Argentina's New President Kicks Off His 'Shock Measures'

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 that the Argentine peso will be devalued by 50%, to 800 pesos to the US dollar, from the previous 400 pesos to the dollar. "For a few months, we're going to be worse than before," Caputo said, two days after the libertarian Milei, a 53-year-old economist, was sworn in as president of the second largest economy in South America and immediately warned of tough measures. Milei has said the country didn't have time to consider other alternatives, per the AP.

Argentina is suffering 143% annual inflation, its currency has plunged, and 4 in 10 Argentines are impoverished. The nation also has a yawning fiscal deficit and a trade deficit of $43 billion, plus a daunting $45 billion debt to the International Monetary Fund, with $10.6 billion due to private creditors and others 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, adding that Milei's administration is reducing the number of ministries from 18 to nine. 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. As a candidate, Milei pledged to purge the political establishment of corruption, eliminate the nation's Central Bank he has accused of printing money and fueling inflation, and replace the rapidly depreciating peso with the US dollar. After winning, however, he tapped Caputo, a former Central Bank president, to be his economy minister, as well as one of Caputo's allies to helm the bank, appearing to have put his much-touted plans for dollarization on hold. More here.

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