Argentine President Fires Ambassador After Father's Currency Policy Critique

Javier Milei, President of Argentina, has relieved Sonia Cavallo of her position as Argentina's ambassador to the Organization of American States in Washington, D.C. This decision follows a critical blog post written by Sonia's father, Domingo Cavallo, a renowned economist, about Milei's currency policy.

Domingo Cavallo, who served as Argentina's economy minister from 1991 to 1996 and is credited with curbing hyperinflation, remains a respected figure among the country's business community.

According to Milei's chief spokesman, the decision to remove Sonia Cavallo was made due to her father's "constant torpedoing and sabotaging" of Milei's economic agenda. Milei emphasized that Sonia must choose between supporting his policies or those of her father.

In a radio interview, Milei criticized Domingo Cavallo's recent comments on the Argentine currency policy, calling him "disgraceful." During his tenure as economy minister, Cavallo implemented a policy known as convertibility, which pegged the peso to the US dollar. This policy ultimately contributed to the financial crisis in 2001.

Milei has defended his own currency policy, claiming it is more successful than convertibility and has been implemented without resorting to hyperinflation. He has maintained a commitment to fiscal surplus while reducing taxes. He also pointed out that raising taxes was Cavallo's response to the external Tequila shock in the mid-1990s.

In a January blog post, Cavallo argued that Milei's peso depreciation policy has led to an overvaluation of the real peso, depleting the central bank's net reserves. He emphasized that even substantial disbursements from the International Monetary Fund would be insufficient to lift capital controls.

Milei's government has tightened existing currency controls, slowing the peso's depreciation from 2% per month to 1% per month, a rate below the current inflation rate. This discrepancy has sparked debate among economists about the peso's value and the implications of Milei's controls.

During the radio interview, Milei reiterated his stance against devaluing the peso.