Is it convenient to dollarize Argentina’s economy?

First change:

This Sunday, November 19, Argentina celebrates the presidential election, in which the current economy minister Sergio Massa and the ultra-liberal economist Javier Mille will compete for the presidency, two different economic models. Among Millay’s proposals was the dollarization of the economy. This is what the experts say.

Dollarizing the economy and closing the central bank are plans that attract the attention of Javier Mili, the founder of the far-right party La Libertad Avanza. With these measures, he promises to eradicate the inflation that Argentina suffers from, which is over 140% annually.

However, debates about whether or not dollarization is appropriate in a developing country like Argentina are mirrored around the world, with defenders who see it as an option to alleviate economic problems, but also detractors who assert that countries lose out without a national currency. sovereignty.

In Latin America, only Ecuador and El Salvador have replaced their national currencies 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 of economics at the Universidad del Pacifico (Lima, Peru), to dollarize an economy, a country “must buy all the national currency in circulation and issue dollars.” If so, “a country must have a very large backbone of international reserves,” otherwise it would have to ask the US State Department to provide the missing liquidity, “invest capital from abroad” or “issue bonds” and get into debt.

Regarding the potential to eliminate major problems like inflation, the professor assured that “having the dollar doesn’t free you from those things” because of the dependence that develops on the US currency, a country that suffers the effects of inflation. and unemployment.

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