The May Day march in Buenos Aires on May Day.MARIANA NEDELCU (REUTERS)
Restrictions on foreign currencies and the daily devaluation of the peso have elevated the dollar to fetish status in Argentina. Newspapers and television stations monitor all their quotes minute by minute; street money changers discriminate banknotes by design, colour and age; And Tiktokers and YouTubers teach how to clean them with bleach to keep the paper in good condition. The dollarization of savings is the rule, and has already been extended to the purchase of real estate, some rentals and other smaller transactions. Argentina is a bimonetary country that keeps, if it can, its dollars under the mattress. But these weeks the debate has gone further. Six months before the presidential elections, one of the campaign proposals of the extreme right feeds the fire of discontent: could Argentina get out of the crisis if it forgets the peso and dollarizes the entire economy once and for all?
Javier Milei, the media libertarian deputy who rises in the polls sharing thirds with the ruling Peronism and the moderate right, is convinced that yes. Milei has gone in less than three years from television sets to leading presidential polls with his stridency: from his calls to "burn" the Central Bank, or cut "with a chainsaw" public spending, to ban abortion again or legalize the sale of organs, his proposals dominate the public agenda. In recent weeks, Argentina has been debating the viability of dollarization, despite the fact that the rest of the political arc has ended up opting against it and almost 60% of the people consulted by pollsters do not agree either.
"Argentina is not in a position to dollarize. The only dollars supposedly available should be the reserves of the Central Bank, where there are no dollars," explains economist Julián Zícari. "Trying to do so would generate a total wage and retirement liquefaction," he adds. According to this economist, author of the book Argentine Economic Crises. From Mitre to Macri, the proposal of dollarization is a "very radical and desperate measure" that comes from "very fanatical sectors that think that the best thing is to exploit everything."
An exchange house in the neighborhood of Palermo, in Buenos Aires, on April 27. Sarah Pabst (Bloomberg)
The proposal with which Milei has walked through the television channels has as its axis the elimination of the Central Bank, the privatization of public companies and a fiscal adjustment that cuts 13 points of GDP. The economist is convinced that a dollarization that does not escape the exchange rate in the parallel market (469 pesos per dollar this week) is possible if all the assets and liabilities of the Central Bank are taken. The rest of the economists have less hope: the calculations in Peronism, the more moderate opposition and different independent organizations, foresee a hyperinflation that would shoot the price of the dollar up to 8,000 pesos.
"The logistics would be very complex if a future government intends to dollarize. To begin with, you would have to take all the pesos in circulation for a very low amount of dollars," explains Emiliano Libman, economist and researcher at Fundar. The analyst does not deny that it could be done one day, although the only example of its feasibility takes as background a trauma: in 1990, inflation reached 2.314%, the convertibility plan led to a parity between the dollar and 10,000 australes of the time, which by 1992 became a convertible peso that circulated at par with the US dollar. The government of Carlos Menem supported the convertibility regime with foreign debt and the privatization of public companies, although it began to make water around 1997. Convertibility finally exploded in December 2001 in the corralito crisis.
"The question about dollarization is enabled because it is taken as an option before what we Argentines have now, which is not good. Perhaps there is a bit of unreality in thinking that dollarization is a magic way out. But it is a policy that leaves you without instruments in unfavorable external circumstances," Libman analyzes. "The process of adjusting an economy, when prices fall in dollars and you do not have the possibility of modifying the exchange rate, can only be done with a recession. And we already banked one that was not enough to save convertibility."
Zícari is exhaustive. "Dollarization is a delirium that would end up turning you into a colony of another country that defines your monetary policy," he says of relying on the U.S. dollar and its Federal Reserve, which is trying to cover its own banking crisis with interest rate hikes. "You would be left without exchange rate policy and with a very limited fiscal policy. Not to mention the possibility of having an industrial development project."
The consensus on the unfeasibility of dollarization has been almost unanimous, but its discussion reveals the effectiveness that the extreme right has had in beginning to define the agenda for the elections. The clearest example was revealed last weekend. Cristina Kirchner again organized a rally in which her supporters expected some electoral definition on her part, but the vice president preferred to make a historical review of the convertibility crisis. He never said his name, but he got into the ring against Javier Milei's speech. "We are all discussing what failed 20 years ago," he charged. "Who are politicians going to make believe today, whatever the origin or the idea, that they will be able to control those who make concentrated economic power and will be able to solve the problems of Argentines in this state of things? Don't me with those fantasies anymore."
Fantasy, in any case, has taken its toll on Argentines. Whether with the dollar stock market, the parallel that is sold on the street, or the rising dollarization of some transactions, ranging from real estate to used electronics, the dollar is already a currency that regulates daily life. "Saving in dollars is as common as thinking about how many Argentines can save. That is, tell me how many Argentines have savings capacity and I tell you how much savings are in dollars in the country, "analyzes Libman. "The conditions fuel this debate, but they are also in place to strengthen the weight."
"We would not be inventing the wheel," says the researcher, who from the Fundar organization has taken advantage of the debate to propose a way out of that bi-monetarism that recovers the national currency. "It may take decades, but some of our neighbors have made it. To have an orderly macroeconomy, low and stable inflation, is not to finance budgets with monetary issuance all the time. Do not abuse that instrument. It's something we haven't tried in Argentina yet."
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