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Agence France-Presse

Argentina devalued its currency by more than 50 per cent in a set of “shock” measures aimed at reviving a crumbling economy and tackling triple-digit inflation.
The government of President Javier Milei, a libertarian who swept from obscurity to the top office vowing to chainsaw spending, also announced cuts to generous state subsidies and a halt to all new public construction projects.
In a pre-recorded video message on Tuesday, Economy Minister Luis Caputo took pains to explain to Argentines the causes of their decades of recurrent economic crises, debt, inflation and fiscal deficits.
Annual inflation is currently at 140 per cent and poverty levels at 40 per cent in Latin America’s third-biggest economy.

The government coffers are also empty, and Milei has repeatedly said: “There is no money”.
Caputo said the country had an “addiction” to spending to more than it earns, and had posted a financial deficit for 113 of the past 123 years.
Argentina’s Milei warns of ‘shock’ austerity as he takes office
“If we continue as we are, we are inevitably heading towards hyperinflation,” said Caputo, adding that for the first time the government would tackle the problem “at its roots”.
This is “precisely so that we do not have to suffer these consequences any more, so that we do not have to suffer more inflation, so that we do not have to suffer more poverty,” said Caputo.
The International Monetary Fund (IMF) – to which Argentina owes US$44 billion – welcomed the measures.
“These bold initial actions aim to significantly improve public finances in a manner that protects the most vulnerable in society and strengthen the foreign exchange regime,” the IMF said in a statement.
Caputo announced the exchange rate would slide to 800 pesos to the dollar, from about 391 in recent days, a devaluation of a little over 50 per cent
The Argentine government has for years strictly controlled the exchange rate of the peso to the dollar, which analysts have derided as an expensive fiction.

There was no immediate mention of lifting the controls which have birthed a multitude of dollar exchanges and a thriving black-market where the dollar has sold for up to three times the official rate at times.
“The devaluation was much, much more than I think most people had expected,” said Nicolas Saldias, a senior analyst with the Economist Intelligence Unit, adding this would have “significant impacts on inflation”.
Milei and his government have doubled down on the message that inflation, and the general economic situation, will worsen significantly before they get better.
“We are going to be in poverty, and the situation is going to be much harder,” said teacher Gabriel Alvarez, 57, reacting to the announcements.
New Argentine leader Milei unlikely to dial back China ties: analysts
Caputo also announced a reduction in the state’s generous subsidies of fuel and transport – with bus tickets costing only a few cents – without saying by how much.
He said politicians had long supported the subsidies to “deceive people into believing that they are putting money in their pockets. But as all Argentines will have already realised, these subsidies are not free, but are paid with inflation”.
Other spending cuts he announced include the suspension of all state advertising for a year – which he said had cost 34 billion pesos in 2023.
In addition “The state will not tender any more new public works, and will cancel approved tenders whose development has not yet begun.
“The reality is that there is no money to pay for more public works that, as all Argentines know, often end up in the pockets of politicians or businessmen on duty.”
He said infrastructure projects would be carried out by the private sector in future.
Another measure would be cancelling the renewal of public jobs contracts that were less than a year old.
Milei has already slashed nine government ministries, which Caputo said would cut 34 per cent of all political jobs.
However, in line with his promise to maintain welfare to the poorest, his government increased a child allowance and food card by 50 per cent.
Saldias said this was “a really clear signal of how severe the inflationary crisis is going to be”.
Argentines remain haunted by hyperinflation of up to 3,000 per cent in 1989/1990 and a dramatic economic implosion in 2001.


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Americas and the Caribbean

Argentina devalues peso more than 50% as part of ‘shock’ measures

Argentina’s new president, Javier Milei, during his inauguration ceremony in Buenos Aires on Sunday. Photo: AFP

Customers watch a television as Argentina’s Economy Minister Luis Caputo announces measures. Photo: Bloomberg

A store displaying a sign with exchange rates in Buenos Aires in November. Photo: AFP

Argentina’s Javier Milei warns of ‘shock’ austerity as he takes office

Argentina’s newly sworn-in President Javier Milei speaks outside the Congress in Buenos Aires, Argentina. Photo: AP

Argentina’s newly sworn-in President Javier Milei greets supporters after his swearing-in ceremony in Buenos Aires. Photo: AP

Argentina’s President Javier Milei is embraced by Ukraine’s President Volodymyr Zelensky. Photo: Reuters

Argentina’s newly sworn-in President Javier Milei and his sister Karina ride a car heading to the government house in Buenos Aires. Photo: AP

New Argentine leader, China critic Javier Milei unlikely to dial back bilateral ties: analysts

Javier Milei, Argentina’s president-elect, pauses while addressing supporters at his campaign headquarters in Buenos Aires on Sunday. Photo: AP

Javier Milei, presidential candidate of the Liberty Advances coalition, speaks at his campaign headquarters after polls closed for Argentina’s general elections in Buenos Aires on Wednesday. Photo: AP

China invested US$50 million to build a space station in Patagonia in southern Argentina. Photo: Reuters

Sergio Massa, Argentina’s economy minister, seen giving a campaign speech in Buenos Aires on Sunday, lost the run-off election to Javier Milei, who will be the country’s next president for four years from December. Photo: Xinhua

Argentina’s president-elect Javier Milei and Donald Trump: how alike are they?

Javier Milei is a showman like Donald Trump. Photo: AP

Javier Milei, a showman like Donald Trump. Photo: AP

Donald Trump on the campaign trail in Florida. Photo: Reuters

Argentina’s president-elect Javier Milei has been referred to as the ‘Trump of the Pampas’. Photo: AP

Who is Javier Milei? How wild-haired TV pundit ignited Argentine rage to become president

Javier Milei has swept to victory in Argentina’s presidential election. Photo: AP

Javier Milei brandishes a chainsaw during a campaign event in September. Photo: AP

President-elect Javier Milei celebrates with his sister Karina Milei. Photo: AP

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World

Americas

Argentina takes the first steps in President Javier Milei’s economic shock-therapy programme
South America’s second largest economy is on its knees after decades of debt and mismanagement


Argentina is taking its first steps in President Javier Milei’s economic shock-therapy programme, aimed at reviving a crumbling economy and tackling triple-digit inflation.


Argentina

Javier Milei

Argentina devalues peso more than 50% as part of ‘shock’ measures

Argentina takes the first steps in President Javier Milei’s economic shock-therapy programme South America’s second largest economy is on its knees after decades of debt and mismanagement

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Argentina takes the first steps in President Javier Milei’s economic shock-therapy programme

South America’s second largest economy is on its knees after decades of debt and mismanagement