The Minister of Economy of Argentina, Luis Caputohas announced the first ten economic measures that they will carry out. As he explained, the objective of the Government of Javier Milei It is reducing the fiscal deficit that is the cause of the high inflation and poverty suffered by the country.
“If we continue as we are, We are inevitably going to hyperinflation.”Caputo warned. In fact, he also warned that it would be a “catastrophe” if a inflation rate of 15,000% annually. For this reason, he explained that one of the main problems that the Milei Executive will face is the recovery of fiscal balance.
Among the most notable measures of this “urgency” package is the currency devaluation by 50%, the suspension of the government advertising in media, reduction in the number of ministries and government secretariats, cutting transfers from the national State to the provinces to a minimum or reducing the energy and transportation subsidies to avoid the risk of hyperinflation. Furthermore, Caputo has also confirmed that no new public works will be tendered nor will employment contracts of less than one year be renewed in the State.
Devaluation of currency
With this 50% devaluation of the Argentine currency, the official exchange rate will jump 400 pesos per US dollar at 800 pesos per unit. According to the head of Economy, this new official exchange rate will give the productive sectors the “adequate incentives to increase their production”mainly to the export sector.
With monetary reserves at critical levels, the Government’s objective seems to be to encourage foreign currency income through exports.
In this scenario, he announced a provisional increase in the iimport taxes and of whats export duties of non-agricultural products.
However, the Government of Javier Milei has not commented on the multiple exchange restrictions that he promised to raise during the campaign or how he will solve the problem of heavy liabilities of the Central Bank.
We are going to be worse than before in terms of inflation for a few months
However, Caputo warned that the coming months will be difficult in terms of prices due to the “legacy of repressed inflation” left by the Government of Alberto Fernández (2019-2023), with a rate of inflation of 142.7% year-on-year last October. “We are going to be worse for a few months than before in terms of inflation,” explained the head of the Economy portfolio.