Dollarization will provide an 'incredible boost' to Argentina's economy, veteran emerging-markets investor says
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- A plan by Argentina's president-elect to dollarize the economy won the backing of Mark Mobius.
- The veteran emerging-market investor said the currency shift would be an "incredible boost" for the economy.
- Sky-high inflation has made investing in Argentina dangerous, Mobius added.
Argentina's possible flip to the dollar would be an economic boon and would solve the country's issues with inflation, Mark Mobius told Bloomberg TV on Tuesday.
The comments from the veteran emerging-market investor come after Javier Milei won Argentina's presidency over the weekend, bringing his dollarization plans a step closer to reality.
"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," the founding partner of Mobius Capital said. "You will see inflation down dramatically."
Milei wants to formally adopt the greenback and ditch Argentina's peso as a solution to runaway inflation and chronic government overspending.
But Mobius acknowledged that an official currency shift is not guaranteed. To do so, Milei would need political allies in Congress, of which he has few.
Mobius also endorsed Milei's plan to dismantle Argentina's central bank. Some economists have said that abandoning the peso in favor of the dollar would effectively put the Federal Reserve in charge of Argentina's monetary policy.
Dollarization critics have warned that a sudden currency switch could trigger a recession, citing a shortage of dollar reserves at Argentina's central bank. But Mobius said that there's plenty of dollars Argentines hold offshore.
Meanwhile, the country's consumers have already adopted the US tender for many domestic transactions, from paying wages to securing Airbnb rentals.
Mobius also warned that the current condition of Argentina's economy has made investing there difficult.
"We had to buy companies on the basis of their book value rather than anything else," he told Bloomberg TV "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."