At stake in Argentina’s election: replacing the peso with the U.S. dollar
At stake in Argentina’s election: replacing the peso with the U.S. dollar
Argentina votes for its new government on Sunday in the middle of an economic crisis, with inflation at almost 140%. One of the presidential candidates, Javier Milei, is promising to dollarize the economy and get rid of the local currency, the peso.
At an industrial unit in Argentina, 23 employees come and go with goods and operate the machinery. The company, Wardes, is 46 years old and manufactures specialized painting equipment and sandblasting machines.
The owner, Juan Pardi, said the peso is losing value so fast that some of his providers would rather not sell and keep their stock.
That means it’s become very difficult to buy the supplies Pardi needs in Argentina. “Some suppliers tell me, ‘I’ll sell to you, but please transfer dollars to me,'” he said.
Pardi is also struggling to buy foreign parts as he cannot easily get hold of the dollars he needs, which are at a controlled exchange rate, regulated by the government.
“I’ve lost foreign purchase orders. I couldn’t export the goods because I was missing some components that come from abroad,” said Pardi.
To fix the problem, libertarian presidential candidate Javier Milei said that he will dollarize Argentina’s economy and close down the central bank. He argues printing more money has just fueled inflation, which reached almost 140% this year.
“No one wants that repugnant paper that is the peso, because it’s the currency issued by Argentine politicians,” said Milei. “And that paper can’t be worth even excrement because that garbage is not even good as fertilizer.”
At a political rally, supporters of Javier Milei cheer for him. Some hold three-foot-wide fake $100 bills with the face of Milei where Benjamin Franklin’s should be, including 19-year-old Leandro.
“With the increase in purchasing power through dollarization, people could save more,” he said.
But many economists are not convinced.
“We don’t have enough dollars to dollarize our economy, and nobody is going to loan Argentina’s economy for this purpose,” said Leandro Bona, who works at the Latin American Faculty of Social Sciences.
The only way the economy could be dollarized, he said, is by making each dollar worth much more against the peso, which the country would need a huge devaluation of its currency for.
“We are going to earn less dollars than we earn now, even in pesos,” Bona said.
Back at the factory, owner Juan Pardi agrees. “As business owners, we will find a way to survive, but the people who work for us — the marginalized, the uneducated … I believe the country will become very small in terms of the economy.”
Dollarization is not yet a done deal for Argentina. First, voters must choose who they want to be president on Sunday — and whether they can live without the peso.
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