Correísmo’s candidate for vice president, Andrés Arauz, revealed again that the goal he will have for coming to power will be the de-dollarization of the economy.

In an interview with the Argentine newspaper Perfil, Arauz harshly criticized it, saying that “dollarization was imposed in violation of our Constitution.”

Already in April 2020, Arauz wrote on his blog about “good de-dollarization” (the said article was later modified to put “de-dollarization” and “new currency” in quotation marks).

This supposedly good de-dollarization “would require more means of payment and make imports more expensive.”

This is where he falls into error. The generation of “electronic currency”, which would be issued without collateral, would also cause the devaluation of such “electronic currency” and the loss of its purchasing power. If the state were to use the mentioned “electronic currency” to pay salaries to suppliers as well, a two-currency system would quickly be imposed, in which the “electronic currency” would lose its value in relation to the dollar.

His new proposal is essentially the same: “What I have proposed for Ecuador is the creation of electronic means of payment, digital central bank money.”

An Argentinian journalist asks him: “Convertibility?” (Argentine’s system that maintained a non-dollar currency, but in theory convertible – until it suddenly collapsed amidst the proliferation of “patacóns” -), to which Arauz replies: “a kind of electronic convertibility where the dollars are pretty much absorbed (by the state) and can be used for international payments.Using dollar bills for national payments is extremely inefficient and reduces international trade opportunities.

(…) why would Arauz publicly propose de-dollarization, when he has enormous support in Ecuador…

The journalist insists: “Your de-dollarization proposal is actually turning dollarization into something similar to the convertibility that Argentina had,” and Arauz points out: “Yes, from the use of modern technologies, electronic payment methods. Not old-fashioned convertibility, but ‘equatorization’ by electronic means and, furthermore , a very active policy in managing the balance of payments”.

There is also mention of the creation of a common currency (“sur”), which would function in a similar way to “sucre”. This ALBA mechanism was used to launder money and extract dollars from Ecuador to Venezuela. Arauz was one of its promoters.

The question is why Arauz would publicly propose dedollarization, when he has enormous support in Ecuador (80% according to polls). The answer is that it imposes a straitjacket on public consumption, since it does not allow inorganic monetary emission (as happens in Argentina and Venezuela, where inflation exceeds 3 digits).

Other candidates, such as Yaku Pérez and Xavier Hervas, although they claim to maintain dollarization, talk about the use of international reserve funds (made up mainly of public deposits), which in practice would weaken dollarization. (OR)