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This Sunday, November 19, Argentina celebrates the presidential runoff in which Sergio Massa, current Minister of Economy, and the ultra-liberal economist Javier Milei will compete for the presidency, with two different economic models. Dollarizing the economy is among Milei’s proposals. This is what the experts say.
Dollarizing the economy and closing the Central Bank are the proposals that attract the most attention of Javier Milei, creator of the far-right party La Libertad Avanza. He assures that, with these measures, he would eliminate the inflation that Argentina suffers, which remains above 140% annually.
However, debates about whether or not dollarization is appropriate in an emerging country such as Argentina are replicated throughout the world, with defenders who maintain that it is an option to eliminate economic problems, but also detractors, who assure that without a national currency countries lose sovereignty.
In Latin America, only Ecuador and El Salvador suppressed their national currencies to replace them with the US dollar. Panama uses its national currency, but only for small transactions and uses the dollar for large economic movements.
According to Jorge González Izquierdo, professor emeritus in Economics at the Universidad del Pacífico (Lima, Peru), to dollarize an economy, a country must “buy all the national currency that is in circulation and deliver dollars.” In that case “it is essential that a country has a very large backbone in international reserves”, otherwise it must ask the United States Department of State to provide it with the missing liquidity, look for “investment capital from abroad” or “issue bonds” and get into debt.
Regarding the possibility of eliminating major problems such as inflation, the professor assured that “having the dollar does not make you immune to those things” due to the dependence generated on the US currency, a country that is also suffering the effects of inflation. and unemployment.
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