[Op-Ed] Korea Urgently Needs Argentina’s Chainsaw Economic Reforms

Argentina’s Milei Government Cuts 18 Ministries to 9, Reduces Public-Sector Workforce by 70,000

Lowers the benchmark interest rate and devalues the currency by 50%, pushes privatization of state-owned enterprises, and abolishes various regulations

Sharply cuts subsidies in the energy sector, a main cause of the fiscal deficit, and reduces government spending by 30% year-on-year

Achieves a fiscal surplus in President Milei’s first month in office, while JPMorgan’s country risk index plunges from 2,000 to 750

The radical economic reforms being pursued by Argentine President Javier Milei are drawing global attention. Grounded in capitalism and liberalism, the Milei government adopted “small government” as its banner immediately upon taking office.

To revive Argentina’s crisis-stricken economy—long plagued by chronic inflation, fiscal deficits, and rising national debt, even experiencing sovereign default—the Milei government launched “chainsaw” reforms. Their significance lies in the fact that they go beyond simple austerity measures and seek to fundamentally change the structure of the Argentine economy. To overcome the chronic economic crisis caused by excessive government intervention and reckless fiscal management, the government introduced free competition based on market principles.

The government boldly streamlined its bureaucracy by reducing the number of ministries from 18 to 9 and cutting nearly 70,000 public-sector jobs. It also implemented strong austerity measures to restore fiscal soundness, slashing government spending by 30% compared with the previous year.

It returned the leading role in economic management to the market. It lowered the benchmark interest rate and devalued the currency by 50%. It is also pushing to privatize major state-owned enterprises, including Argentina’s oil company, and boldly eliminating various regulations that hinder market functioning. Examples include abolishing rent controls and modernizing labor laws. These institutional improvements are also expected to help attract foreign investment.

A particularly meaningful change has been the sharp reduction of subsidies in the energy sector, long identified as a major cause of chronic fiscal deficits. Private investment in the energy sector had been weak because rates were kept excessively low. In response, the Milei government declared an energy emergency. Its policy is to improve the regulatory framework of the energy market in order to increase private participation and ease the burden of government spending.

From President Milei’s first month in office, the government achieved a fiscal surplus, and the inflation rate, which had reached 211% annually, fell sharply. The plunge in JPMorgan’s country risk index from 2,000 to 750 shows that international financial markets are viewing Argentina’s changes positively.

Given South Korea’s continuing fiscal deficits and rising national debt, it is urgent for us as well to improve the efficiency of government spending. This year, the issuance of government bonds increased by 27% compared with the previous year. According to the National Assembly Budget Office, national debt is projected to surge to 2,087 trillion won by 2033. This raises concerns about worsening fiscal soundness.

As Milei’s reforms demonstrate, bold restructuring is necessary to restore fiscal soundness. It is time for Korea, too, to take up the “chainsaw” for more efficient government spending.

Inhyuk Kwon

Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [칼럼] 아르헨티나의 전기톱 경제개혁, 한국 도입 시급

Author: In-hyeok Kwon

Date: 2025-05-08

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&idx=27602