President Javier Milei announced a plan in June 2024 to replace the Argentine peso with the U.S. dollar as the sole legal tender [1].
This move represents a drastic attempt to stabilize an economy plagued by extreme price volatility. By removing the government's ability to print currency, the administration aims to stop hyperinflation and restore international confidence in the country's financial system [1, 2].
Milei said his administration would move to fully dollarise the economy within the next 12 months [1]. This target suggests a completion date by mid-2025 [4]. However, reports on the timeline vary, with some sources describing dollarisation as a long-term goal rather than an immediate one-year project [2].
The proposal follows years of severe currency devaluation. In 2023, the inflation rate reached approximately 250% [1]. Jurist Caroline Kleiner said that by the end of the 1990s, the Argentine peso had already lost the trust of the people due to heavy devaluation [5].
Implementing the plan requires addressing significant financial hurdles. Argentina currently holds public debt totaling $100 billion [3]. While the government seeks to attract foreign investment, the transition would strip the state of its primary monetary-policy tools. Economists said that while the move could curb hyperinflation, it would leave the government unable to manage the economy through traditional currency adjustments [2].
Market reactions to the administration's broader reforms have been mixed. Fitch recently upgraded Argentina's sovereign rating to B+ from B [6]. Despite this upgrade, some investors remain skeptical and have warned of potential capital flight [7]. The government is expected to focus the initial rollout of the new currency system in major urban centers, including Buenos Aires [5, 7].
“President Javier Milei said his administration would move to fully dollarise the economy within the next 12 months.”
Full dollarisation is a high-risk economic strategy that trades monetary sovereignty for price stability. By adopting the U.S. dollar, Argentina would effectively outsource its monetary policy to the U.S. Federal Reserve, eliminating the risk of domestic hyperinflation but losing the ability to devalue its currency to make exports more competitive during global downturns.
