Argentina Implements Shock Therapy to Revive Economy: Peso Plummeted by Half, Bitcoin Contracting Mechanism Opened
Argentina’s right-wing liberal president, Javier Milei, has announced a series of radical economic shock therapies since taking office. Not only did he directly devalue the Argentine peso by more than half, but he also froze all public works and cut government spending, leading to public protests expressing discontent. Prior to the election, Milei had supported the abolition of the Argentine peso and advocated for economic “dollarization.” However, he now seems to have abandoned this path but allows for contracts to be signed with Bitcoin and other cryptocurrencies.
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Argentine peso depreciates threefold since the beginning of the year
Contracts can be signed with Bitcoin and other cryptocurrencies
Milei announces radical economic shock therapy
Argentina is facing the dilemma of hyperinflation, with a projected inflation rate of 147% in 2023. The Argentine peso (ARS) has devalued from 176 to 1 US dollar at the beginning of the year to 366 US dollars, depreciating by more than double. Last week, Finance Minister Luis Caputo directly lowered the official exchange rate to 800 in a television speech, stating that the central bank’s goal is a monthly devaluation of 2%. Caputo stated that these measures have been welcomed by the International Monetary Fund (IMF) and, although painful in the short term, are necessary to reduce the country’s fiscal deficit and lower the triple-digit inflation.
Diana Modino, Argentina’s Minister of Foreign Affairs and International Trade, wrote on the X website:
We approve and confirm that in Argentina, you can sign contracts with Bitcoin.
She further added that this is based on Article 766 of the debtor’s obligations, where the debtor must deliver the corresponding amount of the designated currency, regardless of whether that currency is the legal tender of the Republic. So, besides Bitcoin, other cryptocurrencies or things like a few kilograms of beef or a few liters of milk.
Modino did not provide details of any new measures the government may plan regarding cryptocurrencies. However, the early recognition of the world’s largest cryptocurrency and the newly elected president Milei’s views on currency policy align with the severe inflation and currency problems facing the local currency—that is, devaluation.
Javier Milei, the new right-wing liberal president, firmly believes that privatization and a free market are the only solutions to rescue Argentina. On the 20th, he announced a series of detailed contents of the so-called “economic shock therapy” in a national television speech, including cutting government spending, privatizing state-owned enterprises, relaxing mining regulations, abolishing rent regulations, lifting export restrictions, and significant currency devaluation.
Although the new policy has gained recognition from the International Monetary Fund (IMF), calling it an important step for Argentina to restore stability and rebuild its national economy, it has triggered a wave of price increases across the country. For example, meat prices have risen by 40%, Shell has raised fuel prices by 37%, and Argentine Airlines has directly doubled ticket prices.
The intense policies have also sparked backlash from the public, with large groups of protesters demonstrating throughout the night in the capital Buenos Aires. Whether the new government’s economic policies can bring a glimmer of hope to Argentina can only be proven with time.
Javier Milei
Bitcoin
Argentina
Argentine peso
Further reading:
Argentina’s right-wing liberal president-elect, Javier Milei, to implement economic shock therapy
Bitcoin adoption in Argentina is on the rise, presidential candidate Javier Milei shows a positive attitude towards cryptocurrencies.
