Lourdes Casanova

director of the Emerging Markets Institute at Cornell University

Lourdes Casanova, director of the Emerging Markets Institute at Cornell University, says Argentina’s previous experiences with sweeping deregulation and “dollarization” were not successful, and should serve as cautionary signal.

Casanova says:

“In 1991 the peso was pegged to the U.S. dollar to fight hyperinflation. Although inflation was initially brought under control, the peg became unsustainable. Today there are echoes of that experience. Milei has succeeded in sharply reducing inflation but has struggled to stabilize the peso’s exchange rate against the dollar. Given that currency trading is the largest financial market in the world—often reaching USD 4–5 trillion a day—no amount of reserves can single-handedly offset that pressure.

“Having President Trump as a political ally surely helps Milei, yet the underlying challenge remains: how can a relatively small economy shield itself from the turbulence caused by currency volatility? 

“History shows that leaders of very different ideologies have struggled to answer that question. Without a durable solution, a resource-rich country like Argentina risks falling into a downward spiral of mounting dollar-denominated debt and a weakening peso—a difficult situation to escape.”