Rising Debt Defaults in Argentina Spark Debate Over Milei's Economic Reforms

A record number of Argentine families are struggling to repay debts as the country undergoes an economic overhaul under President Javier Milei. According to the Instituto Equilíbria, 16.3 percent of credit granted to individuals is overdue by at least three months, affecting approximately 5.8 million people. This represents nearly one third of all credit borrowers.

The surge in defaults follows a period of drastic economic shifts. President Milei reduced public spending and lowered annual inflation from a peak of 289 percent in early 2024 to 34 percent. While these measures stabilized the economy and encouraged banks to lend, they also increased the need for credit among families facing austerity. Furthermore, real interest rates have become strongly positive, often exceeding 100 percent per year, which has ended the previous trend of inflation eroding the real value of debts.

Economic impacts have been uneven. While export sectors like energy and agriculture have advanced, the construction, industry, and retail sectors have slowed. Many Argentines have seen their wages shrink or stagnate since 2023. Nery Persichini, head of research at GMA Capital, noted that while there is economic growth, people are not feeling it.

Political reactions to the crisis vary. Left leaning peronist opposition leaders and labor unions have accused Milei of forcing citizens to borrow just to survive. In contrast, the president's office stated that the numbers do not show a crisis and that delays are tending to decrease. Government officials described the defaults as a temporary consequence of an expanding private credit market. President Milei himself dismissed the issue as a private matter between agents, asking in a television interview if anyone had forced the borrowers to take the loans.

Economists suggest the scale of the problem could transition from a microeconomic issue to a macroeconomic one. This development comes 14 months before Milei's attempt at re-election.