Milei says he won’t devalue, downplays importance of currency controls

August 15, 2024

2 minutes read

Argentine President Javier Milei said that he is “not willing to devalue [the peso] and ruin Argentines” and defended the government’s decision to not lift the currency controls known as “cepo” in a speech to close the Council of the Americas event on Wednesday.

Referencing the currency controls, the president said they can’t be eliminated without solving structural issues first and claimed that saying that the economy cannot grow under these conditions is a “falacy.”

“Nobody wants to get out of the ‘cepo’ more than me but doing so without fixing structural issues first would only worsen the problem,” he said, adding that there are already elements pushing growth forward. “To say you cannot grow with [currency controls] is a fallacy; pensions and salaries are improving, and that will expand demand.”

Milei’s presentation circled around many aspects of the government’s economic performance. He said that his administration had achieved “the largest fiscal adjustment in the history of mankind” and “the biggest reform program” in Argentine history, claiming that “the whole world is talking about the Argentine miracle.”

“Our program is based on an organized macroeconomy, deep cuts in public spending, and obsessive care to give freedom back to every Argentine,” he added.

Regarding the 2025 budget, he said that the government will “redesign the way it is written” with the goal of achieving “zero deficit” and therefore not having to take on new debt.

Milei rejected a devaluation

In his speech, the president rejected a devaluation and expressed hope in “changing the levels of productivity.”

“We are not willing to devalue and ruin the lives of Argentines; we will work to change the levels of productivity so Argentines don’t have to get poorer because of the mistakes of third-rate economists and bad governments of the worst kind.”

The libertarian economist also warned that the country was still “paying the price” of a monetary emission in 2023 “equivalent to 13 GDP points,” but stated that his administration had managed to avoid the worst scenarios, which he said would have been hyperinflation.

“Thanks to our fiscal and monetary anchor, we managed to avoid hyperinflation and we’re bringing [inflation] down,” he said. “I always like to work with the issue of wholesale inflation because it foresees the behavior of inflation. [When we took office] last December, monthly wholesale inflation was 54%.”

The president went on to rehash one of his most controversial claims, insisting that the yearly projection of that 54% monthly rate would yield 17,000% inflation. Analysts have stated that this type of projection is incorrect, given that the December figure was the result of a devaluation and many other stationary factors, making it impossible to use it as a baseline to calculate annual inflation numbers.

The president said that the most recent wholesale inflation figure was 2.7%, which, according to him, would result in a yearly rate of 35%, and praised Economy Minister Luis Caputo for the feat.

“Talk about a praiseworthy, major accomplishment for Minister Caputo — to go from 17000% to 35%!”