Argentina’s populist President Javier Milei is planning to dollarize the country’s economy to save the obliterated local currency, the peso. The idea was his key plank during the elections, where he repeatedly mentioned that the US dollar should take over the country’s finances. He is now mulling the ideology again, citing that the only solution to contain inflation is to make the USD the sole currency in the country.
As the US dollar pushed the peso to new all-time lows, the central bank had to intervene and burn close to $1 billion since Wednesday to save the local currency in the forex markets. The large-scale sell-off is affecting the national financial system, and Milei suggested that Argentina must dollarize its economy to stop the damage.
Milei explained that moving the national financial system to the US dollar would take close to four years. In addition, local banks would have to convert their overall portfolio to the USD and implement a dollar-compliant transaction system. This, in turn, would dollarize Argentina and usher it into a new financial era.
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Dollarize Argentina To Save the Economy, Says Milei
Argentina’s President said that his administration will dollarize the country only if people vote for it. He expressed that he would not force his ideology and leave it to the people of the country to decide. Despite conveying the message, Milei is traveling to the US, and reports indicate that he intends to negotiate a loan of $30 billion in the form of a currency swap.
Also, US Treasury Secretary Scott Bessent said that the Trump administration will provide all support to Milei. It includes allowing swap lines, direct currency purchases, and buying dollar-denominated debt. He called Argentina a “systemically important US ally in Latin America,” and praised Milei’s idea to dollarize the country. “Argentina’s assets were in desperate need of a circuit breaker, and they just got one,” said Alejo Czerwonko, CIO of UBS.