In Argentina, Voters Toy With Ditching Pesos For Dollars

Eduardo DE MIGUEL   Thu, August 31, 2023 Many Argentines are still traumatized by events that occurred when their currency was pegged to the dollar at a one-to-one convertible rate in the nineties (Luis ROBAYO)

Many Argentines are still traumatized by events that occurred when their currency was pegged to the dollar at a one-to-one convertible rate in the nineties (Luis ROBAYO)

In inflation-hit Argentina, where rentals, cars, and appliances are increasingly priced in dollars to sidestep the volatile peso, a leading presidential candidate has sparked debate over whether to officially adopt the currency as a remedy to a battered economy.

The US dollar has long been a refuge for Argentines from pesos which lose value faster than they can spend them. Citizens bypass strict currency controls to buy dollars from a flourishing parallel market and squirrel them away at home in what is often their only viable means of savings.

So why not just dump the peso entirely?

This is the tempting message being spread by Javier Milei, a political outsider with radical ideas who has surged to the front of the presidential race ahead of October elections, despite economists long arguing dollarization would be unfeasible.

"Ending inflation is possible, we just have to take the monetary weapon away from politicians," said the 52-year-old lawmaker, referring to the central bank, which he has said he will scrap entirely if he is elected.

With annual inflation at 113 percent, and a peso that was devalued by 20 percent this month, experts say the lure of Milei's ideas is that many Argentines feel they have nothing to lose.

"It would be good to dollarize. With the instability of the exchange rate I sell half as much as I usually do," said Ivan Abl, who has sold fabric in the Once district of the capital for 30 years.

After thinking for a few moments, he adds, "But, that will mean the Yanks will control everything right?"

- Economic ghosts of 2001 -

Dollarization involves replacing a currency entirely with the US dollar, which offers a more stable currency, but removes government control of monetary policy -- such as setting interest rates or taking measures to target inflation.

In Latin America, Ecuador, El Salvador, and Panama have adopted the dollar as their main currency.

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