And if to end the fever we changed the thermometer? Strangled by inflation and a currency – the peso – depreciating visibly, the Argentinians are tempted by a radical remedy: dollarize the economy, a solution advocated by the liberal-libertarian Javier Milei, surprise winner of the primaries in the presidential.

“It’s possible to end inflation, you just have to take away the monetary weapon from politicians”, proclaims Milei, a 52-year-old economist, a polemicist who grew up on TV sets, who has been transformed for 2 years into an “anti-political” politician. -political caste”, with incendiary formulas and radical ideas. And who suddenly took on a presidential profile with 30% of the vote, leading in the primary.

Do away with (“dynamite”, he said) the Central Bank and its “money printing (of pesos) in the service of politicians”, and let the dollar circulate as the currency of transactions – instead of exchange controls current-, is one of his key ideas.

It shakes up the politico-economic debate, in a country mired in 113% inflation, where the peso, devalued in mid-August by 20%, rose in one year from 138 to 350 for one dollar at the official rate (more than double the parallel rate).

Millions of Argentines who see their wallets swell with banknotes worth less and less and their purchasing power melt away, aspire more than anything to a “calm” currency, whatever it is. A kind of “why not, after all”?

– Sweet-tragic memory of 2001-

“It would be nice to dollarize. With this instability of the exchange rate, I’m selling half as much as usual. The only ones who win are the speculators” against the peso, grinds Ivan Abl, a fabric retailer for 30 years in the district. porteño of Once. Before thinking: “But in this case, it’s the Yanquis (Americans) who would control everything, right?”

It’s that the dollar-king awakens memories that are both sweet and painful. Argentina does not strictly speaking “dollarize” its economy, as Panama or Ecuador were able to do.

But it has already in the past “anchored” its currency on the greenback in the 1990s, establishing convertibility “uno por uno” (1 dollar = 1 peso), to get out of the hyperinflations of 1989-1990 at 2,000-3,000% .

An era remembered as deceptive opulence — dried up inflation, suddenly dollar-rich middle class — that crumbled and ended in bloodshed.

In an economy that was suddenly open and deregulated, massive imports dried up currencies, while exports collapsed. Whole swathes of activity, and therefore employment, are disintegrating.

Then external shocks, and a strong dollar, generated too much demand for dollars for the supply, leading to a bank failure, the freezing of withdrawals. Panic, looting, riots killed 39 people in December 2001, probably the crisis that has most traumatized Argentines since the 1976-1983 dictatorship.

Because a fundamental problem of the country (“dangerously low levels of foreign exchange reserves” recalled mid-August the IMF), remains acute, biting. “Dollarizing with a shortage of dollars is a little scary,” summarizes economist Ivan Werning, co-author with two colleagues from the Massachusetts Institute of Technology of a recent study “Chronicle of an announced dollarization”.

In it, he predicts that “before generating low inflation in the long term, a dollarization announced in advance” could – in the case of Argentina – “exacerbate” the opposite in the short term, with “an immediate devaluation , an inflationary leap”, and a “worrying short-term” cost.

Besides “where are they going to get the dollars from to dollarize?” challenges the Minister of the Economy Sergio Massa, who is struggling to stay in the nails of budgetary control of the IMF for the refinancing of the Argentine debt. And at the same time, carries the government banner (center-left) for the October presidential election: he came 3rd in the primary with 27% of the vote.

False problem, reply the economists around Milei, like Emilio Ocampo, since “the dollarization has already been done”, de facto, the dollars are there. According to data from the Central Bank, Argentines have nearly $245 billion “under the pillow”, a mark of a country that has long seen the greenback as a safe haven.

“The Argentinians have already chosen their currency”, repeats Javier Milei.

09/01/2023 05:05:20 – Buenos Aires (AFP) – © 2023 AFP