Government Harshly Criticizes Those Calling for Devaluation to Boost Lagging Sectors

Argentina's government has sharply criticized proposals advocating for currency devaluation as a means to boost the country's struggling economic sectors. Economy Minister Luis Caputo dismissed the idea, stating that if competitiveness were solely dependent on devaluation, Argentina would be the most competitive economy globally. He argued that such a strategy is not a sustainable path to growth.

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If competitiveness depended on a devaluation, we would be the most competitive economy in the galaxy.

Echoing these sentiments, Vladimir Werning, the Vice President of the Central Bank of Argentina (BCRA), also rebuked the notion of tolerating increased inflation to spur economic activity. Werning presented data showing that accumulated inflation between 2003 and 2023 reached approximately 50,000%, significantly eroding the purchasing power of savings. He emphasized that even seemingly moderate price increases lead to substantial damage to family wealth.

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You hear claims that a little inflation isn't serious. It really makes no sense: it's very serious.

The debate involves prominent economists. Roberto Frenkel suggested that a higher exchange rate could be necessary for the viability of non-primary export sectors, even if it temporarily accelerates inflation. Miguel Ángel Broda acknowledged that a stronger dollar might ease some pressures on the productive sector but recognized the government's primary focus on reducing inflation. Broda also warned that maintaining an artificially low exchange rate while opening the economy could lead to business closures.

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You need a higher exchange rate to give some viability to activity that is not primary export activity.