Argentina’s chainsaw president keeps slashing away

Horror-movie slashers aren’t the only ones revving their chainsaws this Halloween. As Argentine President Javier Milei enters his final year in office before he and his party, La Libertad Avanza (LLA), face the nation’s voters in a general election next October, his government has committed to doubling down on its hack-and-slash approach to state controls over South America’s second-largest economy. As hopes for free-market reforms in neighboring Brazil peter out following the October 25, 2026 reelection of incumbent socialist president Luiz Inácio Lula da Silva, Milei keeps on swinging, striking fear into the hearts of bureaucrats everywhere.

Milei’s government began the year by repaying a $2.5 billion currency-swap loan, with interest, to the US Treasury on January 9, 2026. On the back of Argentina’s October 26, 2025 midterm elections in which LLA pulled off an upset victory that nearly doubled its legislative representation, Milei entered 2026 with a popular mandate to enact further structural reforms to labor law, trade relations, and the regulatory and tax treatment of foreign investments.

In February, President Milei extended a special session of Congress to consider a proposed major reform to Argentine labor law that would clarify the status of freelance and gig work, limit sectoral bargaining, address the country’s rampant workplace injury litigation abuse, and remove European-style hiring and termination rules that have driven 40 percent of the nation’s labor force into the untaxed informal sector. The Labor Modernization Law, enacted on March 6, lowers the cost of dismissals and brings greater predictability to employers’ severance obligations, curbing the surge of drawn-out litigation that left companies uncertain what they owed when parting ways with an employee. The reform also decentralizes collective bargaining negotiations over wages from the national level down to the regional and company levels and allows employers and workers to negotiate more flexible schedules. For example, the law maintains a statutory 48-hour workweek but enables more flexibility in how workers allocate those hours by allowing workdays of up to 12 hours.

Despite his personal friendship and political alliance with President Donald Trump, a self-described “Tariff Man,” Milei has continued to eliminate tariffs and other barriers to international trade. In January, Argentina’s foreign minister inked a free trade agreement (FTA) between the members of the Mercosur trade bloc (Argentina, Brazil, Paraguay, and Uruguay) and the European Union (EU), which the country’s congress, with the full support of its LLA members, ratified on February 26, 2026 by overwhelming margins in both chambers. This trade liberalization came after Argentina signed an FTA between Mercosur and the European Free Trade Association, comprised of Iceland, Liechtenstein, Norway, and Switzerland, on September 16, 2025.

After securing Argentines’ access to EU markets, President Milei issued a series of executive orders in 2026 to expand a tax incentive program to attract foreign investment into Argentina’s natural resources and technology sectors. Argentina’s Incentive Regime for Large Investments (RIGI) program offers major foreign investors a discounted 25 percent corporate tax rate (as opposed to the 35 percent top rate for other businesses), exemptions from import and export tariffs on capital goods, spare parts, and components for approved projects, exemptions from currency foreign exchange restrictions, and guaranteed tax, customs, and regulatory certainty for 30 years. Argentina’s constitution allows the president to introduce legislation in Congress. On May 23, 2026, Milei exercised this power to introduce a bill dubbed “Super-RIGI” to expand foreign capital’s access to the program’s benefits. The bill would cut the corporate tax rate to 15 percent for qualified investors and cut payroll taxes on new hires from between 20 and 27 percent to 10 percent. The bill passed the Chamber of Deputies on June 24, 2026, but has stalled in the Senate.

During Milei’s campaign in 2023, 108 economists signed a gloomy public letter predicting economic “devastation” if voters sent Milei’s “very harmful” ideology to the Casa Rosada, Argentina’s presidential palace. “The program proposed by Milei would create more socioeconomic inequality by reducing the role of the state in redistribution and social welfare,” the letter declared. “A major reduction in government spending would increase already high levels of poverty and inequality.”

Milei has indeed carried out a major reduction in government spending. In his first year, his government cut federal spending by 31 percent. When he entered office, government employees made up 35 percent of the nation’s formal-sector workforce. Milei’s administration cut 72,500 public sector jobs, equivalent to 21 percent of the federal workforce. Since that time, however, Argentina’s Gini coefficient, the most common measure of income inequality, has fallen from 0.435 in the fourth quarter of 2023 to 0.431 going into the midterms in 2025 and 0.428 in the second quarter of 2026, revealing that Milei’s “shock therapy” has not exacerbated income inequality. On the contrary, both inequality and absolute poverty have modestly declined. Argentina’s poverty rate, which stood at 41.7 percent when Milei entered office, came in at 32.3 percent in the first half of 2026.

Since his party last faced the voters in October 2025, Milei’s government has marked successes in both fiscal and monetary policy, logging a 2025 primary national budget surplus equal to 1.4 percent of GDP. Under Milei’s direction, Argentina’s central bank has suppressed price inflation from 2.1 percent per month in September 2025 to 1.9 percent per month in September 2026, down from a high of 25.5 percent per month when he took office in December 2023.

As of October 29, 2026, prediction market users gave President Milei a 52 percent chance of winning reelection next year. Despite “El Loco’s” toss-up reelection odds, he maintained a 25-point lead over his main Peronist rival. The extent to which Milei’s reforms to labor, trade, and foreign investment law can cut poverty and drive wage growth in 2027 will determine if this slasher gets a sequel.