Argentina’s Finance Minister devalues peso, announces spending cuts 

By December 13, 2023

Buenos Aires, Argentina — Argentina ‘s new Finance Minister, Luis Caputo, on Tuesday announced a series of economic measures the administration of President Javier Milei will undertake in an effort to turn the country’s battered economy around. Chief among them, Argentina devalued the peso by 50%. 

Caputo released a video statement with a list of financial measures to, among other things, reduce public spending, and also warned of an impending inflation spike that will get worse before it gets better. 

“We are going to be worse than before for a few months, particularly in terms of inflation,” said Caputo. “It is preferable to tell an uncomfortable truth than a comfortable lie.”

The minister said the administration was “inheriting a repressed inflation that’s already uncovering,” blaming the administration of former President Alberto Fernández for an “ultra-expansive monetary policy” and of price controls that failed to keep the economy in check. 

“Everyone sees it on the supermarket shelves, several prices have increased almost 100%,” said Caputo, referring to stores increasing their prices between 25% and 100% in the past week, depending on the product. 

Caputo said the official exchange rate would change from around 400 ARS to 800 ARS per US dollar, a devaluation of 50%. The measure will come with higher provisional taxes for imports and exports until the situation normalizes, he added.

The minister announced other cost cutting measures, including: 

  • Not renewing national government contracts for workers that were signed this year. 
  • Suspending advertising payments made by the government to the national press for one year. 
  • Reducing the number of national ministries from 18 to nine, and the number of national secretaries from 106 to 54, with the aim of reducing public service spending by 50%. 
  • Reducing the money that the national government sends to the provinces to the minimum required. 
  • Stopping any government spending on infrastructure. The private sector will invest in infrastructure going forward. 
  • Reducing subsidies for fuel and public transport. 
  • Keep only the social welfare plans that are directly received by the ones who need it, without intermediaries, and work-incentive plans like “Potenciar Trabajo.”
  • Removing the licensing system for importing goods into the country. 
  • Duplicate the Universal Child Allowance welfare plan and increase the food assistance card programme by 50%. 

The measures were celebrated by the head of the International Monetary Fund, Kristalina Georgieva on social media.

Argentina elected Milei, a controversial, self-described anarcho capitalist whose political stunts include wielding a chainsaw to symbolize his spending cuts, amid its worst economic crisis since the turn of the century. Annualized inflation hit just over 140% in October, and the country has about USD $400 billion in debt, representing around 89% of the country’s gross domestic product (GDP). 

Caputo, 58, is an economist who served as Finance Minister during the administration of Mauricio Macri (2015-2019). He headed the country’s Central Bank in 2018, but resigned months after taking the position.