Watch Out — The Super Peso Is on Its Way

Most economists, columnists, and political commentators still don’t get Javier Milei.
Even though he is arguably the most transparent politician in Argentina’s history, they don’t really listen to what he says. He has a clear game plan, and he has repeated it many times. Yet they keep misreading him because they use outdated lenses. Milei doesn’t fit today’s political or economic categories; he thinks on a different frequency.

Milei’s Mind

Milei says what he thinks and does what he says:

1. He is a convinced libertarian and a radical advocate of free markets.
2. He believes the modern State, in its current form, is fundamentally destructive and he is attempting to dismantle it from within, reducing it to its minimal expression.
3. He rejects the notion that the State should control money or run monetary policy.
4. He intends to make Argentina the freest country on earth by 2031, if he is re-elected.

To any pundit: take him seriously. Read the authors he cites. Milei means what he says.

Why They Can’t Read Him

Economists are hampered in their capacity to understand Milei. They have been trained in Marshallian, Pigouvian, or Keynesian ideas and simply lack the conceptual tools to grasp him. Political analysts miscast him on the traditional left–right axis, labelling him “Argentina’s Trump”. However, that unidimensional map is far too simplistic. Even many libertarians cannot decide what to make of him, as he doesn’t fit well into most of their utopian blueprints.

The Monetary Plan

Milei has never proposed forced dollarisation. He speaks of currency competition, expecting Argentines to choose the currency of their preference voluntarily, not by mandate. He believes that currency will most likely be the US dollar, given Argentines’ long familiarity with it and its role as the world’s universal medium of settlement.

He has hinted at a Henry Simons–style reform, separating transactional banking (with 100% reserves) from investment banking, effectively eliminating fractional reserves. Think of it as the logical conclusion of sound-money principles. Jesús Huerta de Soto has discussed these ideas with him, referring to them as Mises banking.

These reforms form the north star of Milei’s economic vision. However, their timing depends on market access and debt sustainability. They cannot happen while Argentina still relies on the IMF or emergency swap lines.

The Peso Question

Will the government change its current exchange-rate regime? Absolutely not.

• Confidence remains fragile; changing rules just six months in would be self-defeating.
• The bands widen at 1% per month, making them increasingly irrelevant over time.
• The peso is not overvalued by any credible measure.
• The Central Bank is no longer financing the Treasury, and, crucially, it doesn’t need to.

With a US$20 billion swap line from the US Treasury, an additional debt facility in progress, and Washington’s implicit “whatever it takes” backing, Argentina’s external position is stronger than most realise.

What about the commitment to accumulate reserves? The IMF framework allows the peso to float within the bands. As a general rule, the Central Bank intervenes only at the boundaries, though it appears to retain some leeway to act occasionally within the bands to smooth volatility or opportunistically build reserves.

Still, reserve accumulation will mostly remain an exogenous variable. Buying reserves too far from the lower band would inject pesos that multiply through the fractional reserve system. The consequence would be, ironically, a weakening of the peso. The economic team wants to ensure that demand for pesos remains robust: buying reserves at these levels is not an option.

Critics calling for “reserve accumulation at any price” misunderstand this basic point. What they propose is like trying to extinguish fire with gasoline. It would not deter speculative runs against the peso, but rather encourage them.

As for using the Central Bank to purchase dollars for debt service, that would mean printing pesos to finance the Treasury, which is precisely what advocates of central-bank independence claim to oppose. Enough said.

Will the Central Bank target interest rates instead? Unlikely. It does, however, retain some limited capacity to intervene in the futures market to dampen volatility when needed.

The only sustainable way for the Central Bank to accumulate reserves is therefore by purchasing dollars at, or opportunistically near, the lower band.

What to Expect

Milei is running the most coherent macroeconomic programme in the Western hemisphere. There is vast room for catch-up and rising investment opportunities across commodities and materials. It is easy to imagine the Argentine economy achieving high single-digit growth rates over the coming decade, starting from a very low base. Debt-to-GDP will shrink dramatically.

As the political risk of a Peronist return fades and Congress begins passing structural reforms:

• spreads will compress,
• demand for pesos will increase,
• the peso will appreciate toward the lower end of the band, forcing the Central Bank to buy dollars, and
• this will have a deflationary impact, collapsing inflation most likely by next year.

If Milei holds the line — balancing the budget, maintaining a 100-percent-reserve mindset, and advancing deregulation — Argentina could enter a deflationary yet growth-friendly equilibrium. The open question is whether, once trust returns, Argentines will still prefer the US dollar to a sound peso. Everything, of course, is dynamic and depends on execution and countless variables. Yet Argentina may not be following the usual script this time. If policies hold and reforms advance, the country’s next surprise for the world may not be a crisis but a super peso.