Javier Milei has been climbing the presidential polls in Argentina, but the libertarian economist’s rise is even more noticeable in terms of how he influences the country’s public agenda.
First, his television appearances helped shift the country’s Overton window to the right, offering market-friendly explanations for Argentina’s economic ills. His interventions focused on public spending, high taxes, and money printing as the real enemies — a contrast with the Kirchnerite years, in which corporate media or big business were most often presented as the culprits.
Now, one of his radical economic proposals is dominating policy discussion: abandoning the Argentinian peso and adopting the U.S. dollar as the country’s national currency instead.
“If I become president I promise I will dollarize the economy. And if the political caste doesn’t let me do it, then I will call a referendum on the matter. We will get to know if society prefers the crap bills printed by our criminal politicians or real currency,” Mr. Milei said.
Dollarizing an economy is not fully unprecedented, but it has only been tried by three countries in recent history: Ecuador, El Salvador, and Zimbabwe — the latter of which reverted its decision in 2019, reintroducing the Zimbabwean dollar, while El Salvador also recently added Bitcoin to its list of official currencies.
To achieve dollarization, a country needs to withdraw its own currency from circulation and exchange it for U.S. dollars. It also needs to do the same with current and savings accounts, fixed-term deposits, and any other liability denominated in the country’s currency, such as notes and bonds.
That is far from an easy feat, especially for a broke country such as Argentina whose Central Bank foreign currency reserves stand close to zero, meaning that there are almost no dollar-denominated assets to compensate for all those peso-denominated liabilities.
The few countries that underwent dollarization did it under quite different circumstances....
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