At the headquarters of the Argentine Central Bank, economists stare at a shocking chart: the net foreign exchange reserves have fallen to -$12 billion. This means that not only are there no dollars left, but commitments to importers and debtors exceed available assets—a situation unprecedented in the 90-year history of central banking.
On February 7th, the Argentine Ministry of Economy released data showing that in January, capital outflows reached $4.5 billion, while the central bank could only intervene with $200 million in the foreign exchange market. This has forced President Javier Milei’s government to announce a “temporary suspension” of its core campaign promise: full dollarization of the economy. In a televised address, Economy Minister Luis Caputo admitted that “the current conditions do not allow for the abandonment of the peso,” but insisted that “this is a tactical retreat, not a strategic change.”
This radical experiment began in December of last year when Milei implemented a “shock therapy”: abolishing price controls, cutting public spending by 15%, and devaluing the peso by 54% overnight. The initial effect was significant, with monthly inflation dropping from 45% to 25%. However, the side effects quickly emerged: imports of essential medicines and energy fell by 60%, and over 5,000 small and medium-sized enterprises went bankrupt due to dollar-denominated debts. Most critically, Argentina’s main agricultural exports—soybeans and beef—have seen a 40% decrease in foreign exchange earnings as farmers hoard goods, refusing to sell at the current exchange rate.
The international financial community is growing increasingly concerned. The International Monetary Fund (IMF) has postponed the review of its $44 billion loan program to Argentina, while three major international credit rating agencies have simultaneously downgraded Argentina’s sovereign credit rating. BlackRock’s report bluntly states that “Argentina’s dollarization plan lacks basic financial arithmetic support.” Neighboring Brazil and Uruguay have begun stockpiling food in preparation for potential large-scale refugee flows from Argentina.
On the streets of Buenos Aires, protests have erupted once again. Unlike previous demonstrations, this time the middle class has joined in, as their dollar savings have evaporated with the peso’s devaluation. Sociologists warn that Argentina may be on the brink of its most severe social crisis since 2001.
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