The radical libertarian government of President Javier Milei yesterday was rewarded for destroying Argentina’s physical economy in a mere 16 months in office, in the form of a desperately needed IMF loan package of $20 billion, with an initial disbursement of $12 billion. Central to the agreement is Argentina’s lifting of exchange controls, which have been in place since 2019 when then President Mauricio Macri imposed them—ironically enough, on IMF orders at the time.
Macri had been granted a whopping $44 billion package by the IMF two years earlier, which served as the main source of over $80 billion in capital flight from Argentina during his 2015-2019 presidency. In 2019, the IMF demand for exchange controls amounted to insisting that he shut the barn door after all the horses had fled.
Now Milei, a follower of Macri’s neoliberal economic policies, will do the same with the $20 billion from the IMF: “The country’s central bank said on Friday it would next week lift the controls, which limit the movement of dollars outside of Argentina,” the Financial Times happily reported. Milei will also allow the Argentine peso to float against the dollar, at first in a band ranging from 1,000 to 1,400 to the dollar. Since the peso is now trading at about 1,100 pesos to the dollar, a rapid devaluation of over 25% is expected to occur. The flotation band will increase by 1% per month, according to the deal with the IMF, ensuring there will be further devaluations.