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Argentina devalues peso more than 50pc to tackle economic crisis

BUENOS AIRES (AFP) – Argentina’s Economy Minister Luis Caputo announced on Tuesday the devaluation of the peso by over 50 per cent to the dollar, as the new government seeks to tackle the country’s deep economic woes.

“The official exchange rate will go to ARS800” to the dollar, up from ARS391, Caputo announced, part of a raft of “shock” measures to tackle triple-digit-inflation and cut spending.

He also announced a reduction in the state’s generous subsidies of fuel and transport, without saying by how much.

He said politicians had long supported the subsidies to “deceive people into believing that they are putting money in their pockets. But as all Argentines will have already realised, these subsidies are not free, but are paid with inflation.”

In a pre-recorded video message, Caputo took pains to explain to Argentines the cause of their decades of recurrent economic crises, debt, inflation and fiscal deficits.

Argentina’s Economy Minister Luis Caputo is seen on TV during an announcement of the new economic measures by the government of President Javier Milei, in Buenos Aires, Argentina. PHOTO: AFP

He compared the country’s chronic “addiction” to spending more than it earns to a household budget and said the country had posted a fiscal deficit for 113 of the past 123 years.

Caputo said the new government of President Javier Milei had inherited “a fiscal deficit of more than five-and-a-half” points of gross domestic product. “If we continue as we are, we are inevitably heading towards hyperinflation.”

“What we come to do is the opposite of what has always been done… to solve this problem at its roots, precisely so that we do not have to suffer these consequences anymore, so that we do not have to suffer more inflation, so that we do not have to suffer more poverty,” said Caputo.

Other spending cuts he announced include the suspension of all state advertising for a year – which he said had cost ARS34 billion in 2023. In addition “The state will not tender any more new public works, and will cancel approved tenders whose development has not yet begun. The reality is that there is no money to pay for more public works that, as all Argentines know, often end up in the pockets of politicians or businessmen on duty.”

He said infrastructure projects would be carried out by the private sector in future. Another measure would be cancelling the renewal of public jobs contracts that were less than a year old.

Milei has already slashed nine government ministries, which Caputo said would cut 34 per cent of all political jobs.