Argentina: Javier Miley’s government announces peso devaluation by more than 50%

A radical solution to fill the colossal deficit. The Argentine government of ultra-liberal President Javier Miley, inaugurated on Sunday, announced on Tuesday a deep devaluation of more than 50% of the peso, the national currency, to 800 pesos to the dollar to stabilize an economy plagued by inflation and chronic crisis. duty.

The devaluation, designed to boost purchasing power, is part of a series of “emergency” measures announced by Economy Minister Luis Caputo, including cuts to government subsidies for energy and transport. President Miley reaffirmed on Sunday a colossal deficit reduction target of 5% of GDP and warned that “the situation will get worse” in the short term, paralleling stagflation in 2024 (inflation combined with stagnant activity).

“New financial authorities”

According to statements in recent weeks, energy and transport subsidies are under attack in a structurally oversubsidized economy; money emission by the Central Bank, which may be limited or even stopped; a dense public sector of over 3.4 million people, or over 18% of total employment, the highest in Latin America.

Among the “arbolitos”, street changers at a parallel rate in the tourist center of Buenos Aires, the usual barometer of the surrounding anxiety, the exchange of the current volume was concluded at a price of 1,000 pesos per dollar on Monday evening, against 980 a little earlier. Still 2.5 times more expensive than the official price. In anticipation of the announcements, the Central Bank on Monday acted slowly in the foreign exchange market, as a quasi-holiday, officially, to give time to the “new financial authorities” to get comfortable, including the president of the institution.

Miley, for his part, chaired the first meeting of his cabinet on Monday, which was deliberately limited to nine ministers due to austerity measures. The morning meeting is at 8:30 a.m., which Vice President Victoria Villaruel said she wants to make “a very important habit for civil servants who start working early, like any citizen” of Argentina.