Since taking office in 2023, Javier Milei has had to adapt many of his radical ideas to the realities of governing Argentina. Chinese officials he once called “assassins” turned into “great trade partners.” The Central Bank he pledged to burn down is still standing. Talk of dollarisation has ceased.
He’s also maintained a strong grip on the peso – a currency he once called “excrement” – as part of a push to deliver on his main promise: slashing inflation, which is running at its slowest annual pace since 2017. And despite mounting investor pressure, Milei isn’t ready to let the currency float – not when Argentina is still dealing with the fallout of its deep addiction to printing money to fix fiscal problems.
“In Argentina, given its history, it’s very likely that people believe that if the exchange rate jumps, prices will jump too,” Milei told Bloomberg News Editor-in-Chief John Micklethwait in an interview at the World Economic Forum in Davos. “I’m not going to get angry at how people form their expectations, because for 90 years, reality proved them right.”
When Milei will finally subject the peso to pure market forces has been a topic of investor intrigue since the libertarian economist surged to the presidency. But the caution is part of a pragmatic posture he has exhibited in office.
Keeping the currency on a tight leash was particularly crucial in the tumultuous weeks preceding October midterm elections, when fears that his party was headed toward a disastrous defeat led investors to dump Argentine assets. That tested the Central Bank’s grip on the exchange rate while generating concern that a disorderly devaluation would reignite inflation and undermine voter trust in Milei’s economic reform agenda.
He ultimately emerged victorious, thanks in no small part to extraordinary support from the US Treasury. Markets rebounded – and investors doubled down on the push for Milei to abandon currency controls and allow the peso to float.
The positive momentum, they argued, would have made it easier to absorb the political fallout from a likely devaluation and its inflationary shock. In the longer term, he could even benefit from faster economic growth driven by an industrial sector that has been squeezed competitively by a strong peso.
But Milei remains cautious. After letting the peso trade between bands last year, he gently loosened the strings in January, with a new framework that allows the range to expand based on inflation instead of a fixed one percent per month. And he clearly doesn’t think Argentina’s prepared to move faster yet.
The current policy, he said, remains the safest way to limit volatility and teach Argentines not to fear the day when the peso finally does float freely.
The government, meanwhile, will be more confident in the currency’s stability when it is able to fix other problems left behind by his predecessors, including monetary overhang, Milei added.
“When you come and have to run a country, you don’t start from zero,” Milei said. “You need to confront history, and Argentina has a very bad history.”
by Ignacio Olivera Doll & Walter Brandimarte, Bloomberg
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