Some economists are advising that Argentina could greatly enhance its economic position if it were to retire the peso officially and replace it with the U.S. dollar. Argentina has recently lurched further and further into fiscal insolvency.
Argentina has for 10 years maintained convertibility of its peso with the dollar on a one-to-one basis. But investors are deeply worried that it may abandon that anchor.
The dollarization policy has already been tried in Ecuador with stunning results:
Interestingly, Ecuador dollarised despite the misgivings of the International Monetary Fund and other “experts.” IMF Managing Director Michael Camdessus has remarked, “Dollarisation was not, I must be frank, the kind of policy we would have recommended at this stage to Ecuador.”
Source: Dora de Ampuero, Ecuador Bounced Back With the Dollar. Argentina Could Too, Wall Street Journal, November 2, 2001.
For text (interactive subscription required) http://interactive.wsj.com/articles/SB1004659781431345080.htm
For more on International Currency issues http://www.ncpa.org/iss/int/
FMF Policy Bulletin\13 November 2001
