As part of his successful recent campaign, newly elected Argentina President Javier Milei laid out a somewhat radical plan for bringing the nation’s runaway inflation rate under control.
The most recent estimate put the annual inflation rate at a shocking 143% with about 40% of all citizens living below the poverty line. Argentina is also mired in debt, owing $45 billion to the International Monetary and facing another $10.6 billion in debt that will come due next year.
Furthermore, the nation is saddled by a whopping $43 billion in trade deficits.
While Milei proposed replacing the nation’s currency, the peso, with a U.S. dollar-based economy, the strategy will take some time to play out. In the meantime, the peso is expected to continue decreasing in value as compared to the dollar.
According to Minister of Economy Luis Caputo, the national currency would be devalued to roughly half of its former 400-to-1 exchange rate as the nation continues taking drastic measures to address the “emergency” currently facing its economy.
Argentina devalued the peso by 54%, weakening the official exchange rate to 800 pesos per dollar, and announced massive spending cuts to eliminate its primary fiscal deficit next year as the first steps in President Javier Milei’s shock-therapy program https://t.co/gmgDowAtGd pic.twitter.com/OcMwAA2AW4
— Bloomberg TV (@BloombergTV) December 13, 2023
“For a few months, we’re going to be worse than before,” he admitted.
Caputo detailed other measures being put in place to forestall an even worse economic calamity, including a reduction in government jobs and the cancelation of bids for public works projects.
While his announcement was short on some details, he insisted that the overarching goal was to cut down the nation’s deficit, which he described as the “root of all of the nation’s economic issues.”
Acknowledging the short-term pain these steps will have, Caputo said it will be far more preferable to simply following the nation’s current path.
“If we continue as we are, we are inevitably heading toward hyperinflation,” he warned. “Our mission is to avoid a catastrophe.”
Manuel Adorni, a spokesperson for the president, offered a similarly bleak assessment during a recent press conference.
“This government has not been left with a patient with a toothache,” he asserted. “We have found a patient in intensive care on the verge of dying. We are going to do everything we can not only to bring down the fever but to save him from the disease that is killing him.”