Javier Milea’s government’s first economic measures – The Post

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Argentina’s Economy Minister Luis Caputo has announced that the government is devaluing the value of Argentina’s peso by 50 percent against the US dollar. The official exchange rate will be set at 800 pesos to 1 dollar, up from around 360 currently.

It is the first measure by the government of Javier Milea, an ultra-liberal and far-right economist who won the presidential election and took office on Sunday. Milei has to face a very serious economic crisis, inflation at 147 percent and rampant poverty, and in the election campaign he showed that he has radical and bizarre ideas on how to do this: he wants to cut public spending to the bone, dismantle the welfare state, replace the peso with the US dollar and close the central bank.

Rather, it was expected that among the first measures would be the devaluation of the national currency. Argentina has been dealing with very high inflation for years, and the peso is a relatively weak currency compared to others, such as the stronger ones with which most international trade takes place, such as the dollar or the euro. Since last year, the exchange rate has been kept fixed at 360 pesos to 1 dollar to avoid excessive loss of purchasing power of the population, which would have to pay for many more imports of foreign goods in dollars at a higher market-set exchange rate.

However, the exchange rate established by law, despite its short-term social goals, creates distortions in the long term because it does not take into account the real value of the currency: so much so that the black exchange market is very active in Argentina. , where the exchange of the so-called dollar blue for a much higher and more realistic exchange rate than the official one. The devaluation partially allows these distortions to be corrected: the official exchange rate approximates the unofficial exchange rate, which is approximately 1,070 pesos to 1 dollar.

In the short term, Argentines will pay more for foreign goods, with the result that the devaluation is likely to cause inflation to rise further. Secretary Caputo said “we’re going to be worse off than before for a few months” but “this is the right path.”

– Listen to Globo: Who is Javier Milei?

Minister Caputo also mentioned some measures to reduce public spending: the government will reduce energy and transportation subsidies and cancel all public works projects that have not yet started. The number of ministries will be reduced from 18 to 9, and other departments will also be reduced. “There’s no more money, we can’t continue to spend more than we take in,” Caputo said.

The International Monetary Fund said in a statement that it welcomed the new measures, arguing that they would help stabilize the economy and lead to sustainable growth over time. Argentina is the fund’s largest debtor and owes it more than $40 billion, amassed in recent years through various rescue plans.

– Read also: Argentina’s economic problems

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