The picture shows Argentina’s newly elected President Javier Milei delivering a speech on November 19, 2023. (Tomas Cuesta/Getty Images)
[The Epoch Times, November 21, 2023](Comprehensive report by Epoch Times reporter Zhang Ting) On Sunday (November 19), Argentina’s far-right economist Javier Milei won the presidential election, indicating that the The center of the country’s political landscape, economy and foreign policy will be completely changed. Milley’s diplomatic stance is pro-American and anti-CCP. One of his big promises is to dollarize the country’s currency, a move that has attracted much attention for its impact on the Chinese Communist Party.
Argentina is the second largest economy in South America. But it has been mired in an economic crisis in recent years, with inflation reaching triple digits and growing poverty exacerbating domestic political unrest. President-elect Milley’s top campaign proposal is to tackle inflation. The solution was to take the battered national currency, the peso, out of circulation and strip the central bank of its power to print money, in favor of the U.S. dollar as the national currency. Economists say the unrestrained printing of money to pay for public spending is one of the factors driving inflation as high as 143%.
“There is a moral obligation to close the central bank,” Milley said on Sunday night.
Currency dollarization seen as solution to Argentina’s economic turmoil
In early 2000, Ecuador experienced a severe financial crisis. Then-President Jamil Mahuad announced dollarization, which quickly restored financial stability in the country. Annual inflation in Ecuador has averaged 2.8% over the past two decades, compared with a peak of nearly 100% in 2000.
For Argentines currently mired in triple-digit inflation, Milley’s pledge to dollarize the Argentine economy is the ultimate solution to the country’s economic turmoil. But gaining support in Argentina’s Congress and implementing a dollarization plan could face challenges. A major obstacle is that Milley will face a divided parliament in which no one party has a majority. In addition, dollarization will face legal challenges. Economists also question whether Argentina will be able to find enough funds to implement such a bold plan amid the current economic crisis.
After Sunday’s victory, Milley renewed his vow to overhaul Argentina’s bloated government, cut spending and open up the economy.
What does currency dollarization mean to the CCP?
This time the Argentine election also affects the CCP’s nerves. As Argentina’s second largest trading partner, the CCP is very worried about Argentina’s changing situation.
Argentina has maintained close ties with the CCP in recent years. China and Afghanistan announced the establishment of a comprehensive strategic partnership in 2014. At the same time, the two sides also reached a bilateral currency swap agreement.
An October report in The Diplomat magazine said Argentina’s dollarization would mean a profound change involving abandoning the peso and dismantling the country’s central bank. This potential move, along with Milley’s tough stance on China, has raised questions about whether the currency swap agreement established between Argentina’s central bank and China’s central bank will continue to exist. This fundamental shift could herald a reorientation of Argentina’s economic strategy and could affect its trade dynamics and diplomatic relations with China.
Starting in 2008, the CCP began to establish a global network of central bank currency swaps in an attempt to internationalize the RMB. As of May 2023, the CCP has signed bilateral currency swap agreements with more than 40 countries and regions. In particular, the currency swap agreement with Argentina has attracted attention due to its long term and wide range of uses.
Argentina has authorized the RMB as one of the country’s important pricing, settlement, trading and reserve currencies. “Beijing Youth Daily” threatened that Argentina’s further use of RMB is just a microcosm of the internationalization of RMB. Milley’s election makes the policy implemented by the CCP in Argentina face great uncertainty.
As a critic of the CCP, Milley condemned the CCP for restricting people’s freedoms and that some people were killed by the CCP just for doing what they wanted.
He said that due to different ideological positions, it is not his desire to maintain commercial relations with China, and he will regard the United States and Israel as Argentina’s main partners. But for the private sector, Milley believes in letting them decide whether to maintain commercial relations with China.
Milley will take office in December for a four-year term. After taking office, the China-Arab alliance established by his predecessor over the past few years, including the possibility of Argentina joining the BRICS group on January 1 next year, may be halted.
According to a report by the Argentinian media Buenos Aires Times, government sources revealed that during Argentine President Alberto Fernandez’s visit to China in October this year, Chinese Communist Party officials expressed their disapproval Concerns that Milley might be elected.
Editor in charge: Lin Yan#