Argentine economy minister - who profited from last major devaluation - announces deep cuts, record devaluation
Argentina’s Economy Minister Luis Caputo announced a package of ten austerity measures Tuesday evening - chief among them a devaluation of the peso by a record 54%, taking the official wholesale dollar exchange rate from 366 pesos to 800 pesos.
The decision was part of a package mostly consisting of government cuts the minister said were to “neutralize the crisis and stabilize economic variables.”
The "shock" package also included deep cuts to provincial and social aid transfers, transport and energy subsidies, public works, pensions, and other cuts totaling 2.9% of GDP.
The program also included tax hikes of 2.2% of GDP - mainly through import and export tax increases (which Milei had loudly campaigned against), as well as a steep income tax increase by way of reduced standard deductions.
The cuts and tax hikes - which in a statistical table released by Caputo purports to eliminate the nation's budget deficit - fails to take into account the deep recession similar shock devaluations have inflicted on Argentina in the past.
Caputo said the devaluation — a 118% exchange rate jump — was to provide the agribusiness and industrial sectors “the appropriate incentives to increase production.”
Black and blue
It is the steepest devaluation of the peso since early 2002, when the Argentine peso plummeted after the 2001 foreign debt crisis - during which Caputo served as an adviser to then-Economy Minister Domingo Cavallo.
Cavallo - who endorsed newly-elected far-right President Javier Milei - became reviled for using US$13 billion in IMF loans to finance capital flight - only to then impose deep cuts and a bank withdrawal freeze that plunged the nation into riots and depression.
Later named Finance Secretary when Trump ally Mauricio Macri took office in late 2015, Caputo, 58, was among numerous Macri officials and relatives found to have purchased millions in dollar futures contracts ahead of Macri's 40% devaluation that December.
Caputo's Axis fund made US$50 million from betting on the move - a devaluation he himself arranged.
The country's perennial "blue" (black) dollar - which Milei had pledged to make redundant by lifting currency regulations - jumped 12% today to a record 1,115 pesos.
Retailers have meanwhile reported a dramatic 100% jump in wholesale prices - on top of 40% increases the week before Milei took office last Sunday, leading to hoarding and shortages.
At: https://buenosairesherald.com/economics/argentina-chainsaw-plan-revealed-deep-cuts-record-devaluation
Argentine Economy Minister Luis Caputo winces as he announces yesterday's "shock" measures - including deep budget cuts, steep tax hikes, and a record daily devaluation of 118%.
Caputo pledged that the measures would balance the budget and stabilize the nation's economy - already battered by a foreign debt crisis inherited from his former boss Mauricio Macri in 2019, as well as by a record drought last year and 150% inflation.
Similar shock measures in Argentina in the past have invariably resulted in deep recessions however, as well as a massive wealth transfer from working and middle classes to the country's notoriously tax-averse elite.
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This, primarily, is why.
Because it's the same crash-it-and-cash-out, borrow-and-offshore scam that derailed the country for good in '81 - and that sunk if further in '01, in '18 (the 'Macrisis'), and now again.
The fact is also, that Big Biz interests in Europe and the U.S. (in some cases, at least) like seeing these heists.
One, because they're right up their ally; but two, because they believe it would force Argentina to sell its natural resource-related state firms and exports for peanuts.
And you know how they love a good bargain - except, of course, when it comes to their mistresses.
Those - as Trump knows so well - tend to be nothing but a big headache, and very expensive.
To paraphrase them - it's the money, honey.
That said - Thank You, Judi, for your insights, concern and good cheer always. Happy Holidays to you and yours. 
They do get carried away in spectacular ways, don't they?
One can only shudder realizing there has to be a private side in Milei's "life," too. Good grief.
As so much of the oligarchy's behavior seems to get heavily edited before reaching the US, what does make it this far leaves no doubt extremism does suck the sanity out of everything human! Same everywhere, no doubt!
So glad for any and all commentary and information you have shared here, We learned long ago very little truth actually is allowed to see the light of day once the fascists gain the upper hand anywhere.
This is an excellent day to spend indoors, warm, and out of the cold wind, slippery footing, all of which looks beautiful through well-insulated windows, surrounded by warmth and good spirits.
Very best holidays for you, peppertree! ❄️ 🌲🌲🌲🌲🌲 