Treasury official now at the OMFIF policy think tank in the United States, said dollarization meant authorities would lose the ability to act as a lender of last resort, which would "heighten the vulnerability of the financial system." Reuters Graphics Reuters Graphics DOLLARS UNDER THE MATTRESS "It's very costly to give up flexibility of the exchange rate." "To me, it is an absolute last resort," said Olivier Blanchard, a former IMF chief economist and now an academic. While the IMF has not commented on the plan, many experts see it as a drastic move. Milei spoke with the IMF in August, with dollarization part of the discussion. The government also has a $44 billion loan program with the International Monetary Fund (IMF), which means economic policy making often comes with strings attached.
Milei's presidential rivals, Economy Minister Sergio Massa and conservative ex-security minister Patricia Bullrich, have both shot down the idea of dollarization as impractical. "I don't know what's the solution, but I disagree with dollarization," said Martina Rivero, 25, who works at a baby clothes store in Buenos Aires' trendy Palermo district. Polls in recent months show more people oppose the idea, though some new surveys suggest support is rising as inflation peaks. Many Argentines themselves are unconvinced, fearing loss of economic independence and over-reliance on the United States. The country is a major global exporter of soy, corn and beef, has one of the world's largest reserves of electric battery metal lithium and huge shale gas and oil reserves in Vaca Muerta. Zimbabwe dollarized and then abandoned it, though economists estimate that 80% of its local economy remains in dollars.Īrgentina's $650 billion economy, though, would be by far the largest dollarization experiment, were it to happen. However, it was forced to undo the peg a decade later as a major economic crisis and run on the peso sparked riots and saw the currency board collapse.īolivia has a dollar peg, Venezuela has a quasi-dollar driven economy, while Ecuador, El Salvador and Panama all officially use the dollar.
#Pesos to dollars chart 2022 full#
The central bank loses its monetary policy setting role, but often is kept to handle technical and administrative tasks such as reserves management and payment systems.Īrgentina pegged its peso to the dollar in 1991 under the neo-liberal economic policies of President Carlos Menem and even debated full dollarization. Dollarization has been tried elsewhere, usually either replacing the local currency with dollars at a set exchange rate, or intervening in the markets to 'peg' the local tender to the dollar.
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