Libertarian Javier Milei won on Sunday in Argentina’s presidential runoff has far-reaching consequences for the country’s struggling economy, including the fate of the peso.
A political outsider who promised to “disrupt the status quo,” Milei’s economic platform was based on a desire todollarize the Argentine economy. Dollarization means the country would give up the Argentine peso and use the US dollar as the currency.
If implemented, the policy would hurl the nation into unfamiliar territory: No country the size of Argentina has previously handed over the reins of its monetary policy to decision-makers in Washington.
Ecuador and El Salvador have alsodollarized their economies to fight inflation.
Argentina has one of the highest inflation rates in the world; data released last week showed prices increased 142% year-on-year. Milei’s proposal to change Argentina’s currency from the peso to the US dollar is based on the thesis that the dollar is stronger than the peso and, unlike the peso, cannot be printed at will.
His vision has attracted international attention and a series of warnings from critics, who characterize the move as a straightjacket, saying thatdollarization causes a country to lose the autonomy needed to influence the economy through moves of monetary policy such as changes in interest rates.
Sergio Massa, current Minister of Economy and candidate in Milei’s run-off opponent, had criticized thedollarization plan as a renunciation of national sovereignty.
Supporters of the plan, including analysts at the Cato Institute, a libertarian economic think tank based in Washington, D.C., favor the move as a practical strategy to tame what has been a decades-long problem.
CNN’s Abel Alvarado contributed to this report