A former Trump official and an Argentine economist insisted on dollarization: “Argentina is sinking”

At an event organized by the liberal think tank Cato Institute, economists and former international officials once again insisted that Argentina should move towards formal dollarization. It is something that was part of the presidential campaign of Javier Miley in 2023, but it was an idea that he later quickly discarded when he formed his economic team.

The main presentations were given by David Malpassformer US Undersecretary of the Treasury during Trump’s first term and former president of the World Bank between 2019 and 2023; and on the other hand Emilio Ocampoan economist at UCEMA and one of the dollarization “hawks” who was close to Milei in 2023.

Malpass maintained that “Eliminating the Argentine peso would generate enormous benefits for the people in Argentina” and assured that he would allow “investments come in massively” to the country. According to him, as long as the local currency exists, investors’ fear of suffering exchange restrictions, devaluations or state controls will persist.

“The problem is that as long as the peso continues to exist, new investments are not going to arrive“, he stated. And he added: “If Milei said that he was going to complete the elimination of the peso, the money would ‘flood’ into Argentina and his program would begin to work.”

The former official went further and maintained that it would not even be necessary to previously raise a large amount of dollars to implement the scheme. “There is no need to get dollars in Argentina. Not even the dollars under the mattress are necessarybecause the moment Argentina says it will stop imposing the peso, dollars would enter massively,” he stated.

In that sense, he relativized the usual calculations about the amount of foreign currency required to dollarize: “US$20,000 million is really a small figure. Much more money would enter Argentina.”

Malpass also linked the Argentine economic crisis directly to the persistence of the local currency. “The alternative is not working. Argentina is sinking,” he said. And he added: “90% of the deterioration that Argentina is suffering today is due to the existence of the peso”.

The former president of the World Bank also questioned the resistance of international organizations and political sectors to this scheme. “The world is organized in favor of local currencies. The country’s elites benefit from that, the central banks benefit, the IMF benefits and so does the US Treasury,” he noted.

For his part, Ocampo — one of the economists who promoted the dollarization project during Milei’s presidential campaign in 2023 — defended the experience of Latin American countries that adopted the dollar as their official currency, such as Ecuador, Panama and El Salvador.

The economist highlighted that these countries have much more developed financial systems than Argentina. “In Ecuador you can access 20-year mortgage loans, something impossible in Argentina,” he stated. And he added that “The amount of dollars that Argentines have is four or five times greater than the amount of pesos”, as proof that society has already chosen a reference currency.

Ocampo also rejected the argument that it is enough to maintain fiscal balance without eliminating the peso. “Argentina does not have a lender of last resort. The only lender of last resort we have is the IMF,” he ironized. As he explained, the Argentine currency works as a survival mechanism for an inefficient economic system. “Weight is like oil in a rusty old engine that can’t run”, he graphed.

“Weight is essential for survival of a system that condemns Argentina to stagnation“, he said. And he added that dollarization would accelerate growth and give a signal of long-term credibility. “The important thing is commitment. When people get paid in dollars, it is very difficult for a politician to take that currency out of their pockets,” he said.

Milei has an ideological affinity with the Cato Institute. In May 2024, during an official visit to the United States, the President participated in an activity organized by that liberal think tank in Washington.

The Cato Institute was founded in 1977 and is one of the most influential centers of liberal thought in the United States. Among its promoters were the economist Murray Rothbard, a reference of anarcho-capitalism and the Austrian school. He is one of the economists most cited by Milei.