Argentina's potential dollarization in 2024 has been a key focus since President Javier Milei's election, given his campaign promises to adopt the US dollar as legal tender to combat the country's severe inflation problems. However, recent statements from his economic team, particularly Luis Caputo, have indicated that dollarization is now viewed as a medium-term goal rather than an immediate priority. The evidence strongly suggests that full dollarization will not occur in 2024, as the Milei administration has prioritized achieving fiscal stability and reducing central bank liabilities before considering such a dramatic monetary shift. The government's cautious approach, combined with practical obstacles like insufficient dollar reserves and the need for extensive preparation, makes dollarization extremely unlikely within the specified timeframe.

Economic Background

Argentina's Current Situation

• Triple-digit inflation (>140% annually)
• Severe shortage of foreign reserves
• Complex system of currency controls
• Significant central bank liabilities (LELIQs)

Milei Administration's Approach

• Primary focus on achieving fiscal surplus in 2024
• Gradual reduction of central bank obligations
• Medium-term goal of dollarization
• Initial maintenance of currency controls

Outcome Analysis

Scenario 1: Dollarization in 2024 (1.1% probability)

Requirements:

• Official adoption of USD as legal tender
• OR formal peg of peso to USD
• Credible reporting confirming implementation

Obstacles:

• Insufficient dollar reserves (~$50B shortfall)
• Need for extensive financial system preparation
• Current focus on fiscal stabilization
• Explicitly stated "medium-term" timeline

Scenario 2: No Dollarization in 2024 (99% probability)

Supporting Factors:

• Clear statements from economic team about timeline
• Focus on preliminary economic reforms
• Technical and practical constraints
• Market-driven approach requiring gradual implementation

Key Factors to Watch

1. Fiscal Performance

• Progress toward surplus targets
• Reduction in money printing
• Public spending cuts

2. Central Bank Reform

• Management of LELIQ obligations
• Building of foreign reserves
• Interest rate policies

3. Political Developments

• Public support for reforms
• Congressional cooperation
• Social stability

4. Economic Indicators

• Inflation trends
• Exchange rate stability
• Foreign investment flows

Recent Developments

• Caputo's confirmation of medium-term dollarization goal
• Initial market-positive reception to moderated approach
• Focus on voluntary debt swaps over mandatory measures
• Reduction in borrowing rates from 133% to 40%