Argentina’s libertarian President Javier Milei has intensified his unconventional currency strategy, further slowing the monthly devaluation of the peso in an effort to combat the nation’s inflation crisis. According to the Financial Times, Milei has reduced the so-called “crawling peg” devaluation rate to just 1 percent per month starting in February, down from 2 percent, as part of his bid to stabilize the economy.
The peso’s official exchange rate weakened by 22.8 percent over 2024, a stark contrast to the country’s 117 percent rise in consumer prices during the same period. This approach caused the peso to appreciate more than any other currency in real terms last year, sparking concerns among economists about its impact on the competitiveness of Argentine businesses.
Milei’s policies have yielded dramatic results, with the country’s month-over-month inflation rate dropping from a peak of 26 percent in December 2023 to 2.7 percent in December 2024. This reduction is largely attributed to his sweeping austerity measures, which have reshaped Argentina’s economic landscape since he assumed office during a severe economic crisis in late 2023.
Despite the success in curbing inflation, Milei’s slower peso devaluation has drawn criticism. Analysts warn that the real appreciation of the peso could delay efforts to rebuild Argentina’s negligible foreign currency reserves, which many view as a critical vulnerability in the president’s economic program. Historical precedents of rapid real peso appreciation in Argentina have often led to abrupt devaluations and economic turmoil when central bank reserves were depleted.
Milei, however, insists that rapid devaluation would reignite inflation and derail the macroeconomic stability achieved under his administration. He argues that Argentina’s competitiveness should instead rely on structural reforms, including deregulation, tax reductions, and lower corporate borrowing costs.
Pressure on Milei’s currency strategy is expected to intensify in the coming months due to a weakening Brazilian real, low global prices for Argentine exports such as soy, and a stronger US dollar. Analysts like Nery Persichini of GMA Capital note that these factors could challenge the government’s ability to maintain its current course.
With Argentina’s midterm elections approaching in late 2025, Milei-backed candidates are expected to perform well, incentivizing the administration to prioritize inflation control as a cornerstone of its policy. As Luciano Sigalov of Bull Market Brokers observes, Milei’s government believes the risks associated with its unorthodox currency strategy are manageable and justified by the need to sustain inflationary gains.
