In Argentina, President Javier Milei launched his “economic shock therapy.” He just devalued the peso by -50% in hopes of cleaning up the country’s finances. What is looming in this inflation-ravaged territory?
Javier Milei devalues the peso by -50% and begins his economic policy
“Dollarize” Argentina’s economy. This is the promise made by the newly elected president, Javier Milei. The controversial politician campaigned against Argentina’s catastrophic inflation and the devaluation of the peso fiat currency. Among other things, he plans to get rid of the central bank and use only the dollar.
This is what Javier Milei wants to agree with the secondary markets, which currently dictate the real price of the peso. Until then, the peso was worth around $400. But on the unofficial market individuals exchanged it rather around $800, as the dollar appreciates locally. It has also topped $1,000 several times.
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President of Argentina therefore, it announced the devaluation of the peso, for the fiat currency to return to its unofficial but real rate. As of 2019, the country effectively artificially maintains the value of the peso by controlling trade. But Argentines still faced catastrophic inflation, which reached +150% in a year.
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“Shock therapy” for the economy
Hence this “shock therapy” proposed by Javier Milei. The president plans drastic cuts in government spending, a gradual phase-out of the peso and some social assistance, which he says is unnecessarily expensive. In a recent televised address, he reiterated his plans and warned the people of Argentina ahead of difficult months:
” For a few months we will experience more difficult times than before, mainly regarding inflation. And that’s what I’m saying (…) because it is better to tell an inconvenient truth than a convenient lie. »
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International Monetary Fund (IMF) welcomed the decision of Javier Milea, considered “ambitious”. Kristalina Georgieva, director of the institution, stated:
“I welcome these decisive measures.(…)This is an important step towards restoring stability and restoring Argentina’s economic potential.»
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What about cryptocurrencies?
Although Javier Milei has a reputation as a “pro-crypto” president, he did not mention it in his first announcements. It should be recalled that despite the enthusiasm of a certain part of the crypto community, the very populist Milei never made any promises about cryptoassets. He most welcomed the principle of Bitcoin, which advocates “private sector“.
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The one we call the “Trump of Argentina” is therefore in the process of implementing his agenda. Will it be enough? The coming months will be crucial for Argentines: 40% of them currently live below the poverty line.
Source: BBC
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