Milei’s “radical plan”, revisited – part 1
Peter Rock-Lacroix
In 2023, Javier Milei pitched dollarization as the path toward prosperity for Argentina.
Two years on, it’s the peso and the past that remain.
Milei’s Dollar Dream Dies
It is a radical plan that had never been tried in a country as large and complex as Argentina.” That was how economics editor Larry Elliott described President-elect Javier Milei’s dollarization proposal in a Guardian article published shortly after the 2023 election. Back then, getting rid of the peso and adopting the U.S. dollar was the centerpiece of Milei’s libertarian agenda. But the peso remains, and dollarization has quietly faded.
Since taking office on 10 December 2023, Milei’s most attention-grabbing idea has
slipped from view. The plan that once dominated headlines was overtaken by a crawling peg, austerity measures, and political reality.
Milei’s pivot away from dollarization reflects Argentina’s economic realities. Limited reserves and political resistance made full dollarization unrealistic. Milei’s claim that dollarization would have landed him in prison suggests that the only way this would have occurred is if he had bypassed Argentina’s legal framework without legislative or democratic approval.
Instead of swimming upstream, Milei followed a familiar formula. He began with sharp
devaluation of the peso and implemented a crawling peg to manage volatility. This was paired with austerity to reduce the deficit and reliance on the IMF to stabilize reserves. Milei’s policy choices reflect a redux of what has already been tried over the last several decades.
Milei’s Recycled Remedies
Milei ran as a radical, vowing to dollarize and close the central bank. Yet his actual policies resemble some earlier attempts to tame inflation. The closest parallel is Argentina’s 1991 convertibility plan, which pegged the peso to the U.S. dollar under Law No. 23.928. This regime, which required full monetary backing with foreign reserves, initially stabilized inflation and brought some economic stability through the 1990s.
While the 1990s currency board was the most restrictive in Argentina’s history, Milei’s crawling peg has come the closest since. Relatively speaking, the rigid monetary policy of the 1990s currency board makes Milei look moderate. But not to be outdone, Milei paired harsh fiscal austerity with his more ‘moderate’ monetary policy. Budget cuts and deregulation efforts plunged over half the country into poverty within six months, surpassing the currency board years before it reached similar levels. Though the 1990s crisis built gradually, Milei’s adjustment hit like a shockwave, delivering pain with remarkable speed.
By the end of the decade, the currency board began to unravel. The contagion from the 1998 Russian default triggered global financial instability, making investors more cautious about lending to emerging markets. As a result, Argentina’s borrowing costs rose sharply, leading to a growing fiscal deficit and increased capital outflows. Under the currency board, Argentina could not simply issue pesos to cover the shortfall, since every peso had to be backed by U.S. dollars. As reserves drained, the system became unsustainable and eventually collapsed.
After the collapse in 2002, Argentina adopted a managed float, using capital controls, central bank intervention, and reserve accumulation to stabilize the peso and keep the real exchange rate competitive. From 2002 to 2015, monetary policy focused on the money supply rather than targeting inflation. When the central bank bought U.S. dollars, it later used sterilization to “soak up” excess pesos, based on the belief this would control inflation.
Although Milei’s exchange rate policy has greater similarity with the 2002-15 managed float than the currency board, his emphasis on fiscal tightening and disinflation aligns more closely with the post-2018 policy reversal under Macri.
Early in his presidency, Mauricio Macri (2015–2019) lifted currency controls and allowed the peso to float more freely in an effort to attract investment and restore market confidence. However, rising inflation, currency instability, and capital flight led to a reversal in 2018, including new taxes, spending cuts, and a record loan agreement with the IMF.
Despite his extreme promises, Milei’s government appears set to continue its dependence on IMF support while cutting government spending. Though he inherited the restructured IMF program from the previous administration, Milei began talks for a new $20 billion IMF loan in March 2025. This was his first original deal as president and a clear indication that IMF financing remains central to his strategy.
Though Milei promised a break from the past, his policies rely on the same orthodox remedies: a managed exchange rate, IMF support, and fiscal austerity. His approach recycles familiar tools rather than delivering the radical shift he once pledged.
Peter Rock-Lacroix is a graduate student at Modern Money Lab., Torrens University.
