by Jorge Otaola and Walter Bianchi
BUENOS AIRES (Reuters) – Argentina’s new Economy Minister Luis Caputo unveiled shock therapy on Tuesday, announcing several measures, including a more than 50% devaluation of the peso, aimed at resolving the country’s worst economic crisis. has known the country for decades.
Luis Caputo said the plan would be painful in the short term, but was necessary to reduce the budget deficit and bring down inflation in Argentina.
“The goal is simply to avoid a catastrophe and get the economy back on track,” Luis Caputo said in a recorded speech.
He said the country needed to tackle a deep budget deficit which he estimated at 5.5% of gross domestic product (GDP).
“We are here to get to the root of the problem,” said Luis Caputo. “To do this, we must end our dependence on the budget deficit.”
Argentina is struggling with inflation near 150%, central bank reserves are in the red and two-fifths of the population live in poverty. The country has taken out a loan of 44 billion dollars (40 billion euros) from the International Monetary Fund (IMF).
The Minister of Economy unveiled a set of measures which, in addition to the devaluation of the peso, provide for a reduction in subsidies to the energy sector and cancel public works tenders, after the inauguration on Sunday of President Javier Milei.
The IMF called the measures “bold” and said in a statement that they would “help stabilize the economy and lay the foundations for more sustainable, private-sector-led growth” after the “severe setbacks policies” of recent months.
(Reporting Jorge Otaola, Walter Bianchi and Nicolas Misculin, with contributions from Eliana Raszewski, Lucila Sigal, Maximilian Heath and Rodrigo Campos; French version Camille Raynaud)
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