The first step before the ‘shock therapy’ of Argentina’s right-wing populist president Javier Milei came from the Central Bank of Argentina. The bank restricted access to dollars until the new program was announced.
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The Central Bank of Argentina has decided to restrict access to the dollar at the official exchange rate until the administration of President Javier Milei announces the first measures of the shock therapy program aimed at eliminating inflation.
The bank said Monday that the country’s official foreign exchange market, where the peso is overvalued, will operate with limited transactions to give Milei’s team time to comply with administrative procedures and implement its own policy.
Following this announcement, investors are predicting a major devaluation of the currency in the next few days. Presidential spokesman Manuel Adorni said that Milei’s Economy Minister Luis Caputo, who took office promising serious spending cuts, will announce his first measures.
“No other government has ever inherited a situation worse than the one we inherited,” Milei said on Sunday. “There is no alternative to the changes and the shock that will be experienced,” he said.
According to Abrdn Investment Director Andrew Stanners, although Milei’s statements are encouraging for investors, the steps he will take will be tested over the next few months.
“It will be important how long he can carry investors and, most importantly, voters,” said Stanners, adding: “Will he be able to pass laws? Will social pressures temper some of the much-needed fiscal austerity? “As the year progresses, the market will definitely start to focus on that,” he said.
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