Milei’s New Program: Dollarization, the Enemy of the People

Javier Milei has made headlines all over the globe, with his far-right ideology and far-left economic program gaining him the Argentinian presidency, but only 10% of seats in Parliament. Yet this colourful character, likened to Donald Trump and Boris Johnson, has been met by mass protests by Argentinians ravaged by sky-high inflation rates only weeks after his election (Al Jazeera 2024). Milei plans to fully deregulate and dollarise the Argentinian economy in order to help the Argentinians who are ravaged by the 40% poverty levels and 200% inflation (VOA 2023). Having announced his intention to abolish rent caps and remove government subsidies, protesters accused Milei of “selling the country”, disregarding the poor in favour of selling state assets to foreign multinationals (BBC 2024).

Are dollarization and increased alliance with the West actually in the worst interest of the Argentinian people?

BRICS, an organization founded on the principle of de-dollarization and Global South unity, accepted Argentina as a new member last year, yet President Milei has pulled out of the agreement, declaring that he wants to weaken ties with BRICS countries, its biggest trading partners, strenghten ties with the US and Israel instead (Reuters 2023). Milei’s economic plan has been approved, and he begins his term by devaluing the peso by more than 50 percent, cutting state subsidies for fuel and transport, reducing the number of ministries by half, and scrapping hundreds of rules to fully deregulate the economy (Al Jazeera 2024; BBC 2024). Although his economy favours liberal Western values, his reform package is very conservative on cultural and personal issues, and he has recently declared at the WEF that feminists, climate activists, and much of the academic establishment are “enemies of freedom and prosperity” (Jacobin 2024).

Still there are many issues with dollarization and privatization: the Argentinian crisis of 2001 is an example of the risks of free-market reforms. The crisis was caused by a similar economic plan at a time when Argentina was also experiencing hyperinflation, pegging the peso to the dollar and thus generating more economic instability (Dominguez and Tesar 2004, Fanelli 2002). Dollarization limits the power of domestic authority and leaves a country at the whim of external powers, further destabilizing it and not boosting trade with any countries, not even US (Eichengreen and Hausmann, 1999; Klein 2002). US and Argentina are very different economies, so monetary policy favourable to the US will not necessarily help Argentina. Argentina also does not have US dollar reserves, and the peso would require a substantial devaluation to pursue dollarization that would increase inflation and make the economic situation in Argentina even worse (Elliot 2023). Although praised by the IMF, Milei’s policy comes as a simple apparent fix to a complex issue, a further exemplification of IMF’s aims to entrench world countries into the Western system, destabilizing them and keeping them dependent on the US (FT 2024, Stiglitz 2017). BRICS de-dollarization has remained the economically-proven more successful plan (Yeyati 2006).

Sources:

Al Jazeera (2024). Argentina’s lower house approves Milei’s ‘omnibus’ reform bill. [online] Al Jazeera. Available at: https://www.aljazeera.com/news/2024/2/3/argentinas-lower-house-approves-mileis-omnibus-reform-bill.

BBC (2024). Argentina: Tens of thousands march against Javier Milei’s cuts. BBC News. [online] 24 Jan. Available at: https://www.bbc.co.uk/news/world-latin-america-68085197 [Accessed 15 Feb. 2024].

Dominguez, K. and Tesar, L. (2004). International Borrowing and Macroeconomic Performance in Argentina. [online] Available at: https://www.nber.org/system/files/working_papers/w11353/w11353.pdf.

Eichengreen, B. and Hausmann, R. (1999). Exchange Rates and Financial Fragility. [online] National Bureau of Economic Research. Available at: https://www.nber.org/papers/w7418.

Elliott, L. (2023). Does Javier Milei’s dollarisation plan for Argentina make any economic sense? The Guardian. [online] 20 Nov. Available at: https://www.theguardian.com/world/2023/nov/20/javier-milei-dollar-plan-argentina-economy [Accessed 15 Feb. 2024].

Fanelli, J.M. (2002). Growth, instability and the convertibility crisis in Argentina. CEPAL Review, 2002(77), pp.25–43. doi:https://doi.org/10.18356/69e0f2ef-en.

FT (2024). IMF chief confident in ‘pragmatic’ Milei despite setbacks. [online] Financial Times. Available at: https://www.ft.com/content/79b4e7e2-9b1a-4b1b-8ff6-efc6f1bd960c [Accessed 15 Feb. 2024].

Jacobin (2024). Javier Milei’s Freak Show Act Is a Taste of Things to Come. [online] jacobin.com. Available at: https://jacobin.com/2024/02/javier-milei-neoliberalism-far-right-libertarianism-davos [Accessed 15 Feb. 2024].

Klein, M.W. (2002). Dollarization and Trade. [online] National Bureau of Economic Research. Available at: https://www.nber.org/system/files/working_papers/w8879/w8879.pdf [Accessed 15 Feb. 2024].

Reuters (2023). Kremlin notes Argentina President-elect Milei’s comments on Russia, but hopes for good ties. Reuters. [online] Available at: https://www.reuters.com/world/americas/kremlin-notes-argentina-president-elect-mileis-comments-russia-hopes-good-ties-2023-11-20/.

Stiglitz, J.E. (2017). Globalization and its discontents revisited : anti-globalization in the era of Trump. New York: W.W. Norton & Company.

VOA (2023). Argentines Protest Milei’s Economic Reforms. [online] Voice of America. Available at: https://www.voanews.com/a/argentines-protest-milei-economic-reforms/7415017.html [Accessed 15 Feb. 2024].

Yeyati, E.L. (2006). Financial Dollarization: Evaluating the Consequences. Economic Policy, [online] 21(45), pp.63–118. Available at: https://www.jstor.org/stable/3601043.