Argentina: Devaluation and austerity measures announced

Argentina: Devaluation and austerity measures announced

“There is no money to pay for works that often end up in the pockets of politicians and businessmen,” Caputo argued

Argentina’s Economy Minister Luis Toto Caputo Tuesday admitted people would be worse off for a couple of months while announcing in a recorded message the new measures adopted by the administration of President Javier Milei to bounce back from the crisis left behind by the previous government.

In a move to quickly achieve a fiscal balance, a devaluation of the Argentine peso was decreed together with cuts in public spending and subsidies.

Caputo underlined that the Government was bequeathed “the worst inheritance in its history,” due to which “Argentines are getting poorer and poorer.”

“The fiscal deficit exceeds 5.5 points of [the Gross Domestic] Product [GDP], with a Central Bank with an absolutely deteriorated balance sheet, without dollars in its assets and a monetary issue of more than 20 points of [the Gross Domestic] product, which has caused inflation to currently sail at 300% per year and punish Argentines every day,” the minister went on.

“Our mission is to avoid this catastrophe and, for this, we must recognize the genesis of the problem, which has always been the fiscal deficit,” he stressed. Hence, “it is fundamental to solve our problem of addiction to fiscal deficit … so that we do not have to suffer more inflation and poverty.”

 

 

In this scenario, Caputo announced that “State labor contracts with less than one year of validity will not be renewed” and that the national government’s advertising is suspended “for one year.”

He also recalled a reduction in the number of ministries from 18 to 9, and of secretariats from 106 to 54, which will result in the suppression of more than 50% of the managerial positions and 34% of all politically-linked jobs within the national government. He also said that “discretionary [fund] transfers -known as National Treasury Contributions or ATN- from the national government to the provinces will be reduced to a minimum.”

Caputo then announced that the peso/dollar parity would be set at AR$ 800 / US$ 1 while the so-called “credit card” dollar for transactions abroad, which includes the PAIS tax and other surcharges would be AR$ 1,320. This quotation also applies to home streaming services such as Netflix or Spotify.

The minister also announced an increase in non-agricultural export taxes while Government-funded allowances to people in need were to be upped by 50%, in addition to a halt of all public works and the reduction of energy and transportation subsidies through which politicians deceive “the people making them believe that they put money in their pockets, but this is paid for with inflation.”

“This is the right path because if we continue on the other path we are going to more poverty, inflation, and suffering but if we do our homework let us dream of the country we had 100 years ago,” Caputo explained.

“There is no money to pay for works that often end up in the pockets of politicians and businessmen,” he also pointed out.

Caputo also announced the end of the SIRA import system and its replacement with another scheme in which companies with no previous permits will need to be requested.

Regarding additional steps, the Economy Ministry said on X that the Central Bank (BCRA) “will announce tomorrow, after its board meeting, the measures related to monetary policy, interest rate and debt, complementing the announcements made by the Ministry of Economy.”