministries by presidential decree.

He fired some 25,000 public employees, and is working through 75,000 more.

Cuts of a similar scale in the US, with about seven times Argentina's population, would mean shedding 700,000 government workers.

Milei also hacked back the Argentine equivalent of Social Security by an estimated third, canceled infrastructure projects, and froze budgets at the surviving ministries.

This week, in an interview with the podcaster Lex Fridman, Milei said DOGE should act with speed too.

When prompted for advice, he said, "Just cut to the chase."

Milei described a physical timer in Argetina's deregulation ministry meant to focus minds by counting down days.

Harsh medicine

His measures helped tame a crisis: Argentina's inflation was 25.5% when Milei took office, and as of October, it was 2.7%.

The government ran its first surplus in 12 years, and trimmed tens of billions from its national debt.

It also spurred a recession and mass civil unrest as hundreds of thousands of people took to the streets and unions held regular strikes across the country.

Economists told Business Insider that major differences in the US and Argentine economies make the two tough to compare.

First — Milei took power in an economic meltdown where inflation of 25.5% was hammering the economy.

Milei solved that, said Maria Victoria Murillo, director of the Institute of Latin American Studies at Columbia University.

But "the consequence was a deep recession that facilitated controlling inflation but has been very painful and is accepted because inflation was terrible and people do not want to go back."

"I am not certain that would be the case in the US," she said.

Kimberley Sperrfechter, Capital Economics' Latin America Economist, noted that President-elect Donald Trump's policies mostly point to more state spending, not less. He explicitly ruled out changes to Social Security, the government's single biggest budget item.

The US balance of power is also different. Milei was able to make his changes mostly by executive decree. As BI reported, Trump would have to contend with Congress, where Republicans have only slender majorities.

The toast of Mar-a-Lago

DOGE's leaders don't seem blind to that — in August, Ramaswamy touted Milei as an inspiration but said Argentina was "much less complicated" an economy to overhaul.

It hasn't dimmed Milei's popularity in Trumpworld.

Milei was a guest of Trump's at Mar-a-Lago, the first world leader to meet him since his election victory, where he called his victory "the greatest political comeback in history."

On the Fridman podcast, Milei advised Musk and Ramaswamy to go "all the way" in cutting US federal spending.

Since Election Day, Ramaswamy and Musk have posted about Milei more than a dozen times: DOGE is readying its work with at least one eye on Buenos Aires.

• Elon Musk and Vivek Ramaswamy, co-heads of DOGE, are working out how to cut the federal government.
• Javier Milei, the Argentine leader who both men have praised, advised cutting to 'the very limit.'
• Milei closed nine ministries, firing thousands of officials, and cut spending by an estimated 31%.

Argentina's president says Elon Musk and Vivek Ramaswamy should all go "all the way" in cutting US federal spending.

Javier Milei made the comments in an episode of the Lex Fridman podcast released on Tuesday.

"My advice would be for them to go all the way, to push it to the very limit, and do not give up," he said. "Do not let down their guard."

Milei has presided over sweeping spending cuts in Argentina, firing tens of thousands of public employees, shutting down half the country's 18 ministries, and cutting state spending by an estimated 31% in his first 10 months in office.

The measures have helped bring inflation down from 25.5% when he took office in December 2023 to 2.7% in October.

But they have also ignited a recession and mass civil unrest, with hundreds of thousands of people taking to the streets and unions holding regular strikes across the country.

"Just cut to the chase. Cut to the chase," Milei told Fridman when asked what advice he had for Musk and Ramaswamy.

Both Musk and Ramaswamy have repeatedly praised Milei and taken inspiration from him for their Department of Government Efficiency.

On Wednesday, Musk said Argentina had made "impressive progress,'" while Ramaswamy said on Monday that the US needed "Milei-style cuts on steroids."

On Sunday, Ramaswamy told Fox News that he expected the wholesale closure of some federal agencies — a measure that mirrors that taken by Milei in Argentina.

Milei and Musk have long spoken admiringly of one another and were together at President-elect Donald Trump's Mar-a-Lago resort last week.

The two men met for the first time in April at Musk's Tesla plant in Austin, where they discussed free markets and their opposition to bureaucracy, according to a statement from Milei's office.

In an X post in September, Musk said his companies were "actively" looking for ways to invest in and support Argentina after the two men met on the sidelines of a United Nations summit in New York held at the time.

While Milei has achieved most of his sweeping cuts via executive decree, US spending cuts would likely involve working with Congress, where Republicans will hold just a slim majority.