(FILE) Vview of several Argentine 5 peso bills in Buenos Aires (Argentina) in 2020. EFE/Juan Ignacio Roncoroni

Milei’s dollarization, a waste of time for Argentina

Buenos Aires, Sept 18 (EFE).- Argentina is debating dollarization after decades of failure to tackle inflation, which has been above triple digits throughout 2023.

The discussion comes in response to a proposal by far-right candidate Javier Milei, who is well-positioned to win the presidency in October.

Milei’s polemic plans have captured the imagination of a society tired of losing its purchasing power.

For experts, his approach is unrealistic. So much so that nearly 170 Argentine economists recently signed a public warning about the dangers of dollarization.

“It’s not a good idea and the dollars are not there, so the whole debate is abstract. (…) We are wasting time,” says Federico Poli, director of the consulting firm Sistemica and one of the signatories of the letter.

Under the banner of dollarization, the abolition of the Central Bank and putting a “chainsaw” to public spending, Milei, candidate of the movement Freedom Ahead, won first place (29.86%) in the primary elections on August 13.

The far-right candidate says he has five projects to dollarize, but at the same time rules out implementing the measure in the short term, speaking of “currency competition.”

(FILE) The presidential candidate for the Libertad Avanza party, Javier Milei, is seen during his campaign closing, on Augusdt 13, 2023 in Buenos Aires (Argentina).EFE/ Juan Ignacio Roncoroni

His advisors have downplayed the possibility due to the lack of foreign currency and political support; they also have modified the proposal to abolish the Central Bank and speak of regulating it, admitting the difficulty of removing exchange restrictions due to the issued debt.

In a society that historically mistrusts the peso and uses the dollar as a savings currency and for large transactions such as real estate purchases, dollarization has taken a central position in the debate leading up to the October 22 elections.

The other main candidates reject the idea.

Patricia Bullrich, former Minister of Security of Mauricio Macri (2015-2019) and candidate of Together for Change (center-right), proposes a peso-dollar coexistence (bimonetarism).

Sergio Massa, current Minister of Economy and official leftwing candidate (Union for the Homeland), has not proposed any change.


The threat of dollarization is so great that more than 170 economists from different schools have warned against it, calling it a mirage and speaking of “insurmountable obstacles.”

The main problem is that Argentina lacks the necessary dollars to save the monetary base and support bank deposits.

Obtaining the necessary funds would mean an “absurd increase” in public debt for a country whose securities are quoted at 30% of parity.

Economists understand that the “only alternative” would be to dollarize at an exchange rate so high that it would cause “a (hyper)inflationary outbreak” in a society where more than 40% of the population lives in poverty.

Dollarization would also be a violation of property rights.

Adopting it would be “disastrous,” Poli says, it would leave the country “without a basic economic intrument: monetary and exchange rate policy,” it would happen the same as at the end of convertibility.


Argentina adopted the convertibility of one peso to one dollar in 1991, which stabilized prices by preventing the central bank from issuing currency without foreign exchange support, but the plan collapsed in 2002, causing a major socio-economic crisis.

The “1 to 1” was welcomed after Argentina suffered three hyperinflations, two between the presidencies of Raúl Alfonsín (1983-1989) and Carlos Menem (1989-1999), and another before due to the “Rodrigazo” in 1975, when the exchange rate jumped by 100%, followed by a triple-digit inflationary burst, after years of inflationary increases since the 1950s.

According to experts, Argentina’s chronic economic issues are explained by the constant imbalance of its fiscal accounts. When the country can’t finance it with taxes or public debt, it does so by issuing currency, which increases the amount of money beyond the demand, raising prices.

The Central Bank has been restricted throughout the years to prevent its autonomy and to comply with the monetary financing required by the Treasury.

What Argentina must do is “not take shortcuts” and “get the public accounts in order,” says Poli.

“We are discussing nonsense instead of reducing public spending in the least painful way,” he added.

(FILE) A man buys fruits in a supermarket in 2021, in Buenos Aires (Argentina).. EFE/ Juan Ignacio Roncoroni

Inflation accelerated again in 2005, and the government of Néstor Kirchner (2003-2007) responded by having the National Institute of Statistics and Censuses (Indec) underestimate the CPI in 2007.

However, it continued to accelerate until it reached 26.9% during the last term of Cristina Fernández (2007-2015).

The Indec was normalized during the Macri government, but his administration ended with an annual inflation of 53.8%, due to the application of a gradualist policy to reduce the fiscal deficit and despite having resorted to a program with the IMF.

The fall in purchasing power led to the election of the Peronist Alberto Fernández (2019-2023), who has brought inflation to 124.4%, in an already inflationary international context.

Therefore, Milei’s idea of earning in dollars, which inspires so many followers, added to the provocation of calling those who speak out against it “failures” and “accomplices of the politicians’ scam.”

Nevertheless, the explicit prohibition of dollarization in the Constitution, cited by the President of the Supreme Court, Horacio Rosatti; the uncertainty about the composition of Congress after the October elections, and the threat of a binding plebiscite are other elements that lead to the conclusion that the debate is a waste of time. EFE