Libertarian Javier Milei’s victory Sunday in Argentina’s presidential run-off contest has far-reaching consequences for the country’s struggling economy, including the fate of the peso.
A political outsider who ran on a promise to “break the status quo,” Milei’s economic platform rested on a desire to dollarize the Argentinian economy. Dollarization means the country would give up the Argentine peso and use the US dollar as its currency.
If enacted, the policy would hurl the nation into unknown territory: No country of Argentina’s size has previously turned over the reins of its own monetary policy to Washington decisionmakers.
Ecuador and El Salvador have also dollarized their economies to combat inflation.
Argentina has one of the world’s highest inflation rates; data released last week showed that prices rose 142% year-over-year. Milei’s proposal to switch Argentina’s currency from the peso to the US dollar rests on the argument that the dollar is stronger than the peso and, unlike the peso, cannot be printed at will.
His vision has drawn international attention and a number of warnings from critics, who refer to the move as a straightjacket, saying that dollarization results in a country losing autonomy to influence the economy through monetary policy moves such as interest rate changes.
Sergio Massa, the country’s current economy minister and Milei’s run-off opponent, had criticized the plan for dollarization as a surrender of national sovereignty.
Proponents of the plan, including analysts from the Cato Institute, a libertarian economic think tank based in Washington, DC, favor the move as a practical strategy to tame what has been a decades-long problem.
CNN’s Abel Alvarado contributed to this reporting