Argentina Considers Dollarization Amidst Economic Struggles

Bullion Bite

As Argentina continues to grapple with rampant inflation and devaluation of its currency, the country's citizens and economists are debating a potential solution: dollarization. Presidential candidate Javier Milei has proposed a plan to abandon the Argentine peso as a fiat currency and convert all deposits and reserves to U.S. dollars.

Milei argues that this move would be one of the most feasible solutions to the country's economic problems, as it would end inflation, which has hit Argentine citizens hard. However, the proposal is not without its detractors. Critics argue that abandoning the national monetary policy in favor of following the U.S. Federal Reserve's dictates could be detrimental to the country's economy.

The proposed dollarization plan is estimated to cost the country $40 billion, but many Argentines view it as a potential solution to the devaluation and inflation crisis. The peso has lost over 15% of its value in less than ten days against the U.S. dollar, giving Milei's campaign a boost.

Former Treasury Minister Domingo Cavallo suggests that dollarization could be an option to "stabilize" the country in 2024 or 2025 before implementing a series of reforms to lessen the impact on wages, pensions, and other assets.

As the debate over dollarization continues in Argentina, the country's future economic policies remain uncertain.

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