WSJ: Bury the Peso

Sojourner

Registered
Interesting article in today’s Clarin reporting on a Wall Street Journal proposal that Argentina adopt the US dollar as its currency.

"Argentina is back in the soup, as it so often is. The prospect that Peronists might retake power has Argentines fleeing the peso for dollars, and on Monday the center-right government of President Mauricio Macri imposed capital controls. Here’s a better idea: Replace the peso with the U.S. dollar as Argentina’s legal tender."

The WSJ article points out that dolarization is currently in practice in three SA countries: Ecuador dolarization in 2000, Panama in 1994, and El Salvador in 2000. The changeover would be challenging but in Ecuador, for example, only coins continue in the local currency. Results, according to WSJ: Positive. Constitutional? WSJ not entirely sure.

One of those ideas “so crazy it might just work” I guess, but way above my pay grade. Personally I can’t imagine Argentina biting the bullet.

 
The problem is not the currency, it is Argentina's habit to spend more than it has.

With this habit, it is better to have your own currency. This way, the country can print money and neutralise its debt through inflation. If Argentina keeps being a serial spender and were to dollarise its economy, we would end up with another corralito and pesification in the end.
 

sergio

Registered
The problem is not the currency, it is Argentina's habit to spend more than it has.

With this habit, it is better to have your own currency. This way, the country can print money and neutralise its debt through inflation. If Argentina keeps being a serial spender and were to dollarise its economy, we would end up with another corralito and pesification in the end.

I don't know that it would lead to pacification. The problem is that they will never dollarise. It would limit corruption - can't have that !
 

HenryNisental

Registered
Precisely, with the USD as currency,(or even euros, swiss franks,etc),the govmt could not overspend at all. It will be forced to balance its budget, whether it likes it or not.
 

cafeamericano

Registered
I think this opinion piece, while brutally harsh, is an accurate assessment of the situation and the proposal for dollarization.


I think the quote below is a near perfect description of "he who must not be named"

"He’s simply Argentine, and thus bewilderingly capable of holding multiple opposing and incompatible ideas in his head, and simultaneously believing they are all true."
 
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