What was the MUC dollar and why did it disappear from the Peruvian economy?

the dollar of Single Exchange Market (MUC) was a currency, similar to the US dollar, that circulated in parallel in the Peruvian market. This currency was created during the government of Francisco Morales Bermúdez in 1977, through Law No. 21953.

In a free market economy, the exchange rate is governed by the interaction of supply and demand. However, the price of the MUC dollar was set by the Government. Specifically, the State acquired the dollars in the open market and then sold them to national businessmen at a lower price on the condition of strengthening their economic position.

In other words, the muc dollar it was a form of subsidy to the Peruvian industry. However, at the end of the 1980s, during the first term of Alan García, the Peruvian economy reached hyperinflation that reached close to 1,000%. This situation caused a greater difference between the MUC dollar and the normal dollar, which increased public distrust of the State’s ability to maintain the business subsidy.

How did the MUC dollar disappear?

Consequently, businessmen stopped trusting the national economy and began to use the muc dollar in their personal accounts, thereby increasing instability and generating a sharp decline in international reserves.

On August 8, 1990, the government of Alberto Fujimori began a series of propaganda announcing that it would implement a package of measures to stabilize the economic situation. The Minister of Economy at that time, Juan Carlos Hurtado Miller, among other things, eliminated the single exchange market, which meant the end of the muc dollar

It was determined that the dollar would trade under the interactions of supply and demand, as it currently works. Since then, there has been no further intervention in the foreign exchange market to fix exchange rates.

The case of the blue dollar in Argentina

In Argentina, during the Cristina Kirchner government crisis in 2011, a dollar nicknamed “blue” or “black” began to circulate. This arose from the restrictions on the purchase of dollars imposed by the Argentine government, which caused a massive purchase of dollars on the “black market.” Unlike the MUC dollar, the “blue dollar” was more expensive.

According to international reports, the “Dolar blue” came to triple the value of the official dollar sold in Argentine banks, its price was even communicated at par with the US dollar.

Are the MUC dollar and the blue dollar the same?

The difference is that the MUC dollar was officially created by the Government Peruvian to subsidize companies at a very low price, while the blue dollar is more expensive and functions as a savings refuge for many Argentine families and companies fleeing the peso and its recurring devaluations.