Argentina devalues ​​peso by more than 50% as part of emergency economic reforms

New york
CNN
—

Argentina will lower the peso by more than 50% as part of an emergency to help the country’s economy, the country’s economy. It was announced by Minister Luis Caputo on Tuesday.

The drastic change has changed the official exchange rate to 800 pesos to the dollar from 365 pesos and came a few days into the administration of President Javier Miley.

Miley insisted that the peso should be removed and replaced with the dollar so that the economy would recover. The peso has been specially supported for years by capital controls, and its value has fallen by about 52% this year against the US dollar.

Argentina’s central bank in recent years has printed more pesos to help the country’s government avoid its debt crisis. That is what has caused the increase in prices.

The move marks the first of many steps to reduce hyperinflation, which led Argentina’s central bank in October to raise its benchmark interest rate to 133%.

Caputo on Tuesday reiterated Miley’s “no money” campaign theme as he outlined other measures, including job cuts. new government. plans to not renew labor contracts that are more than one year old and reduce energy and transportation assistance.

“For a few months we will be worse off, especially in terms of the economy,” he said.

Regarding government jobs, Caputo said “there is no money to pay for jobs that usually end up in the pockets of politicians and businessmen”.

The International Monetary Fund said Tuesday after Caputo’s speech that it supports the new plans.

“The staff of the IMF welcomes the measures announced earlier today by the new Minister of Economy of Argentina, Luis Caputo. These first bold actions are intended to improve the public finances in a way to protect the most vulnerable in society and strengthen the management of foreign exchange,” said Julie Kozack, IMF communications director, in a press release.

;In his victory speech on Sunday, Milei gave some details of his economic plan. But the self-proclaimed “anarcho-capitalist” – who used a chain on the campaign trail to represent his plans to reduce state spending – promised “big” changes.

“I want you to be aware that we will begin the reconstruction of Argentina after more than a hundred years of decline, rewriting the ideas of freedom, although we will have to endure a difficult period, of we will move forward,” Miley, a wealthy woman, told the crowd like her oath of office.

Although Caputo did not mention a plan on Tuesday to remove the peso, and revive the economy of the South American country. Argentina is needed to exchange all pesos held by residents and businesses for dollars and assign a dollar value to all assets and contracts.

That would take the role of controlling the country’s monetary policy – the power to control interest rates and print money – from the Central Bank of Argentina to the US Federal Reserve.

A many challenges It is indicated on a bid to advertise Argentina, the main factors are the lack of money to send the peso, and it is unlikely that the only change will be save the country’s economy.

While other countries have taken this step – including Ecuador, El Salvador and Panama – none have been as big as Argentina.

Milei has already met with high-ranking representatives of the United States since taking office and his economic department worked with the IMF to change the country’s policies in abroad and revive its economy.