Argentina is facing the worst possible inflation crisis, and the survival of its people is in a risky place. The world of international finance has experienced its fair share of events that have been coupled with decisions that could have far-fetched implications for global economic and political sectors.
Argentina was invited to join the BRICS group this year at the bloc’s annual summit. However, its recent move does not coincide with the BRICS agenda of de-dollarization efforts that would seek to employ their own local currencies in international trades.
Argentina recently noted its intention of dumping its local currency in favor of the dominant US Dollar. This move has ignited debates and talks on the region’s economic stance as it raises controversies among financial experts and the natural region. Still, this move has been fostered by various proceedings.
Argentina and the BRICS bloc
During the annual BRICS Summit this year, Argentina received an invitation to join the International group following the set change in leadership in the country. Considering the win in the primary elections, Javier Milei’s vision of achieving the dollarization vision is against that of the bloc. His win in the final race could mean a new road map for crypto adoption in the country.
Moreover, the presidential candidate, Milei, has been strongly rooted in his stance against the bloc’s de-dollarization efforts, pleading for dollarization of the country’s economy. The major reason behind his vision is the rising inflation figures that might reach 185% within the next year. As such, citizens may decide to onboard Milei’s vision regardless of the radical approach.
Following Argentina’s invitation announcement as among the expanded BRICS nations, some controversies on the country’s international financial future were raised. The decision to join the bloc rests in the hands of Argentina’s current president, Alberto Fernández.
Adding to the country’s poor economic state, its leadership is set to change in the October elections, and the new leadership might implement a radical approach towards mitigating the impacts of the poor economy.
Reasons for the radical decision
Based on all these coupled events, a question had been raised: could Argentina dump its Peso local currency for the US Dollar? Despite this being just speculation, it could be a reality based on sentiments made by the primary victor of the presidential elections, Javier Milei. His views on accepting the dominant USD currency might be implemented, and this would realize the speculation.
A recent report on the country’s economic stance states that citizens in Argentina have nearly $200 billion in cash, a figure that is second to the United States globally. Based on the reduced value of the Peso, dollarization efforts might not seem like an outrageous proposal.
However, the BRICS alliance might be in jeopardy, and this would eliminate Argentina from the invitation listing. This is because the bloc has a set target of reducing the dominance of the US Dollar in international finance.
Still, the dollarization decision could be a win for the region’s economy as it tries to gain stability and economic security. As such, this decision would be counterproductive. However, following his sentiments on the matter, it is highly unlikely that Milei would back Fernández’s decision to join BRICS if he wins the elections this month.
Among the economic reasons behind this radical approach of ditching the Peso for USD include inflation and devaluation. Citizens have lost faith in their local currency due to hyperinflation. Regardless of the government’s efforts in stabilizing its value, the Peso has continued to devalue.
Another reason is attracting investors who would play a major role in living the region’s economic status. International trades often require a stable currency for trade that is also widely accepted, and the US Dollar fits the description. This reduces their exposure to risks, including exchange rates.
