Argentina takes steps to speed up Milei’s dollarisation strategy

Argentina’s government is racing against time as it works with major banks and payment firms to advance Javier Milei’s dollarisation strategy even as pesos are in high demand. 

To do so, the government plans to take two key steps — launch the first dual-currency debit card, so that Argentines can make dollar payments despite ongoing exchange rate controls, and allow banks to provide dollar loans in sectors that are currently excluded from such financing. 

The initiatives aim to capitalise on the recent surge of dollar inflows stemming from the government’s tax amnesty. Over the past five months, Argentines deposited more than US$20 billion in local banks. That flow of foreign cash, combined with a move by the government to limit the supply of local currency, has helped the peso strengthen more than 20 percent in parallel markets since it hit a record low in July. 

Now, with a stabilised peso, dollar usage is set to increase, including in everyday transactions, President Milei said last week. “From now on, every Argentine will be able to buy, sell and invoice in dollars, or in the currency he/she considers; except for the payment of taxes,” he said on national television on December 10.

Officials are urging the country’s main payment processors to develop a mechanism to allow debit card purchases in dollars, according to three people who declined to share the names of the companies involved in the talks. 

Economy Minister Luis Caputo wants the card to launch in January, but the companies think it might take until March, the people said. Under the plan, Argentine consumers will be able to use the dollars they deposit into their accounts without going through the foreign exchange market first, contrary to the current system that only allows them to use pesos.

In addition, the Argentine government is pushing banks to extend dollar loans to more sectors. Caputo Wednesday said he wants business loans and mortgages to be offered in the US currency. Current regulations only give access to dollars to those companies that generate revenues in foreign currency. He also pointed to ongoing conversations with real-estate companies to establish dollar-denominated mortgage programmes during his remarks on Wednesday.

“We aim to remonetise the economy, both in pesos and dollars,” he said in a speech in September. “We want people to use their dollars because that reactivates the economy, generates more income and allows us to lower taxes.”

Milei promised to shut down Argentina’s Central Bank during his presidential campaign and adopt the dollar as the country’s currency. Once in office, he changed strategy. The approach, dubbed endogenous dollarisation, involves restricting the supply of pesos, forcing Argentines to use their dollar holdings to pay for regular expenses.

First steps 

Some supermarkets, manufacturers and even bars have begun accepting payments in dollars but financial institutions are still in the process of putting in place the necessary infrastructure to process such transactions.

“Dollar transactions will continue to rise in 2025 and we have to keep developing new products to meet the demand,” said Camila Gallelli, a portfolio manager at Santander Asset Management in Buenos Aires.

That is particularly challenging in the financial technology space as it requires approval from the Central Bank for a uniform virtual key, or CVU, in dollars. Fintech firms have asked the monetary institution to approve it but the Central Bank wants to level the playing-field between fintech firms and banks first, a spokesman said. 

“The challenge is to provide more transactions in dollars. It is a general request from the fintech industry but today we are not so close,” said Mariano Biocca, executive director at the Argentine fintech chamber. The Central Bank could give its approval in mid-2025, she said. “It will become an industry standard, because you can’t not have it,” Biocca said. 

For the time being, both banks and fintech firms are offering alternatives to saving in dollars, in an attempt to put those tax amnesty dollars to use. One of the largest Argentine fintechs, Ualá, has already received approval from CNV, a regulator, to launch a dollar fund that will pay an annual yield similar to US Treasuries, according to a person with direct knowledge.

Santander Asset Management also launched a dollar fund, which is set to be followed by others in 2025. “We’re sensing an exponential growth in our dollar funds,” said Santander Asset Management’s Gallelli, who already manages US$430 million in this fund and doubled his share this year.

Still, analysts doubt that the steps will be sufficient to lay the foundations for the president’s dollarisation strategy. “Dollarisation is going to take time. It needs more structural reforms that will make Argentina a normal country again,” said Alejo Czerwonko, UBS Group AG’s chief investment officer for Americas emerging markets, in an interview.

“Maximising this one-time flow of dollars that Argentina received may be useful to achieve the objectives and is welcome. But by itself it is not enough.”