The peso went into freefall after the first round presidential primary results were announced, in which Milei gained more than 30pc of the vote.
A devaluation took the peso down almost 18pc on Monday. One US dollar now buys 350 pesos at official exchange rates, up from 135 a year ago and 60 just before the pandemic.
The Central Bank of Argentina was forced to take emergency action to defend the economy, raising its headline interest rate from 97pc to 118pc.
Investors are worried that Milei’s shock therapy risks crippling Argentina’s already weak economy and putting it at risk of defaulting on its international debts.
There are also questions about just how credible the policies are when looked at in detail.
Lanau says: ”When his advisers say they will bring the deficit down to zero in a few months while not getting rid of civil servants and not slashing social spending, it is not possible.”
The practicalities of adopting the dollar are also challenging.
“Essentially the government or central bank needs to hold dollar assets at least equivalent to the monetary base, so it can cover all of the cash in circulation and all of the banks’ reserves at the central bank,” says Jackson.
The state has been running down its supplies of foreign currency in the hope of propping up the peso. Without many physical dollars, it is hard to seek to replace the currency. Few are willing to lend to the country.
Then comes calculating the exchange rate at which to make the shift. Too low and households feel hard done by, replacing their hard-earned pesos with a very small stack of greenbacks. But too high and the economy can be hamstrung with an uncompetitive rate, making exports unaffordable and undermining growth.
Milei’s team has indicated it could let individuals choose which currency to use, in a more free-floating manner, though the details are unclear.
Lanau says more announcements on the plan could push Argentinians to buy dollars as soon as possible, effectively dumping the peso and pushing it down further.
“Depending on what he says in the campaign, people could freak out even more,” he says.
Further falls in the peso would mean higher inflation, adding to the already bleak economic outlook. Argentina’s economy has contracted for five of the past 10 years and is expected to shrink again this year before, at best, stagnating in 2024.
It is far and away the biggest borrower from the International Monetary Fund, with a loan scheme worth $44bn rearranged last year. Buenos Aires only agreed a new deal at the end of last month to avoid the country falling behind on its debt repayments to the Fund.
Jackson says: “It is fair to say Argentina is in a pretty dire crisis. There is enormous pressure on the currency. It is really only keeping its head above water because it is receiving funding from the IMF.”
