Just as Russian oligarchs did not keep their capital in rubles, so Argentines do not like the national currency, investing their savings in dollars, keeping «greenbacks» «under their mattresses» for a «rainy day» or opening accounts in foreign banks. Economist Emilio Ocampo claims that more than 200 billion dollars are deposited abroad.
Argentines make almost all transactions in «American presidents», and shopkeepers give a generous discount to anyone willing to pay in foreign currency. Newspapers and television stations monitor exchange rates minute by minute. The streets of downtown Buenos Aires are filled with moneychangers offering black market rates to anyone willing to exchange their dollars for pesos. And ticktockers and youtubers post videos on how to «bleach» dollar bills to keep them clean and crisp.
Annual inflation is 104% and Argentines are trying to weather this by storing their savings in US dollars and even cryptocurrency. While the official exchange rate is 222 pesos per U.S. dollar, the unofficial black dollar exchange rate has risen to 500 pesos in recent days. By comparison, in 2014 under President Cristina Kirchner, the official rate was 8 pesos per U.S. dollar, while the unofficial rate hovered around 12–14 pesos.
Less than a month before the presidential election, one of the winners of the primaries, right-wing libertarian Javier Miley, fanned the flames of discontent: he called for «burning» the Central Bank and replacing the peso with the U.S. dollar. Moreover, and this is something of a paradox — politicians and nearly 60% of Argentines in opinion polls disagree with him.
«Argentina is not capable of conducting [full] dollarization because it requires dollar reserves from the Central Bank, which it doesn’t have», says Julián Zicari, an economist and researcher at the University of Buenos Aires. — It’s a very radical and desperate measure proposed by fanatics who think the best thing to do is to blow everything up».
Argentina is experiencing its worst economic crisis since the depression of the last decade of the twentieth century, with a failed attempt to peg the currency to the dollar that it eventually failed to defend. This led to one of the worst economic collapses in the country’s and hemisphere’s history and a subsequent political crisis.
Argentina’s economic turmoil has now reached desperate levels as a result of debt slavery to the International Monetary Fund (IMF), lack of access to dollars, and a devastating drought that has collapsed the country’s farming and livestock production, crippling the country’s crucial agricultural exports.
In 2018, the IMF provided a record $57 billion to the right-wing administration of then-President Mauricio Macri.
But instead of rebuilding Argentina’s crumbling infrastructure, the money was largely used to finance capital flight.
As a result, Argentines swapped the right-wing radical Macri for the Peronist Alberto Fernandez (Peronism is Argentina’s nationalist movement, in which the left and right, and even the far left and far right, coexist). But Washington, through the IMF and the World Bank (WB), burdened Casa Rosada (the official residence of the Argentine president, located in the center of Buenos Aires on the east side of the Plaza de Mayo — auth.) so that it is impossible to get rid of the foreign debt.
The Peronist government managed in 2022 to renegotiate the terms of the loan and agreed on a 30-month, $44 billion IMF loan program. As a result, the country’s external debt fell from $276472.97 million in the fourth quarter of 2022 to $275093.37 million in the first quarter of 2023, according to the Trading Economics statistics website. But this did not improve the country’s position in any way.
Meanwhile, Milei has contacted IMF officials to probe the ground and explain his economic proposals for a fund-based solution to the country’s crisis. During a virtual meeting that lasted a little over an hour, Milei and members of his economic team assured IMF officials that they had no intention of halting payments or defaulting on any of the country’s debts.
They also mentioned their goals to open the economy, modernize labor laws, cut spending through deep state reforms and «a monetary reform that will end the Central Bank», among other things, to get the powerful financial fund to lobby for the upcoming elections.
Sergio Massa, Argentina’s current Minister of Economy, who came third in the primaries as the presidential candidate of the pro-government alliance Union for the Homeland, was not left out of the search for a way out of the situation.
The shortage of dollars in the international reserves of its central bank forced it to take an unprecedented decision: to fulfill a payment obligation to the IMF in Chinese yuan equivalent to one billion U.S. dollars, with another 1.7 billion paid in special drawing rights, which are considered IMF currency because they are a reserve asset consisting of a basket of major world currencies.
This year Argentina and the IMF renegotiated the repayment terms of the loan to prevent Argentina from defaulting. This was compounded by growing financial market tensions that forced Argentina’s central bank to impose additional currency controls in May 2023.
In other words, the monetarist policies of the International Monetary Fund and the World Bank have led Argentina to take the desperate step of joining BRICS, moving away from the U.S.-led economic order, and de-dollarizing.
Does this mean the emergence of an alternative for Argentina, in particular, and the Global South, in general, to exit the financial bondage of the Global North?
«BRICS has the potential to redefine Argentina’s attitude toward debt», says Julio Gambina, a professor at Argentina’s Rosario National University. «Its investment could allow the country to build a public economy that prioritizes the needs of people and families over those of transnational companies. But that’s still in theory», he said.
Perhaps the most attractive advantage Argentina seeks with this new membership is access to credit lines from the BRICS New Development Bank (NDB), an alternative to existing loans from the IMF. One would then expect Argentina to consider the NDB as an additional source of financing to address its problems.
In sum, Argentina’s membership in BRICS could mark the beginning of a new environment for foreign investment and international trade. And in this respect, to become, along with Brazil, a beacon for other LAC countries that find themselves in the same situation created by long-standing U.S. policies.
The current President of Argentina, Mr. Alberto Ángel Fernández, said that membership in BRICS will open new markets, facilitate the flow of investments and increase the state’s exports.
On August 24, 2023, at the 15th BRICS Summit in South Africa, it was publicly announced that the Republic of Argentina would join BRICS as of January 1, 2024.
However, a few days before the BRICS summit, Argentina held primaries. Javier Milei, a supporter of dollarization of the economy, came in first place. In second place — the candidate from the opposition right-wing coalition Together for Change former Argentine security minister Patricia Bullrich, who favors the abolition of currency controls. And both candidates are against Argentina joining BRICS. Pro-government BRICS supporter Argentine Economy Minister Sergio Massa is in third.
Argentina will hold presidential elections on October 22, with a possible runoff scheduled for November 19, while the inauguration of the new head of state will take place in December, and he will have to quickly decide whether to accept or reject the invitation of the BRICS group.
The future fate of South America’s second-largest country depends on it.