Argentina implements shock therapy for its economy, Argentine peso depreciates by half, opens up Bitcoin futures contracts.

Argentina's newly elected right-wing liberal president, Javier Milei, has announced a series of radical economic shock therapies upon taking office. Not only did he devalue the Argentine peso by more than half, but he also froze all public works and reduced government spending, among other measures, which has sparked protests from the public expressing their dissatisfaction. Milei, who previously supported abolishing the Argentine peso and advocated for economic "dollarization," seems to have abandoned this path but has allowed contracts to be signed using Bitcoin and other cryptocurrencies.

Argentina's libertarian, Javier Milei, elected president, to implement economic shock therapy.

Argentine Peso Depreciates Threefold Since the Beginning of the Year

Argentina is facing a severe inflationary crisis, with a projected inflation rate of 147% for 2023. The Argentine peso (ARS) has depreciated from 176 pesos per US dollar at the beginning of the year to 366 pesos per US dollar, a depreciation of over 100%. Last week, Argentina's Minister of Economy, Luis Caputo, announced on a televised speech that the official exchange rate would be lowered to 800 pesos per US dollar, with a target of 2% monthly depreciation set by the central bank. Caputo stated that these measures have been welcomed by the International Monetary Fund (IMF) and that they are necessary to reduce the country's fiscal deficit and curb the soaring triple-digit inflation.

Contracts Can Be Signed with Bitcoin and Other Cryptocurrencies

Argentina's Minister of Foreign Affairs and International Trade, Diana Modino, wrote on the X website:

We approve and confirm that in Argentina, you can sign contracts with Bitcoin.

She added that this is based on Article 766 of the debtor's obligation, which requires the debtor to deliver the specified amount of designated currency, regardless of whether the currency is the legal tender of the Republic. This means that besides Bitcoin, other cryptocurrencies or even things like kilograms of beef or liters of milk can be used.

Ratificamos y confirmamos que en Argentina se podrán pactar contratos en Bitcoin.

— Diana Mondino (@DianaMondino) December 21, 2023

Modino did not provide details on any new measures the government may have planned regarding cryptocurrencies, but the early recognition of the world's largest cryptocurrency and the views of the newly elected President Milei on monetary policy align with the country's severe inflation and currency issues, which is devaluation.

Milei Announces Radical Economic Shock Therapy

Javier Milei, the new right-wing liberal president, firmly believes that privatization and free markets are the only solution to rescue Argentina. On the 20th, he announced the details of a series of so-called "economic shock therapy" measures during a national televised speech, including cutting government spending, privatizing state-owned enterprises, relaxing mining regulations, abolishing rent laws, lifting export restrictions, and significant currency devaluation.

While the new policies have gained recognition from the International Monetary Fund (IMF), calling it an important step for Argentina's stability and economic reconstruction, they have sparked a wave of price increases across the country. For example, meat prices have risen by 40%, Shell has increased fuel prices by 37%, and Argentine Airlines has doubled airfare prices.

These drastic policies have also triggered public backlash, with large protests taking place throughout the capital, Buenos Aires, overnight. Whether the new government's economic policies can bring a glimmer of hope to Argentina can only be proven with time.