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ECONOMY | 15-12-2023 09:13

Argentina still plans to dollarise, Milei’s economy chief says

“The objective remains the same — to get to dollarisation,” declares Economy Minister Luis Caputo.

President Javier Milei still intends to eventually scrap Argentina’s peso after sharply devaluing the currency as part of an initial round of shock therapy, according to his economy minister. 

“The objective remains the same — to get to dollarisation,” Luis Caputo told LN+ TV in his second straight night-time interview.

Caputo, who announced the new government was slashing the value of the peso by more than half late Tuesday, declined to offer a timeline for abandoning the currency altogether but conceded it’s not a near-term goal.

“The president always campaigned on dollarisation and closing the Central Bank,” Caputo said. “Those rallying flags haven’t been set aside.”

Echoing comments by Central Bank officials earlier in the day, the economy minister said this week’s aggressive currency devaluation was intended to start re-anchoring inflation expectations. Annual consumer price gains galloped past 160 percent even before Milei’s opening salvo, which also included aggressive spending cuts, amid expectations the pain will become more acute in the near term.

Monthly inflation hit nearly 13 percent in November, according to data released Wednesday by the national statistics agency.

Instead of gradually devaluing, the new government opted instead for “overshooting” to bring the official rate near those seen in parallel markets, Caputo said. The goal is to “contain this repressed inflation,” as well as expectations, and keep monthly price gains from topping 20 percent, he added. 

The so-called 'blue chip swap,' which mirrors what Argentines can get for their money on the black market, was at about 1,040 pesos per dollar on Thursday. After the initial front-loaded cut, which brought the official rate to 800 pesos from about 365 previously, Caputo reiterated the official rate will be reduced by 2% each month going forward. 

by Patrick Gillespie, Bloomberg

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