Over the past few years, Argentina has emerged as one of the most fascinating economies to watch around the world. Long seen as a cautionary tale of fiscal mismanagement and runaway inflation, the South American nation is now offering something rarely seen in its modern history – a glimpse of economic recovery.

Just last month, president Javier Milei and his libertarian party, La Libertad Avanza, swept Argentina’s midterm elections with a decisive 41 per cent of the vote. This marked a considerable show of confidence in Milei, who’s often described as part economist, part showman.

Milei’s leadership style has also captured global attention. Known for his impassioned TV appearances and his disdain for the “political caste”, he has built his reputation on disrupting Argentina’s long-entrenched political order.

Political earthquake

His win in late 2023 was described as “a political earthquake”, but at the time, Argentina’s economy was in a dismal state. Inflation was peaking at 287 per cent – among the highest in the world – while public debt had ballooned to more than 100 per cent of GDP.
Two years later, the turnaround is striking. With a programme of radical spending cuts and free-market reforms, which have defined his first two years in office, Milei has accomplished a great deal already. Inflation has plunged to around 31 per cent. Growth has rebounded to 5 per cent. Poverty has dropped to 32 per cent. And in 2024, the government posted its first budget surplus in 14 years – a symbolic milestone that would have seemed unthinkable just a few years ago.

His administration has slashed public spending, removed price controls, deregulated industries, and opened up trade. These moves have restored a measure of investor confidence in Argentina, and none more so than the United States, where Washington
has become one of Buenos Aires’ strongest backers.

Trump tick of approval

In October 2025, the Trump administration announced a massive US$40 billion financial support package for Argentina, aimed at stabilising the country’s economy. The package includes a $20 billion currency swap with Argentina’s central bank, providing US dollars in exchange for pesos to bolster the nation’s foreign currency reserves. While contingent on Milei securing the election win, it shows Trump is a major supporter for Milei’s agenda.

Still, scepticism remains warranted. Argentina hasn’t got a good track record of paying back its loans and currency devaluations. Argentina is the International Monetary Fund’s (IMF) single largest borrower, with its debt exceeding the combined total of seven other debtor nations – Ukraine, Egypt, Pakistan, Ecuador, Ivory Coast, Kenya and Bangladesh. The IMF is known as the lender of last resort and countries around the world owe over $180 billion – of which Argentina is ranked number one with over $56 billion in loans, which sit outside the government’s $460 billion in public debt levels.

Its history of defaults, currency collapses, and political instability continues to make investors nervous. Even as the peso shows signs of stabilising, it has fallen about 30 per cent this year, including roughly 4 per cent over the last month, prompting further intervention from the US Treasury in mid-September. US secretary of treasury Scott Bessent said the US would do whatever was needed to stabilise the situation, calling Argentina a key ally in the region.

Pay attention

For New Zealand, Argentina’s transformation is worth paying attention to. While trade between our two nations is modest – around NZD$20 million in exports in 2024 and $200 million in imports – both countries share similar agricultural strengths, from beef and dairy to wine.

Looking ahead, growth is increasing – Argentina is now predicting economic activity will increase by 4.5 per cent in 2026, well above many countries and its unemployment at 7.5 per cent. But for all the optimism, Argentina’s recovery is far from guaranteed. And while inflation has fallen dramatically, at 31 per cent it remains punishing by global standards. Few countries, including New Zealand, would trade their own inflation challenges for Argentina’s any day of the week.

Argentina’s story is far from over. The coming years will test whether Milei’s brand of economic shock therapy can deliver lasting change or whether the old cycles of boom and bust will return. But for now, Argentina offers something it hasn’t in a long time: hope.

Chris Smith is the general manager of CMC Markets in New Zealand.

*Disclaimer: The information in this article is of a general nature and not intended to be personalised financial advice.