Javier Milei aggressively celebrates a string of successes

Argentina’s president has much to shout about. But job worries loom

Photograph: Reuters

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The president of Argentina has had an excellent few months. So some gloating was to be expected in his formal state-of-the-nation speech at the opening of Congress on March 1st. It was also a chance to outline a statesmanlike vision and reach potential new allies. Instead, his success seems to have bred hubris and aggression. Despite promising last year to ease up on the insults, Javier Milei shouted at his Peronist rivals, who interrupted frequently, calling them “murderers and thieves”, “coup plotters” and “cavemen”. He revelled in it. “I love making you cry.”

This neatly captures the two faces of Mr Milei: his wise if tough liberalising reforms are often accompanied by angry, occasionally paranoid rhetoric—even when he is flying high. He has passed a swathe of legislation, the economy is growing and the central bank has at last begun accumulating foreign reserves, long demanded by investors. The main worry is whether the economy is generating enough good jobs.

Politically, the president has never been stronger. Despite not having a majority, his government managed to pass almost its entire legislative agenda for the recent extraordinary sessions of Congress. That included a budget, a reform to lower the age of criminal responsibility and a trade deal with Europe.

The biggest prize of the legislative bonanza was a major labour reform. Previous attempts at such change by non-Peronist governments left them traumatised, says Ignacio Labaqui of Medley Global Advisors, a research firm. Mr Milei’s success demonstrates his strength and his team’s growing ability to convene coalitions.

Argentina’s labour laws, which date to the 1970s, are so asphyxiating that more than 40% of Argentines work in the informal sector, dodging the law altogether. The government wants the reform to boost formal employment. The change makes it cheaper to fire people and creates clarity about severance costs. That should dampen the boom in lengthy lawsuits that leave companies unsure what they will owe if they sack someone. It will help on disputes over workplace injuries, too. According to a study by IERAL, a local think-tank, the country has roughly the same rate of workplace injuries as Spain, but they result in more than 12 times as many lawsuits.

The reform also empowers salary negotiations at the regional or company level, rather than making participants rely on national wage agreements. That should boost employment by allowing businesses to pay wages that more accurately reflect labour costs in their particular region, says Federico Sturzenegger, the minister of deregulation. Juan Grabois, a Peronist congressman, fumes that the law “takes us back 100 years”. Expect layoffs and lower salaries, he says.

Mr Milei is also tackling a critical and long-standing weakness: Argentina’s lack of foreign reserves. That has been a big worry for investors and the IMF, both of whom need to be paid back in dollars. Last year the government was forced to spend reserves to prop up the currency. In the first two months of this year, the central bank has purchased $2.7bn (see chart).

The government would like to tap global capital markets for dollars to help roll over Argentina’s enormous debts. Yet it appears irritated that the interest rates it would probably be charged have not fallen more than they already have. It has recently suggested sourly that for now it has cheaper options than global capital markets. Still, it will soon be wooing investors again at a glitzy event in New York dubbed “Argentina week”. So far, the high probable rates suggest markets are not fully convinced by the speed of reserve accumulation, nor by the exchange-rate regime.

Chart: The Economist

The band within which the peso partially floats has been widening more rapidly this year. In general, the currency has been strengthening. Mr Milei has long favoured a strong peso to help pull down inflation. Its strength is partly a reflection of the dollar’s global weakness. But it is also boosted by capital controls, which still restrict companies from taking dollars out of Argentina, and by tight monetary policy, which offers juicy returns in pesos. Despite urging from investors, the government appears in no hurry to float fully, fearing uncontrollable lurches. Meanwhile, local interest rates are both high and volatile. Blame that, in part, on the government’s poor communication of monetary policy. It is also a problem that Argentina targets the total money supply rather than interest rates, as happens in most rich countries.

All this weighs on businesses, for which a strong peso means pricier exports and high, volatile rates mean headaches. But that is a cost Mr Milei mostly seems willing to pay. Yanking inflation down is his signature achievement, and he is unlikely to change course. Since a monthly-inflation low of 1.5% in May last year it has been steadily creeping back up, stirred by economic recovery. In January it was 2.9% monthly—some 32% annually.

The government rightly highlights solid growth. After shrinking in 2024, last year GDP grew by 4.4%. This year, the forecast is 4%. Yet recovery is uneven. Mr Milei has opened up the economy by slashing red tape at customs and by trimming tariffs. Output from industry, flabby after years of lavish protection, is still lower than when Mr Milei took office in December 2023. Output in other parts of the economy, including agriculture and the oil sector, has surged. But they are not as labour-intensive as industry (see chart). Economic recovery has in fact happened with lower levels of salaried formal employment. The labour reform will not quickly fix this, warns Martin Rapetti of Equilibra, a consultancy.

Nevertheless, at 6.6% unemployment is only a percentage point above what it was before Mr Milei took office. Many are clearly finding some kind of work. Filings under a tax scheme for small contractors with low incomes have grown sharply. Many fear, however, that all this amounts to well-paid jobs being replaced by low-paying contract work or informal labour.

Loves labour lost

Broadly the voters who so resoundingly backed Mr Milei in the midterms in October are still with him. Though his approval ratings have softened, they are above those of the past two presidents at this point in their terms. But there are signs of discontent. A general strike failed to stop the reforms, though unions may use legal challenges to tie them up in court. As much as middle Argentina likes lower inflation, many do not care for Mr Milei’s aggressive language, which could become a vulnerability if economic news darkens. And voters’ priorities are shifting. Polling shows that unemployment now consistently beats inflation as the biggest concern.

I would like to lodge a formal labour complaint Photograph: Silvana Safenreiter/ZUMA Press Wire/Eyevine

The government downplays all of these worries. Liberalisation is already offering Argentines cheaper goods. In time opening up the economy should also result in more-competitive businesses. Mr Sturzenegger claims that, because industry is mostly in the capital city and agriculture and oil are in the regions, “you’re going to have a kind of an exodus from the greater Buenos Aires area towards the interior.” If that happens, the shift may be painful.

Mr Milei remains bullish. “New industries will more than compensate for the demand for labour lost by the old industries, and with much better wages,” he claimed in his speech. His political future may turn on how quickly that happens. ■

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논증 분석

유형: diagnosis

핵심 주장

Javier Milei는 정치적·경제적 성과를 거두고 있지만, 고용의 질 저하와 공격적 수사라는 취약점이 그의 정치적 미래를 위협할 수 있다.

논리구조

1. 전제: Javier Milei는 최근 수개월간 탁월한 성과를 거뒀음에도 불구하고, 3월 1일 의회 국정연설에서 Peronist 경쟁자들을 ‘살인자와 도둑’, ‘쿠데타 모의자’, ‘원시인’이라 부르며 오만과 공격성을 드러냈다.
2. 논거: 정치적으로 Milei 정부는 과반 의석 없이도 예산안, 형사 책임 연령 하향, EU와의 무역협정 등 거의 전체 임시국회 입법 의제를 통과시키는 데 성공했다.
3. 논거: 핵심 성과인 노동개혁은 1970년대 법률을 개정하여 해고 비용 절감, 퇴직금 명확화, 지역·기업 단위 임금 협상 허용을 통해 40% 이상에 달하는 비공식 고용 문제를 해결하려 한다.
4. 반론: Peronist 의원 Juan Grabois는 노동개혁이 ‘100년을 후퇴’시키며 대량 해고와 임금 하락을 초래할 것이라고 경고한다.
5. 진단: Argentina의 외환보유고 부족 문제는 여전한 취약점으로, 올해 첫 두 달간 중앙은행이 27억 달러를 매입했으나 국제 자본시장은 페소화 환율 체제와 보유고 축적 속도에 완전히 납득하지 못하고 있다.
6. 진단: 강한 페소화와 높고 변동성 큰 금리는 수출 경쟁력을 약화시키고 기업에 부담을 주며, 월간 인플레이션은 지난해 5월 1.5% 저점 이후 1월 2.9%(연 32%)로 재상승 중이다.
7. 진단: GDP가 2025년 4.4% 성장했으나 회복이 불균등하여, 관세 인하로 타격받은 제조업 생산은 Milei 취임 이전보다 낮은 반면 농업·에너지 부문은 급성장했지만 이들 부문은 노동집약도가 낮다.
8. 진단: 경제 회복이 정규 임금 고용 감소와 함께 진행되었으며, 저소득 소규모 계약직 신고가 급증해 많은 이들이 양질의 일자리가 저임금 계약직이나 비공식 노동으로 대체되고 있다고 우려한다.
9. 반론: 컨설팅사 Equilibra의 Martin Rapetti는 노동개혁이 고용의 질 문제를 빠르게 해결하지는 못할 것이라고 경고하며, 여론조사에서 실업이 인플레이션을 제치고 최대 우려 사안으로 부상하고 있다.
10. 처방: Milei 정부는 경제 자유화가 장기적으로 더 경쟁력 있는 기업과 더 많은 일자리를 창출할 것이며, Buenos Aires 대도시 지역에서 내륙 지역으로의 인구 이동이 일어날 것이라고 낙관한다.

결론

Milei의 정치적 미래는 자유화 개혁이 얼마나 빠르게 양질의 일자리를 창출하느냐에 달려 있으며, 고용 불안이 해소되지 않으면 공격적 수사와 맞물려 정치적 취약점이 될 수 있다.

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