The fragility of Milei’s reforms in Argentina
Dollarisation is the only restriction on power that can work regardless of who governs next
Nicolás Cachanosky is an Associate Professor of Economics and the Director of the Center for Free Enterprise at The University of Texas at El Paso
President Javier Milei’s reform program in Argentina is not protected by institutions that can truly tie the hands of the next government. Rather, they depend on Milei’s party, La Libertad Avanza (LLA), and its continued hold on power.
Most of Milei’s reforms are reversible at a low political cost because, in Argentina, institutional restrictions are usually de iure, not de facto. There is also a self-inflicted fragility: Milei has governed largely by decree and has disregarded proper legislative procedures, showing the political system that this is a legitimate channel. A future government under current rival Axel Kicillof, the governor of Buenos Aires Province and a leading Peronist politician, could use the same methods to reverse Milei’s free-market reforms.
Dollarisation, which Milei campaigned for in 2023 but has not implemented, matters in this context. Not because it would be a stronger de facto restriction on future governments than others, but because it would work regardless of whether a future government wants to respect it or not.
With 18 months left in Milei’s term as president, neither law nor social consensus guarantee that LLA’s reforms will last. Polls suggest that the results of the 2027 election, when Milei will face off against Kicillof, are up in the air. The Milei government itself acknowledges this scenario when it warns about the “Kirchnerist risk” that Kicillof poses.
In the meantime, financial markets are not valuing Milei’s current economic program, but rather the probability of that program surviving a potential change of government.
In last October’s midterm parliamentary election, Milei’s LLA party obtained nearly 41 per cent of the vote compared to the Peronists’ 31 per cent. According to a hasty interpretation, the positive market reaction validated Milei’s course and ended all electoral uncertainty. But this was not the case. The October 2025 election determined seats in parliament, not the continuity of Milei’s economic program. Besides, the result came only weeks after a resounding defeat in the province of Buenos Aires in September, when the Peronists beat LLA by 13 percentage points. Milei and his party also enjoyed the explicit support of the U.S. Treasury, which backed the government politically and financially—through a USD $20 billion currency swap line—in the campaign’s final stretch.
The relevant question for investors looking at Argentina is not whether Milei won in 2025, but who will be in power in December 2027. That question remains unanswered.
A counterintuitive point is also worth considering: if the Argentine electorate, after supporting left-wing populism for nearly two decades, was able to “convert” in only two years and support a libertarian program of shock adjustment, there is no reason to assume that this conversion is permanent. A rapid shift in preferences can, by definition, be reversed just as quickly. The same, volatile opinion poll movement that allowed Milei to win in 2023 and consolidate his power in 2025 could lead to his defeat in 2027. Public sentiment is not a permanently acquired asset. Treating it as such is a fundamental error. So is equating the macroeconomic stabilisation achieved thus far with a consolidated institutional reform.
What part of Milei’s program is at risk if Peronism wins in 2027? Virtually everything.
All changes implemented by decree or administrative resolution can be reversed in the same way. Tax withholdings, deregulation by Emergency Decree, and any other measure within the Executive Branch’s discretion fall into this category. A Kicillof government does not need Congress to reinstate exchange controls, for instance: it would only require a signature to do so.
Other changes that Milei brought about do require Congressional approval to be overturned, such as the labour reform and various spending cuts. But, with a strong Peronist presence in Congress, these reversals can be implemented as swiftly as LLA’s own reforms.
Also, since the budget is the prerogative of Congress, there could be new fiscal deficits if the next government does not prioritize balanced budgets. Argentine history shows that there is a low political cost to reversing these types of fiscal reforms.
Beyond the good intentions of Milei’s new Central Bank Charter, the Central Bank’s independence does not depend on the charter either. As is the case with the other reforms, this is reversible: in Argentina, institutional restrictions may exist on paper, but are not binding in practice. There is no culture of compliance. Nor does violating such restrictions involve a high political cost.
A Central Bank that is “independent” according to the law remains, in reality, only as independent as the current Executive Branch wants it to be. It is not the case that LLA’s recent reforms lack a law to protect them. Rather, the problem is that, in Argentina, laws alone have rarely been a real institutional protection. What makes a reform irreversible is not the legal text itself. Instead, it becomes irreversible only if its undoing is more costly in political terms than leaving the reform in place. That cost depends on the precedents of compliance, not on articles of law.
Much of LLA’s reform program is reversible and its reversal has a low institutional cost. In Argentina, the continuity of any reform ultimately depends on the government’s political will, because there is no institutional constraint that truly can tie the government’s hands.
Institutionally, constructing a de facto restriction through conventional means—a law, a charter, a regulatory commitment—is extremely difficult: there is no established custom of compliance to sustain it. An Executive branch with the political will to do so can circumvent it.
Dollarisation is different because it does not depend on compliance with a law. It is not a stronger de facto restriction than the others. Insofar as it removes local monetary power altogether, it is, perhaps, the only restriction available that does not require the next government’s compliance to function.