In an interview on Tuesday, Mark Mobius, a founding partner of Mobius Capital, said that Argentina’s potential adoption of the dollar could prove to be an economic boon, as it would eliminate the struggling nation’s issues with inflation.
The veteran emerging market investor made his remarks after the weekend elections in Argentina saw libertarian firebrand Javier Milei swept into power following a campaign in which he promised to eliminate the inflation-prone Argentine peso, and replace it with the dollar to stabilize the nation’s economy.
Mobius said, “If they dollarize — that’s a big if, by the way — if they go ahead with that, it will be an incredible boost for the economy and for the country. You will see inflation down dramatically.”
Mobius added however that an official shift in currencies is not guaranteed, as Milei will still need the help of allies in Congress, and presently he just does not have them in the numbers he would need.
Mobius also noted he was a fan of Milei’s plan to eliminate the central bank of Argentina, even though critics say that if Milei eliminates the peso, he will be, in effect, putting the US Federal Reserve in charge of the monetary policy of Argentina.
Critics of Milei’s plans have said that if he tries to switch currencies quickly, he risks sending the nation into a recession, due to the shortage of dollar reserves in Argentina’s central bank. However Mobius countered that Argentines hold plenty of dollars offshore.
In the meantime, many Argentines have already begun using the US dollar for many domestic transactions, from paying for Airbnb rentals, to paying wages.
Mobius noted that Milei would need to do something about the nation’s economy as the current condition of it is dissuading investors from moving capital there.
In his interview with Bloomberg TV he said, “We had to buy companies on the basis of their book value rather than anything else. But at the end of the day, it’s been a very dangerous place to be with the currency the way it is and with inflation in that situation.”
