the newspaper Nation from Argentina reported that former Ecuadorian President Jamil Mahuad was contacted by the campaign team of Argentina’s presidential candidate for La Libertad Avanza, Javier Milei, to get his criteria on the dollarization process in Ecuador. In an interview for that media, former president Mahuad talks about the dollarization process, its reasons and the advantages and disadvantages that this decision brings. And that in the middle of the election campaign in Argentina, in which that candidate proposes to dollarize his country and thereby stabilize the economy and eradicate inflation.

After admitting that Domingo Cavallo, Menem’s former minister of Argentina, contributed technically to the Ecuadorian dollarization process, he leaves open the possibility of returning the aid: “If it hadn’t been for the help of Mingo (Domingo Cavallo) and the Argentine experience, (convertibility), who knows…; ( (maybe) we did it very badly. If I can repay in any way for helping what we’ve done, I’d love to. It’s like paying off an old debt,” he said.

In the interview, Mahuad reveals the similarities and differences he sees between the situation that Ecuador was experiencing just before dollarization and the one that Argentina is experiencing.

“Among the differences, first of all, in Ecuador, dollarization was never part of the election campaign. Second, we already had bimonetarism and, furthermore, the dollar was free; there was only one price per dollar, not seven, as in Argentina. That’s a big difference,” he says.

He also sees a similarity in the behavior of inflation: “Both countries were hovering around the edge of hyperinflation, with completely emotionally despondent populations, angry at their leaders. Salaries, brutal depreciation of workers’ incomes… This is a very ugly situation, because everything is already dollarized, except for the salaries of people, who earn in sucres or pesos”.

Mahuad now gives advice on what to pay attention to before making a decision: “First, I recommend that you thoroughly examine the three legs of the table – political, social and economic. It should be studied whether there are reserves in the Central Bank, at what rate they can be dollarized, what are the effects on the financial system and on people. In order for public policy to be maintained, deep down you need a great national agreement”.

He also commented that dollarization would require the question of what legal reforms must be implemented, since Argentina’s current legislation is designed to operate in pesos, and reforming it would require a majority in Congress.

There would always be a plebiscite route, which could be well accepted.

When asked about the positive and negative effects of the measure, the former president explained the possibility of devaluation as a mechanism for encouraging exports. But on a positive note, he reminded that the measure was announced on Sunday evening on the national channel; On Monday, there was no mass response from the bank to withdraw dollars, as was the case until the previous Friday; instead he calmed down. “The announcement alone eliminated the devaluation, stopped the demand for dollars and dramatically lowered interest rates in the markets. Inflation was very high in the first year. But from the second it dropped to the international level and remained in single digits for more than 20 years. It is currently around 2%, lower than in the United States”.

Mahuad also referred to the fact that the decision on dollarization had to be made according to various criteria: against it were those who did not want to lose their own currency, macroeconomists, and even the IMF itself. When asked how it is possible to withdraw domestic currency from the street, he recalled that the Government concluded a contract “with Coca-Cola because it is the company that had the most distribution points in the country; It was sold in the smallest shops and in the most remote places”. He said that it was announced that the Central Bank would be in the territory in eight days: “The following week they arrived with dollars to exchange sucrees and that’s how it was done… In nine months everything was over. Sucre was no longer in circulation. And we have 11 million dollars left in the Central Bank, which shows that it was well done”. He then recalled how the governments between 2000 and 2007 were extremely responsible towards finances. When you dollarize, you eliminate the possibility of printing currency, that is, you lose the lender of last resort, which is the Central Bank. He explained that by not being able to print currency, a “policy of self-restraint” was applied. However, with Rafael Correa’s coming to power, public spending increased from 20% to more than 40% in one year. “And he left such a heavy legacy that we have carried it on our shoulders until now. Dollarization was like a piece of raft in the ocean. Correa did everything to sink him and failed,” he said.