Time to dump the peso?

[sergio]

It's Time to Dump Argentina's Peso

With money growing at over 50 percent per year, it’s no surprise that Argentines treat their pesos like hot potatoes.

www.cato.org

 

[antipodean]

Not going to happen unless it is dumped for “nuevos peronvarios” or "pesos soberanos" or some other madness.
These "switch to USD" arguments that come up every 6 months or so always sound a little US-centric to me and make out as if it would solve everything in one hit. They rarely present a counter-thesis or look at the root problem affecting confidence which is domestic governance and institutional flaws. Simply having or investing dollars in Argentina does not mean they would be any safer than pesos to be able to spur on the economy.

 

[UK Man]

I could think of many more things that need to be dumped before the peso. An attitude change for a start would help.

 

[Renzi]

Not going to happen unless it is dumped for “nuevos peronvarios” or "pesos soberanos" or some other madness.
These "switch to USD" arguments that come up every 6 months or so always sound a little US-centric to me and make out as if it would solve everything in one hit. They rarely present a counter-thesis or look at the root problem affecting confidence which is domestic governance and institutional flaws. Simply having or investing dollars in Argentina does not mean they would be any safer than pesos to be able to spur on the economy.

Another National Review article, fun.

I agree, it's also telling that the author bases his arguments on another questionable Milton Friendman theory. As in it works great on paper (or on scatterplots) but doesn't work in real life when you introduce variables. Chile also has a floating currency like Argentina but has not experienced the same massive inflation, and by most official measures has the highest standard of living on the continent. So the problem is not just monetary policy.

These same neoliberal economists push devaluation one minute (short term gain, long term decline) and dollarization the next. And when neither works, they blame the state.

 

[NeoWonk]

When you ask a realtor if now is a good time to buy a house, the realtor always answers "there has never been a better time to buy!"

When you ask an Argentine, if now is a good time to sell the peso, the Argentine always answers: "there has never been a better time to sell!".

 

[camberiu]

Chile also has a floating currency like Argentina but has not experienced the same massive inflation, and by most official measures has the highest standard of living on the continent. So the problem is not just monetary policy.

Chile and Argentina could not have more distinct monetary policies. Chile has an independent central bank, Argentina does not. Chile cannot print money to cover budget shortfalls, Argentina does it all the time, with gusto. They are as different as they can be and that is reflected clearly on how each country's currency hold its value over time.

 

[antipodean]

These same neoliberal economists push devaluation one minute (short term gain, long term decline) and dollarization the next. And when neither works, they blame the state.

In Argentina, I blame the state yes or yes. Currency is not the illness in this country, it is a symptom.

In Argentina the executive branch can and always does interfere willy nilly in almost every facet of the economy and the state to score short term political points. Without serious restraints on this branch of government there can be no such thing as stability or confidence, let alone a long term vision for the nation.

What Argentine politicians and voters need to learn (or perhaps UBA needs to start teaching) is that a government, regardless of its political/ economic inclinations, can never dictate or legislate confidence - it can only achieve it by delivering real results that people can see, feel and trust.

 

[Iznogud]

BTDT.
Didn't end well.

Our former "Estanciero" bills, aka Monopoly currency, is not the problem.
It's barely a minimalist manifestation of a symptom.
If you are considering the peso as an issue, you are definitely not qualified to solve the problem. Haven't found a tree and you are already barking...

Iz

 

[FrankPintor]

But isn't Argentina effectively dollarized anyway? Certainly for big purchases like apartments, houses, cars, and so on. People are only using pesos for small transactions, and rush to convert their spare pesos to Dollars whenever they can.

The mechanics of getting everyone to use Dollars for all transactions are a challenge. Of the countries I know that use Dollars for everyday transactions, Panama and Ecuador are much smaller and it's easier to manage, and Venezuela is a basketcase (more than VEF 400,000 per Dollar now). Getting change is a huge problem (I think almost all the Dollar coins are in Ecuador, 150 million of them, and it's still not enough), and damaged banknotes need to be flown to the US to be replaced. Where's the advantage in doing this?

 

[Wade K.]

Look at Ecuador. Their Sucre was a joke and made the cost of living there extremely cheap. Switching to the Dollar stabilized their economy but also made the country more expensive. Still fairly affordable, but since they could no longer print money the cost of living crept up until some kind of equilibrium was reached. From an expat point of view I guess getting extra Pesos through Western Union means fighting against any suggestion of Dollarization. To be honest if Argentina decided to try the Dollar and the cost of living rose I'd go elsewhere, most likely Poland.