After successfully reining in Argentina’s runaway inflation and securing a sweeping midterm election victory, President Javier Milei is now turning his attention to two of the most entrenched structural obstacles in the economy: the rigid labour market and a notoriously complex tax system. With his libertarian La Libertad Avanza (LLA) party recording an unexpected landslide in last week’s legislative contests, Milei sees a rare opportunity to push through reforms that he claims will reshape Argentina’s economic model.
Since taking office in 2023, Milei’s radical fiscal and monetary shock therapy — including deep spending cuts and a managed exchange rate — has slashed inflation from triple‑digit territory and restored a measure of stability to public accounts. The turnaround helped propel his coalition to victory, earning him what local media have dubbed “the new political mandate.” Now, armed with increased congressional support, Milei aims to dismantle the statist policies that have dominated Argentine governance for decades, policies he blames for stifling investment, deterring job creation, and fueling the growth of informal labour, which now accounts for about 42 per cent of the workforce.
“We are speaking about nothing less than a paradigm shift in Argentina’s economy,” Milei declared in a televised address this month. “We will leave behind the last 15 years of our history once and for all.” He has promised that his overhaul will restore competitiveness and unlock “unprecedented economic growth,” generating hundreds of thousands of new formal jobs by 2027 in a country where formal private employment has stagnated since 2011.
Economists broadly agree that structural reform is essential if Argentina hopes to achieve durable growth. Yet they caution that the president faces a delicate balancing act. Milei’s austerity measures have brought inflation back under control, but they have also slowed output and aggravated unemployment in some sectors. Foreign investment remains minimal, while concerns that the official exchange rate is overvalued have triggered periodic market turmoil. For now, the president’s popularity — buoyed by falling monthly inflation and a sense of renewed discipline in government finances — offers him a brief political window to act.
The labour challenge
Argentina’s labour market is shaped by powerful, largely Peronist unions that have vigorously defended strict employment protections, collective wage bargaining, and costly dismissal rules. Labour leaders argue these measures safeguard workers against the country’s habitual economic volatility. Employers counter that they discourage hiring and drive small firms into the informal economy. Among the 46 million Argentines, fewer than 6.5 million hold registered private‑sector jobs — a stark indicator of the system’s rigidities.
Milei’s proposed labour bill aims to simplify labour contracts, grant firms more flexibility in wage negotiations, and limit lawsuits over dismissals, which have long been a source of litigation risk for employers. “There are companies that have gone bankrupt just from one excessive claim,” he told business leaders recently. His plan would also dilute the influence of industry‑wide wage agreements, allowing smaller firms to negotiate independent deals.
Labour unions are preparing for a confrontation. Héctor Daer, co‑general secretary of the General Confederation of Labour (CGT), said the organisation will oppose any proposal that “goes backwards on workers’ rights.” The CGT has already hinted at a national strike if the government proceeds without consultation.
Tax reform and provincial politics
The second front in Milei’s reform drive is Argentina’s labyrinthine tax system. The government currently levies more than 160 different taxes, although more than half generate negligible revenue. To compensate for widespread evasion and a shrinking tax base, successive administrations have repeatedly raised taxes on the formal economy, leaving businesses facing one of Latin America’s highest burdens — an estimated 50.7 per cent of profits, according to industry data.
Milei wants to abolish roughly 20 taxes, lower income tax rates, and redesign how value‑added tax (VAT) and other shared revenues are distributed between the national government and Argentina’s 23 provinces. That last element makes the reform politically sensitive. Provincial governors depend heavily on transfers from Buenos Aires and have historically resisted any changes that might erode their fiscal autonomy. Milei has invited several governors — many from centrist and opposition parties — to meetings this month as he seeks to build a working alliance across political lines.
The reforms, supporters say, are urgently needed as Argentina opens up to global markets. The president’s decision to cut import tariffs and roll back protectionist rules has exposed uncompetitive industries — notably manufacturing — to international pressure. “As we transition from a closed economy, where competitiveness didn’t matter much, it is essential to advance in these reforms or many businesses will fail,” said Sebastián Menescaldi, director at Eco Go Consultores. According to economists at the Ieral think‑tank, the combined labour and tax overhauls could raise annual GDP growth by up to two percentage points, citing Brazil’s recent structural reforms as a precedent.
Political arithmetic and macroeconomic risks
Despite his electoral gains, Milei still lacks a legislative majority. La Libertad Avanza and its allies now control 104 of 257 seats in the lower house and 24 of 72 in the Senate — enough to strengthen negotiations but not to pass major bills unilaterally. To succeed, the president must court centrists and regional blocs, a challenging task for a leader who once dismissed moderates as “fiscal degenerates.” Yet Milei appears to recognise the need for pragmatism. He has hinted at naming non‑libertarians to his cabinet and has softened his rhetoric toward former opponents.
“Milei has emerged from the elections in a powerful position, and this could be a new honeymoon period for his government,” said Marcelo Garcia of Horizon Engage consultancy. “He has to move fast to take advantage of that.” Analysts warn that momentum will fade quickly if the economic outlook deteriorates or if social unrest breaks out in response to the reforms.
Underlying all these debates is a lingering fragility in Argentina’s macroeconomic framework. The government’s exchange‑rate policy — pegging the peso within a managed band — has helped suppress inflation but at the cost of draining central‑bank reserves. The resulting shortage of dollars contributed to a sharp peso sell‑off last month. “Without rebuilding reserves, Argentina will always be vulnerable to another crisis,” cautioned Martín Rapetti, executive director at Equilibra Consultancy. He and others urge Milei to craft a credible plan for currency liberalisation before market confidence weakens again.
For now, the administration insists it will not float the currency freely and says pressure on the peso has eased since the election. Officials credit renewed investor optimism following the president’s conciliatory turn. Whether that goodwill endures will depend on Milei’s ability to convert political success into structural transformation — a task that defeated several of his predecessors.
“We’ve done the hard part, stabilising the economy,” Milei told reporters this week. “Now we must do the smart part — changing the rules so Argentina can finally grow.”
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