Due to Milei’s policies, Argentines now need pesos and sell dollars

President Javier Milei displayed hundred-dollar bills with his face during the election campaign, but suddenly Argentines need pesos more than ever thanks to his economic plan.

Now there are more people who sell part of their savings in dollars in exchange for pesos to make ends meet than those who buy greenbacks. The abrupt revival in demand for the crisis-prone currency is an unexpected consequence of the shock therapy policies Milei implemented after taking office on December 10.

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Some 208,000 Argentines sold foreign currency through official channels in April, according to central bank data released Friday, while 51,000 bought dollars or other hard currencies. This builds on a trend that began in January and marks the first reversal of buyers and sellers since at least 2018.

In November, the month before Milei took office, 789,000 Argentines bought foreign currency while only 114,000 sold dollars. The figures are only a small part of the real picture, as millions of Argentines exchange pesos and dollars on the vast black market, as well as through legal financial transactions.

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The need for pesos arises from Milei’s decision to abandon price controls but maintain strict control of the peso, which ultimately reduces the purchasing power of Argentines. Prices were suppressed by the president’s predecessors due to thousands of government-imposed controls that the libertarian immediately began to abandon.

While prices have risen more than 100% since he took office, the peso has only depreciated 59% during that period. That mismatch makes daily essentials expensive in dollar terms as local incomes have plummeted, forcing Argentines to dig into their dollar savings to pay monthly bills.

Milei and his economic team have repeatedly denied that the peso is overvalued and that they plan to accelerate the pace of its devaluation to catch up with inflation. Instead, they argue that companies need to reduce prices.

The president still promises to implement a “currency competition” where the US dollar and the peso will coexist as forms of legal tender. He also says that he will eventually make good on his promise to completely shut down the central bank.