The Argentine government of ultraliberal President Javier Milei, inaugurated on Sunday December 10, announced on Tuesday 12 a strong devaluation of more than 50% of the peso, the national currency, going to 800 pesos per dollar, to stabilize the economy in the grip of a inflation and chronic debt. The devaluation of a peso that was considered notoriously overvalued, to just under 400 to the dollar, is part of a series of “emergency” measures announced by Economy Minister Luis Caputo, including a reduction public subsidies for energy and transport.
These measures, the minister explained in a speech, aim to avoid the “catastrophe” of hyperinflation which he estimates could reach 15,000%. “The genesis of our problems has always been budgetary,” said Mr. Caputo, estimating that for the first time, by voting with a large majority for Javier Milei, Argentines showed that they understood “that there is no has no money.”
The devaluation, as well as the reduction of long-standing subsidies for transport and energy, is destined to initially strongly and negatively affect the purchasing power of Argentines, 40% of whom live below the poverty line. To their attention, the Minister of the Economy assured that the government will maintain social programs to help with access to employment and “strengthen social policies for those who need them, without intermediaries”, a- he insisted, like “food cards” (purchase vouchers for the most deprived).
Inflation at 143% over one year
President Milei indicated in his inauguration speech on Sunday that “the situation would get worse in the short term” before the economy, the third largest in Latin America, reaped the benefits of budgetary austerity by controlling chronic inflation. , currently at 143% YoY.
Minister Caputo also announced, in the interest of budgetary austerity, that the State “will no longer present offers” for public projects, and will cancel past contracts “which have not already started”. “Infrastructure projects in Argentina will be carried out by the private sector, because the State has neither money nor financing to carry them out,” he explained.
