Argentine peso devalued as govt targets ‘root problem’ of fiscal difficulties

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Newly elected Argentine President, Javier Milei, assumed office on Sunday 10 December, and has not wasted any time in implementing his wide-ranging fiscal policies.

The right-wing libertarian president, who describes himself as an ‘anarcho capitalist’, and his Economic Minister, Luis Caputo, unveiled new economic measures this week.

A particular target is reduction of what the newly formed administration believes is an ‘addiction to a fiscal deficit’ present in Argentine economics, in the words of Minister Caputo.

As a result, the peso has been weakened by over 50% from 366.5 per dollar to 800 per dollar, whilst the Central Bank of Argentina has been tasked with further devaluation of 2% per month. 

Argentina has been facing an economic crisis for many years now which has seen financial instability and difficult living standards for citizens. In Caputo’s view, successive governments have been attacking the ‘consequences but not the problem’.

“What we’ve come to do is the opposite of what they always did, and that’s solve the root problem,” the Economic Minister continued in a televised address.

The devaluation of the peso has also been accompanied by public spending cuts, with both policies falling sharply in line with Milei’s stated objectives, which largely focus around decentralisation and a rolling back of the state.

Devaluation could also indicate a move towards one of his most widely publicised potential policies, that being a replacement of the Argentine peso with the US dollar as Argentina’s main currency.

In addition, Milei has also been a strong proponent of cryptocurrency. Whilst he has not called for a similar policy to El Salvador, the first country to adopt Bitcoin as an official currency, he does believe that control over crypto should be handed over to the private sector.

Lastly, the Central Bank may have been instructed to devalue the peso by 2% per month, but it could also one day find itself the target of Milei’s reforms – the new President has been vocal in his desire for the complete abolition of the bank.