Calls to Dollarize the Argentine Economy Grow

The influential Wall Street Journal has once again held up its magnifying glass to Argentina, and reopened a debate more and more present these days: is the time to dollarize and forever banish the Argentine peso? For the US publication, yes. This is something that has also been proposed by several Argentine economists, but in a certain way the issue remains taboo.

The last time that a similar model could have been implemented was under the auspices of the “Law of Convertibility” by former president Carlos Menem and former Minister of Economy Domingo Cavallo. After the hyperinflation of Raúl Alfonsín, which prompted him to deliver the new policy in advance, the ex-president launched the convertible Argentine peso at “1 to 1” in relation to the US dollar. As of March 27, 1991, the rush on the peso was brought to a halt on the back of the desired greenback, and the country lived an atypical decade without inflation.

According to the Wall Street Journal‘s Mary Anastasia O’Grady, Argentina should “adopt the dollar” once and for all and “end the misery caused by peso….Now the markets predict that the economy will contract more than 2% this year and that inflation will reach 40%. The question that seems to be on everyone’s lips: why is it happening again, under a president who should represent change? The answer: because Argentina still has a central bank. To solve the problem once and for all, you must dollarize the economy,” stressed the noted columnist.

In a correct diagnosis, O’Grady states that the Argentine government “lives beyond its means.” There are high taxes and regulations that make many activities uncompetitive. “The effect remains the same: inflated debt and an economy with devaluations or breaches, or both,” she warned.

By Marcelo Duclos