Mohammad Sami

As one of the largest and most influential countries in the region, Argentina plays an important role in shaping political dynamics and regional integration efforts in Latin America. Argentina’s political system, characterized by democratic governance and regular elections, serves as an example for other countries in the region. This country’s commitment to democratic principles and peaceful transfer of power contributes to regional stability and sets a positive precedent for other countries.

International Relations Think Tank: Argentina has one of the largest economies in Latin America, which makes it an important player in the economic landscape of the region. Its political system influences economic policies, trade agreements and investment decisions, which have important consequences for the overall economic development and integration of the region.

On the other hand, Argentina has been actively involved in regional integration efforts, such as the Southern Common Market (Mercosur) and the Union of South American Nations (UNASUR). The political system and its leadership contribute to the decision-making processes and the promotion of regional cooperation plans with the aim of deepening economic, political and social relations between Latin American countries.

After none of Argentina’s presidential candidates won a majority of votes in the first round, in the second round held on November 19, 2023, Javier Millei won the Argentine national election by defeating Sergio Massa. Javier Millei’s proposed measures in response to Argentina’s commercial and economic challenges, especially high inflation and excessive money printing, are grouped into several important areas.

1. Liquidation of the Central Bank of Argentina:

The liquidation of the central bank of Argentina would be a very unusual and unprecedented action. Central banks play an important role in managing a country’s monetary policy, regulating money supply and maintaining financial stability. In fact, the breaking point of Argentina’s economy during the past two decades, when it passed the inflation peak of 140%, made this country feel the need for fundamental economic reforms.

Without a central bank, monetary and fiscal policy functions, such as supervision and regulation of the banking sector, must be transferred to another body to ensure financial stability. In order to reduce inflation and liquidity in the market, Xavier Milei’s proposal is to liquidate the Central Bank of Argentina and replace this system with private financial institutions. For this reason, Xavier Milei’s concession to the private sector for this action is to replace the national currency of this country with the US dollar currency, which can encourage the private sector to accept the market and reduce liquidity and print money in the financial system of this country.

2. Substitution of US dollars instead of pesos:

Replacing the peso with the US dollar as the national currency is a concept called dollarization. Dollarization is recommended in some countries facing severe economic crises to stabilize the economy and restore confidence in the currency. However, this is a complex decision with pros and cons.

The benefits of dollarization include increasing stability, reducing inflationary pressures, and increasing the commercial credit of countries in international markets. It can also attract foreign investment and facilitate trade with the United States. However, dollarization also comes with challenges. It limits the government’s ability to implement independent monetary policy because it relinquishes control over the currency. The implementation of the dollarization process requires careful planning and consideration of the country’s economic structure, debt obligations, and its potential impact on domestic industries, as well as addressing issues such as exchange rates, currency conversion, and public acceptance.

3. Withdrawal from the BRICS agreement and alliance with the United States of America:

BRICS is an association of emerging economies that aims to increase cooperation and promote economic development among member countries. Argentina joined BRICS as an observer in 2018, seeking to strengthen relations with these countries and explore new trade and investment opportunities. This country became a permanent member of this pact in 2023 and was introduced to the world as a developing economy along with Brazil, Russia, India, China, South Africa, Ethiopia, United Arab Emirates, Iran, Saudi Arabia and Egypt.

Miley’s slogan of withdrawing from the BRICS agreement and aligning with the United States of America represents a significant shift in Argentina’s foreign policy and economic alliances. It is likely to include a reassessment of trade agreements, diplomatic relations, and regional integration efforts. Alignment with the United States could bring potential benefits such as access to a larger market, increased investment, and closer cooperation in areas of mutual interest. However, it is important to consider the potential consequences, including the impact on existing trade relations with the BRICS countries and the potential loss of economic opportunities in that bloc. In addition, exiting the BRICS agreement requires careful consideration of the geopolitical implications and the potential impact on Argentina’s regional influence and position in Latin America.

In the end, it can be said that Javier Millei’s proposed measures to deal with Argentina’s economic challenges are on the radical spectrum and will have wide consequences in the Latin American region. The liquidation of the central bank of Argentina, if not accompanied by careful planning and principled design, can lead to financial instability in this country, replacing the peso with the US dollar requires considering the pros and cons of dollarization, and exiting the BRICS agreement requires evaluation Economic reunifications have potential geopolitical implications. Considering the long-term economic and political implications for the country, any major political change in the Milli government should be approached with caution.