Dollarization

[Quilombo]

Why in Argentina's case floating peso would rise to million.

While CO & PY floating currency rose only to 4000 & 7300.

Because Colombia and Paraguay have a history of paying their sovereign debts, haven't had the economic history Argentina has, they don't have a cepo, and perhaps most importantly is their populations savevon their currencies/trust their currency.

Is it possible to kill inflation without dollarizing? I think so, it just takes longer. You could change the organic charter of the BCRA and proceed with Milei's reforms that are generally pro-market, and you could implement a positive real interest rate, but it takes more time to do this.

Other countries have avoided dollarization to fix macroeconomic problems, but I believe Milei's motivation with dollarization also is to set a trap: it will make it socially unacceptable should he lose in 2027 to abandon dollarization since the population will be reluctant to return to the peso, therefore institutionalizing some of his reforms.

We'll have to see, I'm still not entirely sure they'll be able to dollarize at the rate things are going.

 

[aloevera]

Would anyone even continue buying any Argentine exports if Milei's dollarization goes through (it won't, but say it does)?

 

[argeiCanuck]

We'll have to see, I'm still not entirely sure they'll be able to dollarize at the rate things are going.

When?
A month? A year? Or did he say 15 years?

Was any of this explained to the common Argentine (el pueblo) before they voted him?

 

[argeiCanuck]

When?
A month? A year? Or did he say 15 years?

Was any of this explained to the common Argentine (el pueblo) before they voted him?

Is it unreal to expect that before voting, the common "pueblo" would have understood such a complex issue that the professional expert economists failed to understand for many decades?

 

[argeiCanuck]

Txs @Quilombo.
Got it.

 

[antipodean]

Would anyone even continue buying any Argentine exports if Milei's dollarization goes through (it won't, but say it does)?

Looking at what Argentina actually exports today (mostly commodities, with prices set by global markets...) I would hazard a guess and say they will continue buying the vast majority of exports without even noticing that Argentina has dollarized.

 

[wrangler]

Because Colombia and Paraguay have a history of paying their sovereign debts, haven't had the economic history Argentina has, they don't have a cepo, and perhaps most importantly is their populations savevon their currencies/trust their currency.

Is it possible to kill inflation without dollarizing? I think so, it just takes longer. You could change the organic charter of the BCRA and proceed with Milei's reforms that are generally pro-market, and you could implement a positive real interest rate, but it takes more time to do this.

Other countries have avoided dollarization to fix macroeconomic problems, but I believe Milei's motivation with dollarization also is to set a trap: it will make it socially unacceptable should he lose in 2027 to abandon dollarization since the population will be reluctant to return to the peso, therefore institutionalizing some of his reforms.

We'll have to see, I'm still not entirely sure they'll be able to dollarize at the rate things are going.

Firstly, where will the funding come from to implement this? Secondly, will the justice system permit it? These appear to be the major obstacles that dollarization must surmount. Additionally, there's the possibility of the dollar weakening, leading to inflation regardless. I'm also wary of being subject to U.S. monetary policy. However, I find Milei's suggestion appealing, which proposes the option to be paid in a currency of one's choice. This would mean maintaining the Peso as the official currency but allowing individuals to receive payment in various forms, whether in another currency or even through bartering.

 

[Tar Baby]

Simply put, speculation surrounding any Argentine dollarization scheme reduces to the reality of deficient central bank reserves. At the moment, BCRA has insufficient ARS, or other assets, to buy sufficient USD to run an economy the size of Argentina. And being a credit risk they cannot borrow them without burdensome collateralization.

A rolling implementation of dollarization, such as titrated import / export trade in dollars and on a per sector basis is one way to replenish BCRA coffers. But as I don't get paid for this anymore, I wish Presidente Milei all the best.

 

[mikic007]

I don't understand this dolarization hype. You are basically saying my country is not grown enough to manage basic things like own currency. You pass big part of your sovereignty to the country that doesn't give a single thought to you nor you could shape any policy, measure, nothing.

Own currency allows you to apply your own fiscal policies, you have control and through currency manipulation you can bear some crises better.

Dollarization doesn't do nothing you can't do with peso, if you wish so. It forces you to be disciplined, but that should be the case anyway, no matter the currency. Just stop printing surplus, and you have stable currency. Not too hard of the concept...

 

[Ruta Otto]

Simply put, speculation surrounding any Argentine dollarization scheme reduces to the reality of deficient central bank reserves. At the moment, BCRA has insufficient ARS, or other assets, to buy sufficient USD to run an economy the size of Argentina. And being a credit risk they cannot borrow them without burdensome collateralization.

A rolling implementation of dollarization, such as titrated import / export trade in dollars and on a per sector basis is one way to replenish BCRA coffers. But as I don't get paid for this anymore, I wish Presidente Milei all the best.

For that to work, Russia would have to declare war on Argentina, not the other way 'round.