Countries that resorted to dollarization, bimonetarism or digital currency

In the days before the elections, the candidates proposed alternatives such as dollarization, bimonetarism and a digital currency. Economists and geopolitics specialists consulted by PERFIL analyzed these proposals and how these systems worked in other countries around the world, although they warned that the first thing to do is a stabilization plan.

Regarding dollarization, “the best-known models in Latin America are Panama, Ecuador and El Salvador. Ecuador is a case of dollarization and Panama and El Salvador are rather hybrid cases of bimonetarism,” Julio Burdman, professor of Geopolitics at the UBA, explained to PERFIL. “In the Panamanian case, in reality there are two legal tender currencies, but the dollar absorbed the balboa, which only issues coins for small change.”

On the other hand, he continued, “Ecuador’s dollarization was with the suppression of the local currency, while El Salvador is in a situation of currency competition because they have the dollar as currency, bitcoin as currency and the local currency continues to circulate,” he said. .

“Dollarization is a proposal that seeks to be a way to stop the most dangerous thing we have, which is inflation, which destroys the real salary, especially of informal workers,” economist Orlando Ferreres explained to this medium. But, he said, “it is very difficult to implement because there are not enough dollars.” First “we must fix all the relative prices, which are very distorted.”

In addition to the economic impediment to its application, Burdman warned that there are other conditions. “My big question regarding dollarization is political: to what extent Argentina has the conditions to undergo dollarization. First of all, if we are in the political situation of the three countries mentioned and if we have the level of political consensus that, for example, the transition to the euro in the European Union had, where there was a geopolitics aside, because one of the reasons for “Having the euro meant competing with the dollar and not giving up the currency because of a diagnosis of the impossibility of having one’s own.”

In the rest of the economies, “they were all cases of a monetary change in a very turbulent political context. What I do not find are cases of peaceful passage to dollarization,” he explained.

For economist Diego Martínez Burzaco, “before talking about a particular exchange rate scheme and what is most beneficial, this cannot be addressed without a comprehensive macroeconomic stabilization plan.” Once this issue has been resolved, “I think that between dollarization and bimonetarism I am in second place, because it allows you to have some flexibility in the face of external shocks,” he added.

On the other hand, bimonetarism “tries to take advantage of the fact that many goods are already in dollars (apartments, cars, artifacts) and that everything can be implemented in other currencies such as in Uruguay or Peru,” Ferreres explained.

For Burdman, this system “ends up creating a country with multiple realities, and even differentiated geographical areas where local currencies and the dollar govern, with very different social and economic realities.” He gave as an example cases like Venezuela, where “the most oil-rich area of ​​society is dollarized, where people who live well live.”

On the other hand, there are also examples of bimonetarism as a transition process. “I think about Hong Kong and European countries in the late 90s, early 2000s, when they were in this transition regime towards the euro. Now, permanent bimonetarism in a medium-sized country like Argentina, I don’t know if we are going to find a case like that,” Burdman concluded.

Burzaco pointed out that the discussion between dollarization or bimonetarism is not the underlying issue. “Here what has to be guaranteed is an institutional plan of legal security that the Central Bank has to be independent, mechanisms that are sustainable over time, which is something in which Argentina systematically failed, and I think that takes time. ”. In this sense “there is no shortcut possible,” he concluded.

Regarding digital currency, “there are several examples but the most important is the Chinese one. Because in China the yuan is almost all digital,” said Burdman. However, this currency cannot be understood without the particularities of the Chinese system, which has strong regulation imposed by the State. “From the Western point of view, the Chinese system would be very demanding because, for example, they have a credit system that is very tied to the fulfillment of all obligations. If not, the system sanctions you and you enter into a kind of very hard Veraz.”

For Ferreres, a digital currency is difficult to implement. “I believe that if the Government has a concrete plan to lower public spending and adjust the monetary aspect together, there is no need for any measures on the currency, since without inflation they would not be necessary,” he summarized.

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