Chief Argentine Supreme Court Judge Horacio Rosatti said the dollarization plan proposed by presidential candidate Javier Milei is “unconstitutional” because it would abolish the national currency, the peso. 

“If a dollarization [plan] eliminates the Argentine currency, that’s unconstitutional. It says so in the Constitution, that’s not my twisted interpretation [of it],” Rosatti said in an interview with Spanish publication El País published on Tuesday. Article 75 of the Argentine Constitution establishes the country have a Central Bank and a currency whose value must be protected. 

The national legal tender could be either the peso or something else, but it has to be a currency officially emitted by the state, Rosatti added.

Dollarization is one of the main campaign proposals of Javier Milei, the far-right candidate of  La Libertad Avanza (LLA). This would imply Argentina would completely replace the peso with dollars emitted by the United States and be subject to their monetary policy.

Milei also proposes the elimination of the Central Bank.

“There can be many ways economists apply this measure, [but] there has to be a currency emitted by the country. [Argentina] can’t regulate the value of another country’s tender,” Rosatti continued. “We need to stop this fantasy.”

In Rosatti’s view, there are two possible ways of understanding dollarization. One is going directly from one currency to another, like Milei wants, which the judge says can’t be done in Argentina. However, he pointed out that there are things that have been done before in Argentina, like tying the value of a tender to a foreign currency.

As an example, Rosatti cited the convertibility period of the 1990s, when the peso was pegged to the dollar one-to-one. In that case, Argentina established the value of the peso and made it equal to a dollar, not the other way around, a point the judge stresses as important. 

“When someone talks about dollarization, they should be more precise, and [we] should ask, ‘What do you mean by this?’”

Academics and politicians from different sectors have strongly critiziced the dollarization proposal. According to a letter signed by 170 prominent economists, it could cause significant harm without solving the country’s underlying economic problems.

The economists warn that if Argentina were to dollarize, its use of the U.S. currency could bring Argentina’s inflation into step with its northern neighbor — but this would take away the flexibility the country needs to respond to shocks, triggering periods of recession and high unemployment. 

Milei said in a presentation two weeks ago that he would dollarize at the blue chip swap rate, also known as contado con liqui or CCL dollar, which is the implicit exchange rate that arises from investors buying shares, bonds and financial instruments in pesos and selling them in dollars on the international market. The CCL dollar rate was AR$735.1 per US dollar at the time of writing.

Economist Martín Rapetti, however, says the exchange rate required to dollarize would currently be around AR$2,000 pesos per US dollar. 

“At these values, we would undergo something approaching a cycle of hyperinflation during the dollarization transition”.

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