- Right-wing economist Javier Milei won Argentina's presidential runoff Sunday.
- He thinks replacing the peso with the dollar can tame hyperinflation and revive the battered economy.
Far-right economist Javier Milei's victory in Argentina's presidential runoff on Sunday means the country could abandon the peso — a radical move that would run counter to the country's dedollarization drive.
Provisional results showed Milei garnered nearly 56% of the vote, with most counted.
Milei's been hyping up his desire to dollarize Argentina's beleaguered economy. He argued the move would help tame runaway inflation that hit 143% in October after a slump in the peso that's wiped out 99% of its value against the US dollar this year.
The currency has been depreciating since 2008 due to various reasons including hyperinflation, debt, and political instability.
In October, Milei went as far as saying that the peso "can't be worth excrement."
Prominent economist Steve Hanke — a champion of Milei's dollarization drive — posted on X after the results were announced that the candidate's proposal was "clearly a vote-getter."
Hanke, a professor at Johns Hopkins University, said in August that Argentina should "mothball" its central bank and adopt the greenback as its currency to tame inflation.
#ARGWatch: Javier Milei has just won the Argentine presidential election. Milei’s dollarization proposal was clearly a vote-getter.
— Steve Hanke (@steve_hanke) November 20, 2023
REBUILDING ARG'S ECONOMY = DOLLARIZATION. pic.twitter.com/MwEp8pT1Em
However, replacing the peso with the dollar would diminish some of Argentina's autonomy in monetary policy. It would also be the first time an economy as large as Argentina officially adopted the greenback.
Despite its economic woes, Argentina's economy was worth $633 billion in 2022, making it the world's 23rd-largest economy.
Critics of Milei's dollarization plans cite major challenges for Argentina against its backdrop of hyperinflation, economic crises, and political instability.
There's also a fundamental problem with Milei's dollarization plan — Argentina doesn't have enough US dollar assets to finance a major purchase of the currency, wrote Markus Jaeger, a global economy analyst at intelligence firm Stratfor, in October.
In fact, Argentina is so short of US dollars that it used the Chinese yuan to repay part of an International Monetary Fund loan last month.
Coupled with political instability and a history of poor economic management, Argentina would better off reforming its economic regime, wrote Jaeger.
"Full dollarization is the second-best solution to the inflation and economic instability problem," he wrote. "It is also a solution that is fraught with very substantial risks."
The Argentine central bank did not immediately respond to a request for comment from Business Insider, sent outside regular business hours.