Argentine President Javier Milei is seeking to legally forbid the state from printing its way out of fiscal trouble. On July 13, Milei met with ruling-party legislators to discuss a proposal for rewriting the Charter of the Central Bank of the Argentine Republic (BCRA).
Milei aims to put to an end what he calls the product of “91 years of swindling Argentines” and make monetary stability the bank’s sole mandate. The reform would prohibit by law any financing of the Treasury through money printing, eliminate the nontransferable Treasury bills that governments long used to raid the bank’s balance sheet, restrict profit (seigniorage) transfers to exceptional cases, and impose harsher penalties and stronger tenure protections on the bank’s leadership. His proposal directly reverses the 2012 charter reform passed under Cristina Fernández de Kirchner, which turned the BCRA into the government financing arm.
The proposed reforms to the charter follow Milei’s promise to put the house in order. When Milei took office at the end of 2023, Argentina’s fiscal deficit stood at 13 percent of GDP. In 2024 and 2025, the government achieved financial surpluses of 0.3 and 0.2 percent of GDP after interest payments on its debt—the first since 2010.
Monthly inflation fell from 25.5 percent in December 2023 to 1.98 percent in June 2026. Further, the BCRA met the International Monetary Fund’s $10 billion reserve-accumulation target in record time—100 trading days—and is on pace to buy $24 billion this year without destabilizing the exchange rate. Having achieved the surplus and the reserves, Milei now is asking Congress to bind his government and every future one.
The Domestic Economy Tells a Different Story
Despite macroeconomic optimism, Argentine domestic industry is struggling. In the 1970s, it used to represent 25–30 percent of GDP. By the end of 2025, it accounted for 15 percent of GDP, and it continues to shrink. Emblematic firms like tire maker FATE have closed as imports have surged more than 50 percent between 2025 and 2026.
Moreover, corporate delinquency increased from 0.9 percent of bank debt in mid-2025 to 3.1 percent a year later. Further, 5.3 million Argentines—26.9 percent of all debtors—are in arrears. Mass consumption fell 16.4 percent in 2024 and recovered only 2.5 percent in 2025, even though appliance and car sales rose by 34 and 48 percent, respectively, driven by cheap imports.
For decades, the Argentine industry survived behind a closed market, state subsidies, and a protectionist scheme that produced an artificial calm. A perpetually depreciating peso acted as a hidden tariff, making imports prohibitively expensive and masking the sector’s lack of competitiveness. With the printing press turned off and fiscal accounts in surplus, the peso stopped losing purchasing power in real terms. This in turn made imports more affordable. Trade opening benefits Argentina as a whole, but logically it harmed the sectors that lived off protection rather than productivity.
Why Not Dollarization?
Markets price this fragility. In early May 2026, credit rating agency Fitch upgraded Argentina from CCC+ to B–. Nevertheless, JP Morgan keeps rating Argentina’s country risk at 420 basis points (100 basis points = 1 percentage point). The lowest level in eight years for the South American nation, it remains around 100 points above comparable B-rated sovereigns, such as El Salvador, Egypt, and Nigeria. This suggests that investors doubt the reforms will outlive Milei.
Before the October 2025 midterm election—with polls pointing to a poor result for the ruling party—Argentines rushed to protect their savings. Locals bought $8 billion in US dollars in two months to hedge against an opposition-controlled Congress that could block or reverse the reforms from La Libertad Avanza (Liberty on the March). Once Milei defied the polls and won, the panic evaporated, and dollar purchases dropped to $1.3 billion over the following months.
Argentines’ confidence in the peso rests on one man, Milei. The reforms made so far are reversible. Hence the case for dollarization: it would become effectively irreversible, sidestep gradualism, and be immune to the 2027 election. Ecuador found its remedy there in 2000.
However, Milei—once outright dollarization’s loudest advocate—has shelved it. Dollarizing would surrender some tools now working in Milei’s favor: exchange-rate flexibility as the economy opens, seigniorage, and a lender of last resort.
The Peruvian Proof of Concept
There is evidence in the region that the Milei-proposed model could work. Peru’s 1993 constitution bans the Central Bank (CBPR) from financing the Treasury. That rule, along with the two-decade CBPR leadership of Julio Velarde, produced a sound Peruvian currency.
Markets even call Peruvian sol “the dollar of the Andes,” given its stable and healthy indicators. Inflation has averaged 2.8 percent since 2006, reserves have remained above $100 billion, and public debt remains around 30 percent of GDP—among Latin America’s lowest.
Appointed by former President Alan García in 2006, Velarde was ratified by Ollanta Humala, Pedro Pablo Kuczynski, and even Pedro Castillo. The latter sought to remove Velarde in 2021 but backed down when the sol’s value plunged. On July 6, President-elect Keiko Fujimori personally asked Velarde to serve a fifth term. Over a period of intense political instability and twelve presidents, one monetary policy has ruled in Peru.
Ecuador imported credibility by decree amid hyperinflation and financial crisis. Instead, Peru built its own credible monetary base and kept its sovereignty. Milei is apparently seeking to emulate the Peruvian path with a fiscally anchored peso, protected by a reformed charter. Peru proves such a goal is reachable without abandoning the national currency.
One Person Is Not an Institution
Peru’s stability rests on the shoulders of a 74-year-old man. Velarde himself admitted he was inclined to step down before Fujimori’s request. He has groomed possible successors—among them, BCRP General Manager Paul Castillo and Chief Economist Adrián Armas. Still, nobody knows whether the sol’s credibility will survive Velarde’s retirement.
Argentina faces the same risk even more acutely. If Milei loses reelection in 2027, markets fear his policies could be unwound by decree. That is precisely why Argentine bonds trade 100 points above their B-rated peers.
Ecuador offers the counterpoint: dollarization has become arguably the country’s strongest institution. It slashed inflation from 96 percent in 2000 to single digits within three years. It has kept Ecuador’s inflation among the region’s lowest ever since. Nine out of 10 Ecuadorians support dollarization and would not accept a national currency again.
While people come and go, rules can endure. Milei’s charter reform attempts to do legally what Ecuador did monetarily: make sound money independent of whoever holds office. However, having ruled out dollarization, Argentina must build credibility beyond one man.
This implies drafting a reform that shields the new charter against a future counter-reform, like the one of 2012, that could undo everything gained. To this day, whenever Argentines sense danger, they run to the dollar for refuge. A system that citizens abandon at the first sign of trouble is a fragile one, and that is the real test of Milei’s proposal.
