Argentina sharply devalues its currency and cuts subsidies as part of shock economic measures
BUENOS AIRES, Argentina — Argentina on Tuesday announced a sharp devaluation of its currency and cuts to energy and transportation subsidies as part of shock measures new President Javier Milei says are needed to deal with an economic emergency.
Economy Minister Luis Caputo said in a televised message the Argentine peso will be devalued by 50% to 800 to the U.S. dollar from 400 pesos to the dollar.
“For a few months, we’re going to be worse than before,” Milei said, two days after the libertarian was sworn in as president of the second largest economy in South America and immediately warned of tough measures.
Milei said the country didn’t have time to consider other alternatives.
Argentina is suffering 143% annual inflation, its currency has plunged and four in 10 Argentines are impoverished. The nation has also a yawning fiscal deficit, a trade deficit of $43 billion, plus a daunting $45 billion debt to the International Monetary Fund, with $10.6 billion due to the multilateral and private creditors by April.
As part of the new measures, Caputo said the government is canceling tenders of any public works projects and cutting some state jobs to reduce the size of the government.
He also announced cuts to energy and transportation subsidies without providing details or saying by how much, and added that Milei’s administration is reducing the number of ministries from 18 to 9.
He said the measures are necessary to cut the fiscal deficit he believes is the cause of the country’s economic problems, including surging inflation.
“If we continue as we are, we are inevitably heading toward hyperinflation,” Caputo said. “Our mission is to avoid a catastrophe.”
The IMF welcomed the measures, saying they provide “a good foundation” for further discussions with Argentina about its debt with the institution.
“These bold initial actions aim to significantly improve public finances in a manner that protects the most vulnerable in society and strengthen the foreign exchange regime,” said IMF spokesperson Julie Kozack in a statement. “Their decisive implementation will help stabilize the economy and set the basis for more sustainable and private-sector led growth.”
The major figures in the former Peronist government of Alberto Fernández didn’t comment on the measures announced Tuesday.
“There’s no money,” has been a common refrains in Milei’s speeches, using it to explain why a gradualist approach to the situation is a non-starter. But he has promised the adjustment will almost entirely affect the state rather than the private sector, and that it represented the first step toward regaining prosperity.
Milei, a 53-year-old economist, rose to fame on television with profanity-laden tirades against what he called the political caste. He parlayed his popularity into a congressional seat and then, just as swiftly, into a presidential run. The overwhelming victory of the self-declared “anarcho-capitalist” in the August primaries sent shock waves through the political landscape and upended the race.
