The newly elected administration led by President Javier Milei brought swift changes to Argentina’s economy. On December 13, the Argentine peso was devalued by more than 50% against the U.S. dollar. Several other changes that were announced include gradual subsidy cuts, eliminating government ministries, and reduced payments to Argentina’s provinces.
Argentina has suffered from economic crisis going back over two decades since the country defaulted on its international debt for the first time in 2001. More recently, Argentina has suffered from the COVID-19 pandemic, high energy prices driven by the Russian invasion of Ukraine, and long-lasting droughts damaging the supply of crops. These contributed to the country’s increasing inflation and decreasing foreign exchange reserves. The country struggled to make debt repayments due to the cascading effects of these global events. With the ongoing exchange rate and debt crisis, President Milei decided to move forward with the extreme devaluation as an attempt to cut the fiscal deficit and avoid a prolonged period of hyperinflation.
The devaluation of the Argentine peso will severely weaken the buying power of those holding Argentine pesos and protests were organized in Buenos Aires following the change. On the other hand, the devaluation did spur exporters to bring U.S. dollars into the country, boosting foreign reserves as intended. The International Monetary Fund was pleased with the decision and IMF Managing Director Kristalina Georgieva stated that this is “an important step toward restoring stability and rebuilding the country's economic potential.” Argentina will soon begin paying back the IMF with the help of a liquidity loan given by the Development Bank of Latin America and the Caribbean. Other effects of the peso devaluation include fuel prices spiking in December and future export prices for crops decreasing.
For up-to-date Argentina information, please reach out to your AIRINC representative or click here to reach our inquiries team now.
Subscribe to our blog to stay updated on changes around the world that impact Global Mobility, including your cost of living allowances.
Read more on AIRINC's latest research results here.