BUENOS AIRES, Oct 22 (Reuters) - Argentines began voting on Sunday in a national election where a far-right libertarian leads the race, a shift in the political landscape due to fallout from the country's worst economic crisis in two decades.
The ballot is likely to roil financial markets, set a new political and social path for the nation and impact its ties with trade partners including China and Brazil. Argentina is a major grains exporter with huge reserves of lithium and shale gas.
Oh, the doom and gloom. They weren't subtle about what their opinions here.
Actually, a Milei victory is likely to end Argentina's economic misery, and restore it to its rightful place as one of the world's most prosperous countries.
Milei, who's a Trump-like populist in touch with popular sentiment, but with a far more libertarian streak, is roping the voters in, particularly the young ones, with his vow to dollarize Argentina. That would require Argentina just use the American dollar as its currency and flush all those wretched, devalued pesos it has to use now straight down the toilet.
Dollarization would get rid of the peso by exchanging all of them for dollars and then do all its financial transactions in U.S. dollars. Like Panama, they can change the name of the pieces of paper bearing George Washington's visage to something like the Balboa or maybe the San Martin if they like. But what their government won't be able to do is print up another batch of them, fueling monster inflation. They wouldn't even be able to try to do it like they can with the peso, they'll instead have to live within their means like normal bank account holders, balancing their checkbooks each month, and that will be that.
That's too much for a lot of leftwing intellectuals and academics, though, who are leading a charge against dollarization, claiming it wil be a disaster.
Steve Hanke, a Johns Hopkins University economics professor, has pointed out what a lot of hooey he's hearing:
What is somewhat surprising is that a string of foreign economists and so-called financial experts have weighed in and fanned the flames of anti-dollarization propaganda. To name just a few of the notables: Robin Brooks, Arminio Fraga, Guillermo Ortiz, Mark Sobel, Alejandro Werner, and Iván Werning. Some have even argued that a debt default, not dollarization, is the solution to Argentina’s problems. Others lacking any originality have taken to paraphrasing Ecuador’s former left-wing president Rafael Correa, claiming that the adoption of the dollar would be equivalent to a monetary suicide. And, to top it all off, dozens of Argentine economists have signed a letter slamming dollarization as a “mirage.” It’s clear that none of them are aware of the 96 successful cases of dollarization that have been documented by Hanke in a recently published working paper, “Historical Episodes of Full Dollarization.”
And let's not forget the press. Here are some of the flaming horsehockey forecasts from that quarter:
Milei’s Path to Dollarization: Riddled with Doubts -Americas Quarterly
Argentina should beware the dollarisation fairy -Financial Times
Argentina's Dollarization Is a Dangerous Delusion -Washington Post
Here's the really disgusting one:
Argentina needs to default, not dollarise -The Economist
The first fact that needs to be understood is that the Argentine people have already chosen the dollar as their preferred currency. Argentines have more than US$200 billion in greenback bills stashed away in safe-deposit boxes at banks or at home “under the mattress.” In comparison, the supply of pesos, measured by M3, is worth less than US$50 billion. Nobody in Argentina wants to hold pesos. While Argentina might not be officially dollarized, it remains the most heavily dollarized country outside of the U.S.