In the recent runoff of Argentina’s presidential election, Javier Millay, a far-right economist, won a landslide victory, hinting at a possible abandonment of the peso, a move that contradicts the country’s ongoing efforts to de-dollarize.
According to preliminary results, Millay has nearly 56 percent of the vote, and his emphasis on the dollarization of Argentina’s struggling economy is intensifying. He argued that the change could curb the staggering 143% inflation in October, caused by the peso’s 99% fall against the US dollar this year amid ongoing economic challenges since 2008.
Supporters, including economist Steve Hanke, support Millay’s push for dollarization, seeing it as a strong campaign strategy. Hanke from the University “Johns Hopkins” suggested shutting down Argentina’s central bank in favor of accepting the US dollar. However, the change raises concerns about giving up some autonomy in monetary policy and would mark the first time a country the size of Argentina has officially adopted the greenback.
Despite being the world’s 23rd largest economy, Argentina has faced criticism and skepticism about Millay’s plan.
Critics have pointed to the country’s insufficient dollar reserves, which has even resorted to using the Chinese yuan to repay part of its IMF loan due to a shortage of US dollars.
Markus Jaeger, an analyst at Stratfor, outlined the challenges, arguing that while dollarization could solve the problem of economic instability, Argentina does not have the necessary dollar assets for a large-scale transition. Jagger stressed that Argentina, marked by political instability and economic mismanagement in the past, could benefit more from comprehensive economic reforms.
According to Yeager, the proposal for full dollarization, while seen as a means of overcoming volatility, comes with significant risks.