“Miley took a saw and started cutting”: he devalued the Argentine currency by 54% in a couple of days

The “shock treatment” promised by newly elected Argentine President Javier Miley has begun, with a 54% devaluation of the peso and a series of spending cuts already welcomed by the International Monetary Fund.

As he promised during the election campaign, he took his “saw” and began to saw. The new government raised the official exchange rate up to 800 pesos per dollarEconomy Minister Louis Caputo said in televised remarks after local markets closed on Tuesday.

#FacciamoRete #FacciamoInformazione#Argentina, il primo provvedimento della nuova Amministrazione #Milei è LA SVALUTAZIONE DEL PESO ARGENTINO: per comperare un dollaro ieri servivano 400 pesos, oggi 800…😳
https://t.co/WiMUIcAxjG pic.twitter.com/1PsNToW0IA

— giulia33 (@giu33liana) December 13, 2023

Before Miley came to power, it was 366.5 pesos per dollar. “There is no more money,” Caputo repeated repeatedly in his interview, adding that Argentina must solve the problem of “dependence” on the budget deficit. Other measures have been announced, including halving the number of ministries, cutting transport in the provinces and suspending public works!

The government will also cut subsidies in the transport and energy sectors, among other things. At the same time, Argentina will increase some social security programs, Caputo said.

NEW OFFICIAL #ARGENTINA's PESO TO DOLLAR RATE STARTING TODAY – 800 ARS$ to 1 USD$

This is a devaluation of the Argentine peso of about 100% in a day, a sincere price compared to the previous fake rate of 360 pesos per dollar. pic.twitter.com/EeYvnbQhpc

— 𝗡 𝗢 𝗜 𝗦 𝗘 ⚡ A L E R T S (@NoiseAlerts) December 13, 2023

The IMF praised the new government’s “bold initial actions” shortly after Caputo’s announcement. “Their decisive implementation will help stabilize the economy and lay the foundation for more sustainable private sector-led growth.”spokeswoman Julie Kozak said in a statement.

For her part, IMF Managing Director Kristalina Georgieva wrote the following on X, formerly Twitter: “I welcome the decisive action announced today by President @JMiley and his economic team to address Argentina’s significant economic challenges – an important step toward restoring the country’s stability and economic potential.”

In a daunting inauguration speech on Sunday, Miley warned that Argentines would have to “endure months of pain as he works to pull the country out of the economic crisis inherited from his predecessor.” Inflation already exceeds 140% per year and prices are expected to soar by 20-40% in the coming months, the new right-wing president estimated.

The government closed Argentina’s export registry on Monday, a technical move that often heralds a currency devaluation or major policy change. The central bank also announced on Monday that the official foreign exchange market would operate with a limited number of transactions – a restriction it said would be lifted on Wednesday.

Devaluation has long been considered inevitable. Before Miley took office, markets had expected the currency to fall about 27% in the new government’s first week, while investment banks such as JPMorgan and local private advisory firms suggested it could weaken by about 44%. Grocery stores had already raised prices and banks had offered to sharply cut retail prices just hours before Tuesday’s announcement.

Argentine authorities have for years slowed the decline of the peso in the official market through currency controls and import curbs in an attempt to protect dwindling foreign exchange reserves. This accumulation of capital controls has pushed up dozens of exchange rates, making it difficult to do business and limiting investment in South America’s second-largest economy.

During the election campaign, Miley promised to completely abolish the currency, replacing it with the US dollar. He also promised that Argentina will not join BRICS, which will be officially done at the beginning of the new year. It’s unclear that Miley is as interested in Argentina’s economy as he is in tying the country back into the U.S. sphere of influence.

For this to happen, the country must remain defenseless against the competing BRICS geopolitical bloc. After all, the BRICS assumed that the development bank would be used at reasonable interest rates to finance Argentina.

However, China extended a hand of friendship to the new president, with whom it “hopes to cooperate,” and Miley himself sent a letter to Chinese President Xi Jiping with a request to “preserve Chinese-Argentine relations and what was agreed upon, to trade exclusively in national currencies.”

This letter took the Americans by surprise. It may take several days to understand the new president’s policies. After all, he is unpredictable for everyone.

#Milei ya le fue a llorar a #China.

"No hago transacciones con comunistas y por lo tanto no habrá negocios con China"

Javier Milei

Lo primero que ha hecho #MileiPresidente es enviar una carta a Xi Jinping rogándole mantener las relaciones comerciales entre China y #Argentina pic.twitter.com/jZzkd89dNb

— Manel Márquez 🔻 🇵🇸 (@manelmarquez) December 13, 2023

#China stands ready to work with the new government of #Argentina to advance the continuous and steady development of the China-Argentina comprehensive strategic partnership, Foreign Ministry spokesperson Mao Ning told a regular press conference on Wed, in response to a question… pic.twitter.com/smlJCNbSBR

— Global Times (@globaltimesnews) December 13, 2023

Miley knows that to return Argentina to American hands, without funding, he would have to reduce the country’s standard of living to about half of what it is today. That is why he asked citizens to be patient for several months. The image of late former Argentine President Fernando de la Rua fleeing by helicopter still haunts the country’s politicians.

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