Government: New Argentine government announces tough austerity program

As announced during the election campaign, the new Argentine government of ultra-liberal President Javier Milei has announced a tough austerity program. The federal government will no longer tender public construction projects and will terminate contracts that have already been awarded and have not yet started, said Economics Minister Luis Caputo.

The transfer payments to the provinces will therefore be reduced to a minimum and subsidies for energy and local public transport will be reduced. Caputo also announced a sharp devaluation of the local currency, the peso.

“In Argentina we spend more than we earn. Financing this deficit creates problems. If you finance it through the printing press, the peso loses value,” said the new economy minister. “We have come to get to the root of the problem. We have to cure the addiction to the budget deficit.”

Many plans postponed or toned down

Milei was defended as Argentina’s new president on Sunday. He won the election with radical demands for an economic and political turnaround. He announced that he would introduce the US dollar as legal tender, abolish the central bank and many ministries and drastically cut social spending. He has now significantly moderated his tone and postponed or toned down many of his original plans.

Argentina is in a serious economic crisis. The inflation rate is over 140 percent, and around 40 percent of people in the once rich country live below the poverty line. South America’s second largest economy suffers from a bloated state apparatus, low industrial productivity and a large shadow economy that deprives the state of a lot of tax revenue. The national currency, the peso, continues to lose value against the US dollar and the mountain of debt is constantly growing.