Argentina’s government is focused on taming runaway inflation while the October election looms. With rising discontent, the August 14th primary election has already produced a shocking victory for now-frontrunner Javier Milei, a far-right libertarian. Argentina has struggled with economic woes for decades; however, inflation has exploded in the years since the COVID-19 pandemic, with consumer prices soaring over 113% from just a year ago. Rising prices of goods have proven especially stubborn after the recent electoral upset, which led to a market sell-off and a 20% devaluation of the Argentine peso. Soaring inflation is extremely detrimental to economic stability of any country, primarily because it decreases the purchasing power of individuals’ incomes, resulting in fewer goods and services that can be purchased with the same amount of money, which leads to a lower standard of living. According to the AP, official figures now estimate that four of every ten Argentines live in poverty.  

Rising inflation has resulted in a severe burden on the average Argentine, with prices of staple goods skyrocketing. According to Reuters, the price of basic food items has doubled in price, and other goods have also seen sharp increases in recent months. Consumer prices are only expected to rise ahead of the October election. “They’ve turned us into a country of beggars,” declared self-employed worker Carlos Andrada. According to Reuters, this reflects the growing feeling of disenfranchisement among Argentines as their standard of living continues to dramatically slide. These frustrations have placed Milei as the unlikely frontrunner of the presidential election, given the widespread dissatisfaction for how the ruling Peronist bloc has managed the economy.

The economic challenges facing Argentina and Argentines are daunting, as high inflation impacts the lives of the working class and lower income most severely. Unfortunately, when high inflation becomes entrenched, the options for combating include inducing more economic pain. Argentine authorities have been imposing some of the traditional methods of fighting inflation, such as aggressively increasing rates and intervening in the foreign exchange markets to prop up the peso. Essentially, it’s about restoring confidence in the Argentine peso and this ultimately requires a more diversified and robust economy, which requires investment – primarily foreign investment. The upcoming election will determine the government’s future position on attracting foreign investment and fiscal discipline, critical to stabilizing the economy. 

Inflationary pressures, currency crises, and debt issues have consistently plagued Argentina over the past decades, including a period of hyperinflation in the 1980s and 1990s, which significantly eroded the purchasing power and standard of living of Argentines. More recently, Argentina has suffered debt issues stemming from a currency crisis in 2018 in which the peso lost half of its value relative to the U.S. dollar. Record-high loans from the IMF failed to stabilize Argentina’s economy, and the election of the Peronist Alberto Fernandez to the presidency led to a widespread sell-off of government bonds and his administration would ultimately default on the debt. The COVID-19 pandemic severely exacerbated Argentina’s economic woes, and the government resorted to printing money in an effort to provide direct economic support to Argentines. This, of course, helped fuel inflationary pressures, and exchange rate controls and price freezes spearheaded by Fernandez appear to have complicated Argentina’s economic situation. Moreover, a historic drought this year is destroying the agricultural exports that are critical to Argentina’s economy via jobs and tax revenues, further adding to currency weakness. 

Argentina’s economic woes have no clear end in sight. Converging economic crises have coupled with political uncertainty in this year’s election to heighten instability and economic turmoil in the country. The primary election earlier this month made the situation even more unstable, which is why the peso plunged even further after the results. Aside from being an extreme conservative and libertarian, Milei’s key proposed policy to scrap the Argentine peso in favor of adopting the U.S. dollar has incredibly important implications for Argentina’s future. Consumer prices will likely continue to rise for Argentines until the election later this year, when a new government will have the opportunity to restore confidence in the peso. If one of the main opposition parties to Milei prevails, traditional tools to fight inflation and negotiations to reschedule disbursements with the International Monetary Fund will tell the tale. If the radical libertarian Javier Milei triumphs, the dollarization of the economy will limit Argentina’s monetary autonomy and central bank, but that’s not necessarily a drawback given its missteps over the years. In today’s political economy, de-dollarization dominates the headlines, but the entire world will be watching the dollarization experiment if Milei pulls off the upset.