Disinflation in Argentina Reopens the Debate in Mexico Over the Fiscal Recipe and the Social Cost of Austerity
Argentina closed out 2025 with annual inflation of 31.5%, its lowest level in eight years, according to the official statistics agency (INDEC). The figure follows a year shaped by a stabilization program that combined a fiscal surplus, monetary restraint, and an effort to rebuild the central bank’s balance sheet—measures President Javier Milei’s administration has framed as the foundation for continuing to bring price increases down.
In December, monthly inflation came in at 2.8%, with the most notable increases in transportation, housing, and basic services such as water and natural gas—categories closely tied to regulated prices and tariff structures. While the year-end reading showed an uptick relative to prior months, the annual result was the lowest since 2017, when Argentine inflation stood at 24.8%.
The drop in inflation comes after a particularly aggressive adjustment: in December 2023, at the start of the administration, the Argentine peso was devalued by more than 50%, and the government rolled out spending cuts and freezes on budget items. With that, Argentina reportedly ended 2024 with inflation of 117.8%, down from 211.4% the year before, and continued the disinflation process in 2025. Economy Minister Luis Caputo said the fiscal surplus, “strict control” of the money supply, and recapitalization of the central bank will remain pillars of the plan.
For Mexico, the Argentine data point serves more as a point of comparison than as a playbook to copy. Mexico’s economy operates under a different macro framework: an autonomous central bank with a primary mandate of price stability, a flexible exchange-rate regime, and a deeper financial market. Even so, Argentina’s experience reignites domestic discussions about the importance of fiscal discipline, coordination between monetary and fiscal policy, and the political limits of adjustment when it translates into lower subsidies and higher tariffs.
On the home front, inflation in Mexico has been on a slowing trajectory since the peaks seen after the pandemic and the energy and food shocks, though with bouts of stickiness—especially in services—that tend to reflect demand pressures, labor costs, and indexation effects. Banco de México has maintained a restrictive stance for an extended period, aiming to guide inflation toward its 3% target (+/- 1 percentage point), while public debate focuses on when—and how quickly—rates could normalize without reigniting pressure on prices or the exchange rate.
The external backdrop matters as well: Mexico is navigating a global cycle in which interest rates remain high in several economies, alongside risks of financial volatility and the peso’s sensitivity to shifts in risk appetite. At the same time, nearshoring—if it is solidified with investment in energy, water, logistics, and public security—can strengthen productive capacity, ease bottlenecks, and help moderate price pressures over the medium term; but without those conditions, incoming investment could translate into local strains, especially in housing and urban services.
Another key difference is the role of administered prices. In Argentina, tariff realignments and the correction of distortions often have direct and highly visible impacts on inflation. In Mexico, while energy prices and public tariffs also influence the index, the design of support programs and adjustment mechanisms tends to incorporate buffers, spreading costs over time and into public finances. That choice creates a recurring trade-off: containing inflation in the short term can mean budgetary pressure or deferring adjustments that later become unavoidable.
Looking ahead, the main lesson for Mexico is not the size of the cuts, but the credibility and consistency of the macroeconomic framework. Sustained disinflation typically requires clear fiscal rules, sustainable public finances, credible monetary-policy signaling, and a competitive environment that prevents temporary shocks from becoming permanent. In a year when public and private investment will be crucial to supporting growth, the challenge will be to move forward without losing stability anchors: declining inflation, debt on a manageable path, and conditions that keep credit and productive investment from slowing abruptly.
In short, Argentina’s inflation slowdown reflects a stabilization process supported by fiscal and monetary discipline, but with visible costs in tariffs and economic activity. For Mexico, the contrast underscores the advantage of having more stable institutions and macro anchors, while also serving as a reminder that the fight against inflation is not won with rates alone: it requires orderly public finances, investment that expands supply, and policy decisions that balance stability with well-being.
