Is Argentina about to fall into dollarization?

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The idea of ​​dollarizing the economy is no longer new, many biographies have been written about it and many economists talk about it. This is a proposal that comes up from time to time in Argentina, or rather, each time the repeated formulas to improve economic variables and lower inflation They become almost impossible to reach. But since there is no single idea on the subject, there are those who defend dollarization, those who think of an intermediate solution, and those who reject it.

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In this round, the idea of ​​dollarizing was put on the table by deputy Javier Milei, who presented it as “the only available recipe”. At this point, radical deputy Alejandro Cacace took another step and on Monday sent a proposal to Congress.

On the other hand, those who wanted to destroy the initiative emerged. On that side were the head of the Central Bank, Miguel Angel Pesce; former Economy Minister Alfonso Prat-Gay, and economist Carlos Melconian as relevant voices. “Some talk about dollarization and sell it to you as something possible, but they don’t explain that to get there you have to make huge adjustments “Pesce warned. “Those who talk about dollarizing don’t tell the whole truth”, because they “hid” a possible Bonex Plan ”, Prat-Gay said.And Melconian concluded: “Without reservations, dollarization is nonsense”.

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In these voices, Clarín added the opinion of some analysts that the idea is not completely eliminated, but they explain why it is difficult to execute a plan of these characteristics in Argentina. Even the most supported of a type of program in this sense believe that it is a good time to implement it in the country.

For economist Gabriel Rubinstein, author of the book “Dollarization, Argentina in the Global Village”, in 1999 when he wrote it “there is a basic idea that dollarization can contribute significantly to prevent default, and prevent economic collapse “as happened two years after the collapse of convertibility, pesification and the corralito.

“That makes sense at the time and that way,” sabi. The specialist then went for the same idea as Melconian: “To make dollars you need to have reserves, something that doesn’t exist today.” “Before tackling a process of these characteristics, it is necessary to see what purpose is being pursued. If you want to lower inflation to 5% per year, you don’t have to dollarize. “he pointed out.

In his opinion, now the important goal is eliminate the fiscal deficit. “By eliminating the fiscal deficit in the short term you tend to have inflation like any other country in the world,” he said. And he clarified: “That in order not to have inflation there is no need to dollarize”.

For his part, economist Fausto Spotorno, Director of Orlando Ferreres, warns that “the closer we are to hyperinflation, the closer we are to dollarization” and for him it “is a tool that should be considered in a superinflationary that context, but it does not replace the structural reforms that need to be made ”. “Furthermore, both programs demand these reforms,” he stressed.

But for the specialist, beyond dollarization yes or dollarization no, ”Argentina is likely to come up with this problem. requires tethering your coin to something. It can be in dollars, in a basket of currencies from neighboring countries (such as Brazil, Chile and Uruguay), or in a basket of currencies associated with the goods or directly with the goods (that is, the one peso becomes the equivalent of one kilogram of soybeans, plus one corn, and one wheat. ”An alternative of this type would give credibility to the program and avoid discretionary management of monetary policy.

According to the economist, “in order to get stuck in the inflationary process, three things must be achieved: stop issuing for anything, eliminate the fiscal deficit, and stabilize the exchange rate“.

Carlos Rodríguez, rector and founder of CEMA University, and who between 1996 and 1998 served as Vice Minister of Economy during Carlos Menem, defended the idea of ​​a simple and instantaneous program, but warned that “to make dollars you have to have dollars ”, and for this you have to do “convince people to take their blue dollars off the mattress”.

The former Menem official agreed with his colleagues when it was suggested that a plan with these characteristics “on its own the country cannot be organized”. “All the structural reforms that Carlos Menem has not completed are missing, and correct the imbalances that have been added in the last 20 years. This is a necessary adjustment, but not enough“, he hinted.

Economist Diego Giacomini pointed out that for “dollarization to be successful, it must inevitably be thought of as something permanent.” On the contrary, “If it is understood as something short -lived it will be a total failure and lead to major problems”. For the specialist, in the latter case, there is a risk that short -term speculative capital will arrive, take advantage of the good initial return and then leave, causing a worse situation.

Is it worthwhile to dollar without taking other important steps?  Descriptive image: pixabay.

Is it worthwhile to dollar without taking other important steps? Descriptive image: pixabay.

For his part, economist Alfredo Romano, author of the book “Dollarizing a path to economic stability,” assured that the weaknesses he sees in the proposal are “ephemeral.” For specialists, a decision of them it will help stabilize real wages in dollars, it will make the currency in Argentina democracy and I will make sure for the first time an economic policy goes beyond to the politician of the day.

Another point favors, “strictly disciplining monetary policy, which has historically been the blank review of current policy,” and “it will drastically increase credit.”

YN

Source: Clarin

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