2023-12-13 02:37:06
A radical decision to make up for a colossal deficit. The Argentine government of ultraliberal President Javier Milei, inaugurated on Sunday, announced on Tuesday a strong devaluation of more than 50% of the peso, the national currency, going to 800 pesos to the dollar, to stabilize the economy plagued by inflation and a chronic debt.
The devaluation, intended to increase purchasing power, is part of a series of “emergency” measures announced by Economy Minister Luis Caputo, including a reduction in public subsidies for energy and transport. President Milei reaffirmed on Sunday the colossal objective of reducing the deficit by 5% of GDP, and warned that “the situation will get worse” in the short term, in parallel with stagflation in 2024 (inflation coupled with stagnation of activity) .
“New financial authorities”
According to statements in recent weeks, energy and transport subsidies are in the crosshairs, in a structurally over-subsidized economy; monetary issuance by the Central Bank, which could be restricted or even stopped; a dense public sector, of more than 3.4 million people, or more than 18% of total employment, the highest ratio in Latin America.
Among the “arbolitos”, street money changers at parallel rates in the tourist center of Buenos Aires, a usual barometer of ambient anxiety, exchanges of a current volume were negotiated at 1,000 pesos to the dollar Monday evening, against 980 a little earlier. At 2.5 times the official price all the same. Pending the announcements, the Central Bank operated slowly on the foreign exchange market on Monday, like a quasi-holiday, officially to give time to the “new financial authorities” to settle in, including the president of the institution. .
Milei, for his part, chaired a first meeting of his cabinet on Monday – deliberately limited to nine ministers, due to austerity. Morning meeting, at 8:30 a.m., which its vice-president Victoria Villaruel says she wants to establish as “a very important habit, of civil servants who work early, like any citizen” of Argentina.
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