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Right-wing economist Javier Milei won the second round of Argentina’s presidential election on Sunday.
He believes that replacing the peso with the peso can curb hyperinflation and revive a struggling economy.
Milei’s supporters say this would combat triple-digit inflation, but skeptics have their doubts.
The victory of far-right economist Javier Milei in the second round of Argentina’s presidential election on Sunday means the country could simply abandon the peso, a radical move that would run counter to the country’s de-dollarization campaign.
The interim effects show that Milei got about 56 percent of the vote, and most of them counted.
Milei has extolled his preference for dollarizing Argentina’s ailing economy. He argued that the move would tame runaway inflation, which reached 143% in October after a drop in the peso wiped out 99% of its price against the U. S. dollar this year.
The currency has been depreciating since 2008 for a number of reasons, including hyperinflation, debt, and political instability.
In October, Milei went so far as to say that the peso “can’t be bullshit. “
Prominent economist Steve Hanke, a supporter of Milei’s dollarization crusade, posted in X after the effects were announced that the candidate’s proposal would “clearly win votes. “
Hanke, a professor at Johns Hopkins University, said in August that Argentina had “sidelined” its central bank and adopted the dollar as its currency to control inflation.
#ARGWatch: Javier Milei has just won the Argentinian presidential election. Milei’s dollarization proposal obviously garnered support. REBUILDING THE ARG ECONOMY = DOLARIZACIÓN. pic. twitter. com/MwEp8pT1Em
– Steve Hanke (@steve_hanke) November 20, 2023
However, replacing the peso with the dollar would reduce part of the autonomy of Argentina’s financial policy. It would also be the first time that an economy as giant as Argentina would officially adopt the dollar.
Despite its economic woes, Argentina’s economy will be worth $633 billion in 2022, making it the 23rd largest economy in the world.
Critics of Milei’s dollarization plans point to demanding primary situations for Argentina in the midst of hyperinflation, economic crises and political instability.
There’s also a basic challenge with Milei’s dollarization plan: Argentina has enough U. S. dollar assets to fund a giant acquisition of the currency, Markus Jaeger, a global economic analyst at the intelligence company Stratfor, wrote in October.
In fact, Argentina is so short of U. S. dollars that it used the Chinese yuan to repay part of an International Monetary Fund loan last month.
In addition to political instability and a history of economic mismanagement, Argentina would gain advantages from reforming its economic regime, Jaeger wrote.
“Full dollarization is the immediate solution to the challenge of inflation and economic instability,” he wrote. “It’s also a solution that carries very significant risks. “
Argentina’s central bank did not immediately respond to a request for comment from Business Insider, sent outside of general business hours.
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