Argentina has spent most of its 200-year history in deficit; no other country currently owes the International Monetary Fund a greater sum of money. The new finance minister, who entered government with President Javier Milei earlier this month, has been stark in making the point: ‘Out of the last 123 years, Argentina ran a fiscal deficit in 113… we have come to solve the addiction to fiscal deficits.’
Milei’s government is wasting little time carrying out what it calls ‘shock therapy’. The official value of the peso, Argentina’s currency, has been halved against the US dollar. Why might a government want to weaken its own currency, pushing up the price of imported goods for consumers? The answer is that Milei’s government is simply accepting what everyone in the country already knows; the official conversion rate is effectively redundant given the parallel black market in currency, which operates in broad daylight in Argentina.
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