Inflation in Argentina drops to 2.7% and Milei plans to soon liberalize access to the dollar: “we are going to free ourselves from the stocks”

Prices are increasing, in fact they have accumulated an increase of 107% so far this year, but they are doing so at a rate that allows the Casa Rosada to puff out its chest. The inflation figure is the lowest for a month since November 2021, news that we actually already reported last month, but then the boom was 3.5%, so there is a decrease.

“If for two more months we repeat numbers along these lines we are going to lower the ‘crawling peg’ to 1%, and when we repeat three months at 1% we are going to free the capital market, we are going to free ourselves from the stocks,” said the president. yesterday in front of a group of entrepreneurs. To contextualize it, it must be explained that the ‘Crawling Peg’ is an exchange rate system used by some countries to control the value of their currency against foreign currencies. Basically, the mechanism consists of making gradual and predefined adjustments to the exchange rate of the national currency, based on specific economic and financial criteria and not on the market.

And when Milei talks about ‘traps’ he refers to an exchange control system in force since 2019 that limits access to currencies that are not legal tender in the country, especially the dollar, which acts as a safe haven. Since it was introduced by the government of President Cristina Fernández de Kirchner in 2011, the so-called ‘traps’ has evolved into a system that includes several restrictions. There are obstacles to the purchase of foreign currency, debit and credit card expenses in foreign currency and tourist services abroad, as well as limits to the purchase of certain amounts of dollars by natural persons as well as the prohibition of doing so for those who are recipients of State subsidies. Likewise, there is also an obligation on exporters to settle their sales in the official dollar, among other things.

With controlled inflation, the president could have an excuse to apply this measure and encourage the economy, and from his words it is clear that he could do such a thing at the beginning of 2025.

In any case, the news is very good for the Casa Rosada, as it faces the pressure of pressing poverty figures. The fiscal adjustment policy of the new Government has allowed the price boom to be controlled, but has had as a counterpart an increase in poverty, which stood at 52.9% of the population in the first half of 2024, 11.2 points percentages more than in the second half of 2023.

Furthermore, the country is going through a strong recession, with three consecutive quarters of decline in the Gross Domestic Product (GDP), a contraction that will reach 3.5% this year according to projections released by the World Bank in October.