Argentine President Javier Milei has accused politicians of failing to deliver on his campaign promise todollarize the country’s economy, suggesting that such a move could lead to his impeachment.
“It’s not that it wouldn’t have been unfeasible to do so in technical terms, but we deduced that in political terms, politics would play dirty,” Milei said during a interview with Bloomberg last week.
During the interview, Milei spoke about the challenges he faces as leader of the South American country, Included a “bankrupt” central bank and a “fiscal, monetary and currency disaster of extravagant proportions.” Milei’s initial plan to overcome the crisis was to peg Argentina’s economic future to the US dollar.
“We had a strategy todollarize. It was to take the assets of the Central Bank against the national government, move those securities into the market and get dollars,” Milei explained. She claimed that this approach would “work well” because at the start of her tenure, Argentine bonds were valued at an attractive $18, significantly lower than their current value of $54.
“It would have been a very successful approach,” the president added. “But given the structure of the Argentine political system and considering how intellectually dishonest politicians and economists are in Argentina, if we had actually engaged in that kind of market-price transaction… they probably would have accused us of shady dealings and would have sent to prison.”
Milei’s presidential campaign was characterized by his support for a series of free-market reforms to revitalize Argentina’s economy, proposing bold measures such as “dynamiting” the central bank and thedollarization of the economy.
Dollarization, the process of adopting The US dollar as a country’s national currency has historically helped mitigate the impacts of economic or financial crises, often generated by governments excessively printing money to finance high rates of public spending. By replacing a rapidly depreciating local currency with the US dollar, countries can stabilize the economy, instill credibility and reduce inflation.
To date, three other Latin American countries have officially done so adopted the US dollar as legal tender. Panama was the first to adopt the dollar in 1904 to help facilitate the construction and operation of the Panama Canal. However, Panama has also maintained its local currency, the balboa, which is equivalent to 1 dollar and coexists with the dollar. In 2000, Ecuador replaced the sucre with the dollar in response to a severe economic crisis that saw inflation rise to 95.5%. El Salvador followed suit, switching to the dollar in 2001.
Argentina has also already turned to the dollar to save its economy. In 1991, President Carlos Menem anchored the peso against the US dollar to stop triple-digit inflation.
“Dollarization of Argentina is the only, certain way to ensure that, in the future, Congress can fulfill its constitutional duty – established in the original classical liberal version of 1853 – to defend the value of the currency,” write Daniel Raisbeck and Gabriela Calderon de Burgos for the Cato Institute.
Yet Milei’s dollarization plan has faced strong opposition from economists and the Supreme Court claimed that the idea of eliminating the burden was “unconstitutional.” Milei’s Finance Minister, Luis Caputo, had also previously opposeddollarization, favoring an “orthodox stabilization plan”.
Yes, it turned out, Miley set aside the plan and instead focused on other reforms. “Politics does not accompany us or support us; it continually tries to block us,” the president said Bloomberg. Milei hasn’t given up yet dollarization and yet, even if he doesn’t believe this will happen before next year’s legislative elections.