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The peso currency is now in the crosshairs of the country's dark horse presidential front-runner, libertarian radical Javier Milei, who has pledged to eventually scrap the central bank and dollarize the economy, Latin America's third largest.
Milei - facing a tight three-way battle with traditional political candidates on the right and left ahead of an Oct. 22 vote ...
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Milei's dollarization plan has sharply divided opinion: his backers argue it is the solution to inflation near 115% while detractors say it an impractical idea that would sacrifice the country's ability to set interest rates, control how much money is in circulation and serve as the lender of last resort.
"The argument for dollarization is that there is no price stability and the independence of the central bank is an illusion," said Juan Napoli, a Senate candidate for Milei's Liberty Advances party.
Napoli admitted Argentina was not yet ready for full dollarization. Milei and advisers have talked about a nine-month to two-year time frame.
"It requires a great political agreement between us and also having sufficient reserves," Napoli said. The central bank's current net foreign currency reserves are deep in negative territory. "It will take a while, it won't happen immediately."
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... analysts, investors, as well as the usual army of cynics (almost always based in wealthy countries), have been debating which country, if any, would be next to make Bitcoin legal tender after El Salvador.
For example, I wrote for City AM previously that it could be Panama, Paraguay, Guatemala, or Honduras.
But there’s a new nation that is gaining an increasing amount of speculation on this issue: Argentina, a country that’s fighting against triple digit inflation, its highest in over three decades, and that could climb to near 200% by the end of the year.
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The success of dollarization in Latin America has gone under the radar because the dollarized trio are relatively small countries, Ecuador being the largest with a population of 18 million. Were Argentina to dollarize, however, it hardly would be feasible to ignore or hide its benefits — monetary stability, low inflation, low interest rates, longer loan terms, built‐in hard budget constraints — in one of the region’s largest and most influential countries.
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Argentina has essentially no dollars. Which, as critics see it, is a major impediment to presidential front-runner Javier Milei’s plan to dollarize the crisis-ravaged economy. Even Milei’s own advisers are starting to get fidgety about how barren the vaults are.
But ask economist Francisco Zalles about this problem and he scoffs. Just go ahead and make the dollar the country’s official tender, he says, and do it fast. The faster the move, the faster inflation steadies. Then interest rates can come down, and dollars can start flowing in, paving the way for growth.
Zalles is no ordinary economist. He’s one of the few in the world who’s got experience carrying out such a process, having done so in his native Ecuador two decades ago. Conditions then — soaring inflation, plunging currency, stagnant growth — were broadly similar to those in Argentina today. And while Ecuador’s economic record has been uneven since, one thing is certain: The runaway inflation that was making people poorer month after month has disappeared.
“For Milei’s plan to work, he needs nothing,” Zalles, who’d go on to do a stint at Greylock Capital Management, said in an interview. “He just needs to dollarize.”
To many skeptics, Zalles’s vision is dangerously optimistic, even reckless. With no dollars to defend the exchange rate — Argentina has an estimated negative $10 billion in net international reserves — ditching the peso risks sparking a collapse in the currency that could lead to hyperinflation, a possible run on the banks and social unrest as savings vanish.
“Dollarizing without dollars is like saying you want the entire population to wear Nike sneakers, even though you don’t make them and you don’t have the resources to buy them,” said Alejandro Werner, a former IMF director for the Western Hemisphere. “It’s impossible.”
Zalles — and Milei — recognize dollarizing is a drastic move, but argue it’s the cure for what is, after all, a dire situation.
Inflation data Wednesday showed prices rising 12.4% on a monthly basis in August, the fastest pace since Argentina exited hyperinflation three decades ago. The economy is on the brink of its sixth recession in a decade; 40% of the population lives below the poverty line. The peso has tumbled almost 30% on the parallel market in the past month.
Since his surprise win in the August primaries, which prompted the government to devalue the peso by 18%, Milei’s radical plans have monopolized Wall Street’s attention. But key details, including exactly how those measures are going to play out, are still lacking. Some of his advisers have begun walking back some aspects of the proposals amid a barrage of criticism, saying he would not dollarize right away if there are no greenbacks in the central bank — which Milei doesn’t actually intend to shut either, they say.
Zalles shrugs off major concerns. There are gross reserves to tap, he says, and the growing use of dollars will help smooth the process. While Argentines haven’t yet resorted to paying for daily transactions in US dollars, large purchases — anything from apartments to cars, furniture, electronics and home appliances — are increasingly done in greenbacks. People are estimated to hold as much as $200 billion in cash outside the banking system within the country and hoard an additional $250 billion in overseas accounts.
Once you dollarize, that money will flow into the system, Zalles argues, and assuage fears over a potential bank run, similar to what happened in Ecuador in early 2000 when Zalles and two other economists oversaw the switch from sucres to greenbacks.
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The country goes to the polls on Sunday in a three-way race between shock libertarian front-runner , Peronist economy minister and conservative Patricia Bullrich, with voters angry amid a harsh cost-of-living crisis.
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This is astounding. He is facing prosecution for telling people not to save in Pesos which devaluing at an (official) inflation rate of 140%.Argentina prosecutes presidential front-runner Javier Milei for teaching basic economics
With inflation accelerating to 138% annually in Argentina, or prices more than doubling multiple times per year, classical monetarist Javier Milei is slated to win the South American nation's presidency thanks to his radical promise to replace its peso with the United States dollar. The ruling regime, correctly terrified that Milei will end Argentina's ability to fund its Peronist policies at the expense of its citizens's savings, has launched an eleventh-hour attack on Milei, prosecuting the economist for the crime of telling the truth.
At the behest of Peronist President Alberto Fernandez, prosecutors have charged Milei and his party, La Liberdad Avanza, with "inciting public fear," a crime that faces a penalty of up to six years in prison if convicted. How have these classical economists supposedly wronged the public? Fernandez cited Milei's assertion that the "peso is the currency issued by the Argentine politician, and therefore it is not worth crap," and his party's warning that Argentines should not save in pesos.
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The ballot is likely to roil financial markets, set a new political and social path for the nation and impact its ties with trade partners including China and Brazil. ...
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To win outright on Sunday, a candidate will need over 45% of the vote or 40% and a 10-point lead over rivals.
Any run-off would be held on Nov. 19.
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Sergio Massa and the far-right Javier Milei in a run-off vote next month, partial results from Sunday's presidential election suggest.
With most ballots now counted, no candidate has received more than 45% of votes - the threshold to be elected.
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Front-runner Mr Milei was leading in the polls prior to the vote, but Mr Massa has received 36.2% of ballots so far.
Mr Milei has received 30.2% of the votes, according to partial results.
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Massa goes into the second round with the momentum, but there's plenty to play for. Milei could pick up more of conservative Bullrich's 6.3 million voters, who are often highly critical of the big-government Peronist model.
Given Bullrich was in the middle of the three politically, both may have to moderate their stance to win her votes over. Juan Schiaretti, who got a higher-than-expected vote share of nearly 7%, could also play an important king-maker role.
There is likely to be a heated campaign over the next month as the two remaining candidates pitch opposing plans for the economy. Massa pledges to protect the country's social safety net while Milei wants to "chainsaw" through a system that has left the country in its worst economic crisis in decades.
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It took 10 years for former president Mauricio Macri to turn his party, Pro, into a leading political force. And less than 24 hours to destroy it. Pro is part of the Juntos por Cambio (Together for Change) coalition, which brought Macri to power in 2015. This coalition chose Patricia Bullrich as its presidential candidate, but she was knocked out of the race on Sunday, after winning just 24% of the vote in the first round of the election. That vote was won by Sergio Massa, Argentina’s economy minister and the candidate for the left-wing Peronism political movement, with the far-right leader Javier Milei coming in second place.
With the runoff scheduled for November 19, both Milei and Massa are hoping to win over the 6.2 million Argentines who voted for Bullrich.
Bullrich and Macri publicly endorsed Milei on Wednesday, but the move was met with a fierce backlash from the Together for Change coalition, which also includes the century-old Radical Civic Union (UCR) and other centrist parties, such as Civic Coalition. Pro was the hardest hit of all: moderates in the party felt betrayed, while hardliners said they would not abide by a “unilateral” decision that was made without prior consultation.
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... according to a poll released on Thursday.
The survey from pollster Analogias put support for Massa, the outgoing government's economy chief, at about 42% versus 34% for Milei, a combative self-described anarco-capitalist.
Political polling has been wildly off in Argentina in recent years, including ahead of last Sunday's first-round vote, when Milei led in nearly all polls but ultimately came in second to Massa by about six points.
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Argentina election polls are showing an increasingly tight race between Peronist economy minister Sergio Massa and radical libertarian Javier Milei ahead of a runoff ballot on Nov. 19.
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Another situation where the candidate with obviously the most visible support and momentum is significantly defeated by someone with little to no visibly enthusiastic supporters. ...
Argentina has complied with the payment of interests to the International Monetary Fund for US$ 790 million, it was reported Tuesday in Buenos Aires.
The South American country made a new payment worth the equivalent of SDR (Special Drawing Rights) 600 million to the IMF Monday, thus denting the Central Bank’s (BCRA) reserves, which stood at around US$ 21.1 billion, the lowest since 2006 when then-President Néstor Kirchner paid up all of Argentina’s debt to the Fund.
Monday’s payment was made in yuan stemming from the extension of the currency swap with China for a sum tantamount to US$ 6.5 billion.
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Most of the latest polls show Milei with a slight edge over Massa. However, pollsters Reuters spoke to said it was a "wide open" race and that either candidate could triumph.
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Argentina's central bank allowed the peso to weaken slightly on Wednesday to 353 per dollar, traders said, reactivating its 'crawling peg' for the currency that has been frozen at 350 per dollar since a primary election in mid-August.
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The Secretary of Economic Policy, Gabriel Rubinstein, had said last month on social network X, previously Twitter, that from Nov. 15 the peso would be put back on a crawling peg, ultimately allowing it to devalue by around 3% monthly.
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... Peruvian novelist Mario Vargas Llosa, along with nine ex‐presidents from Latin America, and numerous other pro‐democracy leaders, activists, and intellectuals issued a statement today in support of Javier Milei. The only way out of Argentina’s crisis, they write, is through political and economic freedom, rather than the populist path the country has been on. Below, I offer an English translation of the statement. ...
An irony of the BRICS summit in South Africa last August, which included “de‐dollarization” in the official agenda, was the touting of Argentina as one of the group’s new members. Argentina, of course, is on the brink of a presidential run‐off in which the candidate who leads most polls, free‐market economist Javier Milei, vows to shut down the central bank and officially dollarize the country.
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If Milei wins the election on Sunday, Argentina’s dollarization can be a major step toward an enlarged, Latin American “dollar zone,” which can spur extraordinary opportunities for wealth creation across the region. ...
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