Argentina’s Newly Elected President, Javier Milei Implements Economic Shock Therapy: Currency Devaluation, Spending Cuts, and Ministry Closures

Argentina, under the new presidency of Javier Milei, has embarked on a series of drastic economic measures, including a 50% devaluation of the Argentine peso, cuts to energy and transportation subsidies, and the closure of several government ministries.

Economy Minister Luis Caputo announced the currency devaluation, adjusting the exchange rate from 400 pesos to the U.S. dollar to 800 pesos to the dollar, citing the urgent need to address the economic “emergency” facing the country. The libertarian Milei, who assumed the presidency just two days prior, emphasized the necessity of these measures, stating that Argentina couldn’t afford to consider alternative solutions.

Argentina is grappling with severe economic challenges, including 143% annual inflation, a depreciating currency, and a significant portion of the population living in poverty. The country faces a daunting fiscal deficit, a trade deficit of $43 billion, and a substantial debt of $45 billion to the International Monetary Fund (IMF), with $10.6 billion due to multilateral and private creditors by April.

As part of the economic restructuring, Minister Caputo also announced the cancellation of tenders for public works projects and reductions in state jobs to streamline the government. Additionally, cuts to energy and transportation subsidies were introduced, although specific details were not provided.

The IMF welcomed these bold measures, recognizing their potential to improve public finances and stabilize the economy. IMF spokesperson Julie Kozack stated that the decisive implementation of these actions would set the foundation for more sustainable and private-sector-led growth.

In a separate move, President Milei fulfilled his election promise by closing the Ministry of Culture, merging its budget and operations into a new Ministry of Health and Human Capital. This new ministry incorporates several former ministries, such as Health, Social Development, Education, Labour, and Women, Gender, and Diversity. The restructuring aims to streamline government functions and reduce expenditures.

President Milei, known for his flamboyant campaign promises, gained attention by emphasizing significant spending cuts. His administration has already cut nine government ministries, resulting in a 34% reduction in public sector jobs. Milei’s unconventional approach to governance has sparked both support and skepticism, as Argentina navigates a path to economic recovery under its new leadership.