I begin this note making it very clear that I am not against dollarization. What’s more, I didn’t just post on infobae notes showing the convenience of dollarizing, but also, in Ucema we held two debates with Jorge Avila and Alejandro Estradaone in 2018 and another in 2019, on dollarization, with a full auditorium and setting up additional rooms so that people could listen to the debate.
So, I have been debating the dollarization issue for a long time, but I am not making a religious issue out of dollarization, nor is anyone more liberal than another if they are in favor of dollarization or against it.
Having clarified this point, the advantage of dollarization is not that the Central Bank disappears, in any case it is changed. Instead of being the BCRA, the Federal Reserve is the central bank. It can be argued that the FED is of better quality than the BCRA, which cannot be said so lightly that there is no more central bank. That is not true.
The advantage of dollarization is not that the Central Bank disappears, in any case it is changed. Instead of being the BCRA, the Federal Reserve is the central bank
The strongest point of dollarization is that it closes a financing spigot for the treasury when governments want to do populism. But the counterargument that arises is that the provincial governments are going to end up issuing Lecops, Bocanfor and all kinds of quasi-currencies.
We know that Argentina needs an economic plan that includes a monetary reform for the simple reason that we do not have a currency. In addition to dollarization, there are other proposals, such as enacting a law that grants the BCRA independence from political power.
Frankly, this proposal does not completely convince me because in Argentina most politicians are characterized by not complying with the laws that they themselves sanction. For example, in mid-2001 the deposit intangibility law was enacted and within months they were accepting the corralito and then voting for asymmetric pesification and the corralón.
If they mercilessly swept away the convertibility law, ignoring the BCRA Charter, which is a law, is most likely even if they vote unanimously in Congress.
I see a lot of “Fidel Pintos” doing sanata on how to dollarize
It seems to me a very weak argument to answer dollarization with a law that gives the BCRA independence.
Going to the dollarization issue, I see a lot of “Fidel Pintos” doing sanata on how to dollarize. When asked the specific question about how they would implement dollarization, they start with a series of financial arguments, beat around the bush, and never finish explaining two central issues.
The first is where the dollars come from to rescue the monetary base. According to the BCRA balance of April 15, the monetary base was $5.2 trillion, which at the exchange rate of $463 would be USD 11,119 million. In general, they go around to answer this question. One said that he had a message on WhatsApp in which they offered him that figure to redeem the money in circulation. Obviously, he never showed. Soon after, he began to argue that his alliance with the West would allow him to obtain these funds. In other words, they heal according to what is best for them at all times.
The second problem that arises is how to cancel the debt that the BCRA has with the banks and the banks with the depositors. I mean paid liabilities. At the exchange rate of $463 it is USD 28,000 million.
Another problem that arises is how to cancel the debt that the BCRA has with the banks and the banks with the depositors.
According to what they maintain, in the BCRA’s assets there are bonds (including non-transferable bills) from the national government and Temporary Advances (treasury debt with the BCRA) that at the exchange rate of $463 give USD 47,000 million.
Argentine bonds have a market value of 20% of their face value, which means they have USD 9.4 billion to redeem the entire monetary base and remunerated liabilities that add up to USD 39.119 billion.
It remains to explain where they are going to get almost the equivalent of USD 30,000 million to be able to rescue the BCRA’s liabilities.
Doing the math today to see how dollarization is made does not make sense, in my opinion it is an argument that shows that it is not clear how to do it. Or, better said, that they have the concept of dollarizing and their virtues are shown, but to put it into practice it is difficult for them and, then, they excuse themselves by saying that this question is not valid or that the accounts are poorly done and they begin to ramble on with trusts, new bonds and other financial inventions, but they don’t finish explaining to people how they would dollarize. Where are the dollars going to come from to rescue the monetary base and the remunerated liabilities of the BCRA?
Doing the math today to see how it is dollarized makes no sense, in my opinion it is an argument that shows that it is not clear how to do it
Citing authors and saying that they have studied the subject is not enough to demonstrate that something can be put into practice. It’s just impressing people by pretending to know using difficult expressions.
That is why I insist, perhaps dollarization is a solution, but not to be applied at the beginning of the process, but to be implemented at the end of the path of a series of structural reforms.
It could be argued that if all the necessary reforms are made, then it will not be necessary to dollarize. The counter-argument is that, once the reforms have been made, the icing on the cake could be the dollarization that puts a lock on the financing of the treasury via monetary issue.
In short, this debate that different economists have been giving at an academic level for years has become a flag similar to: Menem’s salary. Or “follow me, I won’t let you down”. And the blind fanatics, fed up with the decadence, follow dollarization as the magic potion that will solve all problems and the one who disagrees is a socialist, someone who receives suitcases or any other disqualification.
At the time, Menem stated that if he said in the electoral campaign what he was going to do, possibly they would not have voted. It is not going to be that some living person uses an academic debate such as dollarization, and says things that he knows that he will not be able to implement if he came to government. Something like: if I told you what I’m saying I’m going to do but in reality I know I’m not going to be able to do it, you wouldn’t vote for me.
