Dollars in Argentina: blue-sky thinking or greenback dreaming?
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Foreign Exchange

Dollars in Argentina: blue-sky thinking or greenback dreaming?

The frontrunner in the Argentine presidential election campaign has said he wants to abolish the peso and replace it with the US dollar. Is it blue-sky thinking or just greenback dreaming?

Dollar Sign

The Argentine peso has a troubled past, but it might be about to face its greatest challenge. Free-market radical and populist candidate Javier Milei, who won 30% of the votes in Argentina's primary election, has said he would abolish Argentina's central bank and its domestic currency if he were to win October’s presidential election.

Treasury solutions firm Kyriba’s first-quarter currency-impact report identified the Argentine peso as the most volatile of the G20 currencies over the first three months of the year. Its official rate dropped almost 18% on news of the primary results.

Supporters of Argentine dollarization point to Ecuador, which adopted the dollar in 2000. Some observers have described the decision to scrap the sucre and the central bank there as the most successful monetary policy in Ecuador's history, depriving governments of the possibility to overspend and giving ordinary people control of their money.

Following a visit to the country to attend a conference on 20 years of dollarization, Nicolás Cachanosky, associate professor of economics and director of the Center for Free Enterprise at University of Texas and senior fellow at the American Institute of Economic Research, noted that dollarization largely eliminates domestic shocks that would otherwise come from the politicization of monetary policy.


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