The dollarization of the economy “is the worst of all paths” and could be “worse than the disease,” Bolivian President Luis Arce said on Thursday of the proposal by libertarian Javier Milei, who is running for Argentina’s presidency.
“The solution to the Argentine problem does not lie in dollarization, as a politician running for office in Argentina has suggested. That is rather counterproductive for an economy like Argentina’s,” Arce said in a meeting with the media.
For the Bolivian president, “dollarization is the worst way” and “there are examples in the region”, such as Ecuador and Panama.
He also pointed out that “attempts have already been made” in Argentina itself to dollarize during Carlos Menem’s presidency, through the “automatic conversion box” that established a one-dollar-for-one Argentine peso exchange system.
According to Arce, that was “where Argentina’s economy hit a catastrophe” and was “destroyed” because many people preferred to shop in the United States and the South American country stopped producing and started importing “everything”.
Argentina “stopped generating financial resources, it didn’t have the capacity to create money like central banks have when an economy is not dollarized,” he said.
According to Arce, part of the “success” of the Bolivian model he promoted as a minister and now as president was due to the “Bolivianization” of the economy, which favors local currencies over foreign currencies. The president, who served as economy minister for 12 of Evo Morales’ nearly 14-year government (2006-2019), assured that Bolivia was “a country of dollars” before the government’s Movement for Socialism (MAS) came to power .
Libertarian proposal
Milei, the candidate with the most votes in the primary, proposed dollarizing Argentina’s economy and closing the Central Bank, first bailing out its debt through government bonds. The presidential election will be held on October 22.
According to Infobae, the dollarization model that is most tempting javier milei It is very similar to the policy that Ecuador adopted in the year 2000. According to the consultant Emilio Ocampo, co-author of the book “Dolarization, a solution for Argentina” with Nicolás Cachanosky, “actually the calculation is that in 16 months all pesos will be exchanged for dollars. It will be a gradual process, as happened in Ecuador, which lasted a total of nine months.”
Latin America has had two experiences of dollarization in recent decades: Ecuador and El Salvador. In the latter case, the colón (the local currency) continued to circulate, but in practice it is only used for transactional use.
Panama is more experienced with the dollar and adopted it as the official currency along with the balboa, the national currency, in 1904, shortly after establishing itself as an independent state and under the direct influence of the United States, which at the time took over the control of the Channel from Panama.
Although the balboa (equivalent to one dollar) still exists, it is not printed in banknote format and its use is very limited. (JO)
Questions and answers from the 2023 Elections
Source: Eluniverso
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