Libertarian Javier Milei’s victory in Argentina’s presidential runoff this Sunday has significant implications for the country’s struggling economy, particularly the future of the peso. As a political outsider, Milei has promised to “break the status quo” and his economic platform is founded on the desire to dollarize the Argentine economy, meaning to give up the Argentine peso and use the US dollar as its currency. If this policy is implemented, Argentina would enter uncharted territory as no country the size of Argentina has surrendered its monetary policy to decision-makers in Washington. Ecuador and El Salvador have previously adopted this approach to combat inflation.
Argentina currently faces one of the highest inflation rates in the world, with prices increasing by 142% year over year according to recent data. Milei’s proposal is based on the argument that the US dollar is stronger than the peso and unlike the peso, cannot be printed at will. However, critics have warned that dollarization would limit the country’s autonomy to influence the economy through monetary policy measures.
Sergio Massa, the current economy minister and Milei’s opponent in the runoff, criticized the dollarization plan as a surrender of national sovereignty. On the other hand, proponents of the plan, including analysts at the Cato Institute, a Washington-based libertarian economic think tank, see it as a practical strategy to address a decades-long problem facing Argentina. The outcome of this presidential election will have far-reaching consequences for the nation’s economic future.