- Right-wing economist Javier Milei won the round of presidential elections in Argentina on Sunday.
- He believes that replacing the peso with the dollar could tame hyperinflation and revive the ruined economy.
- Milea supporters say it will solve the problem of triple-digit inflation, but skeptics have doubts.
Far-right economist Javier Milea’s victory in Sunday’s round of Argentina’s presidential election means the country could abandon the peso – which would be a radical move that would run counter to the country’s policies de-dollarization drive.
Preliminary results showed Milei winning almost 56% of the vote, with most of it counted.
Milei fueled his desire to dollarize Argentina’s troubled economy. He claimed this move would help tame runaway inflation it hit In October, 143%. after the breakdown on Libra this year it has lost 99% of its value against the US dollar.
The currency has been depreciating since 2008 for a variety of reasons, including hyperinflation, debt and political instability.
In October, Milei even went so far as to say that the peso “cannot be worth the excrement.”
Prominent economist Steve Hanke — an advocate of Milea’s push for dollarization — published on X after the results were announced, it was stated that the candidate’s proposal “clearly gained votes.”
Hanke, professor at Johns Hopkins University, he said in August that Argentina should “lock down” its central bank for a while and adopt the dollar as its currency to tamp down inflation.
However, replacing the peso with the dollar would reduce some of Argentina’s autonomy in monetary policy. It would also be the first time an economy as large as Argentina officially adopted the dollar.
Critics of Milei’s dollarization plans cite the main challenges facing Argentina in the context of hyperinflation, economic crises and political instability.
There is also a fundamental problem with Milei’s dollarization plan – Argentina does not have enough U.S. dollar assets to finance larger purchases of the currency, wrote Markus Jaeger, a global economic analyst at the intelligence firm Stratfor in October.
In fact, Argentina is so short of US dollars that it has resorted to the so-called Chinese yuan to repay part of a loan taken out last month by the International Monetary Fund.
Combined with political instability and a history of economic mismanagement, Argentina would be better off reforming its economic regime, Jaeger wrote.
“Full dollarization is the second-best solution to the problem of inflation and economic instability,” he wrote. “It is also a solution that carries very serious risks.”
Argentina’s central bank did not immediately respond to Business Insider’s request for comment made outside normal business hours.