During the election campaign, Javier Milei displayed a giant $100 bill bearing his image. Supporters likely felt a chill at the audacious display and backed him to win. Many economists worldwide view the remark as lacking technical and political grounding. Yet at a private meeting in the palace, President Alberto Fernández echoed the same sentiment heard in Milei’s crowds: Let’s dollarize Argentina. A photo captured both leaders, Fernández with a surprised expression.
The anarcho-capitalist argues that surrendering monetary sovereignty to the U.S. Treasury would bring prosperity to a country with deep poverty and high inflation. He claimed that all pesos could be converted to dollars within 16 months, contingent on receiving the necessary endorsements. Our calculation, he asserted, points toward a rapid dollar transition for the entire economy.
Three similar dollarization efforts are known in Latin America: Ecuador, El Salvador, and Panama. Yet this would be the first time Milei’s team has shown real interest. Amid ongoing economic stress, with inflation and bank instability in the backdrop, Ecuador began dollarization on January 9, 2000, under President Jamil Mahuad. The sucre had already depreciated dramatically. Twelve days later Mahuad left office in a crisis that saw indigenous protesters and the Armed Forces converge, and he fled Carondelet Palace in an ambulance.
Dollarization changed the economic landscape, but initially did not halt inflation, which ran around 90 percent in the first year. The economy gradually stabilized, and the cost of living fell by roughly 10 percent annually in the following years. The import and financial sectors benefited from the change, while domestic deposits and public spending adjusted to the new regime.
A dependent model
The rise in global prices for raw materials, especially oil, and a steady remittance flow supported the stabilization process. Remittances, similar to the situation in El Salvador where they account for about a quarter of GDP, filled the central bank’s coffers. With dollars in the treasury, domestic consumption and public investment rose, and living standards improved. This stability, however, depended heavily on the oil market.
Over the years, President Rafael Correa pressed the Central Bank to manage low oil prices. Despite efforts, financing the trade balance deficit required foreign debt. Successive governments Lenin Moreno and Guillermo Lasso deepened that reliance. Foreign debt rose sharply, and Ecuador faced periods of suspended interest payments due to fiscal strain. Financial challenges and political turmoil followed, with poverty remaining a persistent issue.
Warnings and stubbornness
Experts warned that dollarization brought trauma and risks if mismanaged. A former Correismo presidential candidate and former vice president cautioned that dollarization is primarily a monetary issue. A former economy minister noted that it does not solve poverty. Milei’s approach, though, signals a willingness to test these ideas once more, even if the country’s size and structure differ from Ecuador’s.
Analysts estimate that roughly 37 billion dollars would be required to implement a far right economic plan. If the central bank lacks funds, this represents a substantial challenge. Argentina carries a foreign debt well into the hundreds of billions. Projections suggest maturities could reach tens of billions annually in the coming years, complicating financing needs.
Despite widespread skepticism about dollarization, supporters seek fresh loans and backed bonds, with public corporations particularly impacted. Some economists argue that returning savings to the country would be difficult, while others advocate for cautious reform. The debate centers on whether short term stabilization would justify long term constraints on macroeconomic maneuverability.
Social impact
There are strong concerns about the social costs of such a plan. Past attempts to peg the currency to the dollar left social wounds, including periods of sharp inequality and unemployment. The 2001 crisis left a lasting memory of instability. In this climate, the prospect of dollarization raises fears about the loss of monetary independence, potential currency appreciation, and a reduced ability to respond to shocks. Critics warn that long term consequences could include a stalled productive sector and limited policy flexibility during crises.
In Milei’s view, the gap between ambition and reality became evident early on. The central bank leadership anticipated to steer dollarization faced political shifts, prompting criticism from the far right over personnel appointments. A bold move like issuing giant dollar visuals may energize a faction, but it risks losing symbolic resonance if practical implementation stalls. The dream of a currencyless economy remains distant, perhaps unattainable, and possibly a reflection of a political fantasy rather than a feasible plan.
Cited insights and assessments come from multiple economists and financial analysts who emphasize the need for thorough cost-benefit analysis and realistic timelines. The broader lesson points to the importance of credible policy design, transparent financing, and the capacity to weather global price swings. The push for dollarization, while provocative, must be weighed against Argentina’s unique fiscal and institutional realities.