President Javier Milei Consider Dollarization as Argentine Peso Sinks
After seemingly having controlled the dollar, Argentina is facing an obliteration scenario, as the economy has reacted negatively to the defeat of Milei’s party in Buenos Aires’ elections. Milei is now mulling a dollarization process again, after having touted it as a solution to inflation and devaluation during his political campaign.
While Milei lifted the currency controls imposed by earlier governments, the new band‑based flotation system is being tested as the dollar exchange rate has skyrocketed past the upper band. As a result, the central bank has burned over $1 billion since Wednesday defending the peso’s value.
Nonetheless, this has not stopped the nationwide sell‑off, and Milei has touched on dollarization to strengthen the national financial system. He said dollarization must be submitted to the Argentine people, who would have to approve the process by vote.
Milei estimated that moving the national system to the dollar would take nearly four years. Local banks would have to convert their portfolios to U.S. dollars and implement dollar‑compliant transaction systems.
Milei attributed the current crisis to sabotage organized by his political opponents after their victory in Buenos Aires. He stated:
One cannot ignore what the rest of the agents are doing. We expected a hostile scenario, and these people have no problem trying to destroy everything.
Even so, he is not standing idle. The Argentine leader is traveling to the U.S. to meet his American counterpart, and local reports indicate that he will be negotiating a loan in the form of a currency swap for up to $30 billion.
The disbursement, if approved, would help Argentina face upcoming debt payments of nearly $8 billion, giving the Central Bank fresh powder to keep intervening in the current currency exchange market.
