For the economist Emilio Ocampo it would have been ideal to do it last April, but it is still possible, even more so with the rescue of the US Treasury. But the main challenge is the political vulnerability of the government and the lack of time.
The economic exassor of President Milei and was nominated to take care of the Central Bank (BCRA) in full electoral campaign of 2023, Emilio Ocamporeturn to the load with the idea of dollarizing the economy as an exit to the mess in which the libertarian government is still. Moreover, He maintains that US financial aid would allow the elections to be reached and in case of a favorable result would be the time to advance dollarization.
According to Ocampo, the idea that it is necessary to have enough dollars to support the entire M3 in pesos (or at least the M2) to dollarize is wrong, and as “the Nobel Prize Thomas Srgent said more than forty years ago, The convertibility of a paper currency issued by a state depends more on its fiscal credibility than on the amount of reservations in the Central Bank“. Under a dollarization, The only monetary liabilities that must potentially be canceled is the monetary circulation in the possession of the public, which, as of September 19, to the official exchange rate, equivalent au $ 15,000 million (2.2% of GDP), But as I have pointed out several times this cancellation would be gradual and voluntary and could take two years or more as it was in the case of El Salvador, ”says the economist. After explaining one by one the interpretations and mantras that surround the idea of dollarization and refuting them, Ocampo details the examples of dollarization of Ecuador and El Salvador, highlighting that in both cases they did not have international reserves equivalent to the M3 at the time.
As for the very feared “roll-over” of the debt in treasure pesos, dollarization does not put it in danger, but facilitates it, says Ocampo. “The quasi-fiscal problem in Argentina, that is, the endogenous creation of money due to the accrual of the interests of public debt, is essentially a monetary problem, and there is because there is uncertainty regarding the future value of the dollar, the market adds a devaluation premium to interest rates that causes the debt to have an unsustainable trajectory.”
Justified the feasibility of dollarizing, Ocampo points out that, when the dollarization is announced, a exchange rate is set close to the market, preferably above so that it is expansive. “If the BCRA decided to ” give ‘dollars, people are going to take them. That there is excess demand for dollars will depend on the fixed parity.”
The recipe to dollarize
So how can it be dollarized. The Ocampo recipe is as follows:
- It is necessary to have a strategy that involves both the Ministry of Economy and the Ministry of Foreign Affairs. First, we must probe the Trump administration and seriously propose the project, not only as for its economic and financial advantages but also geopolitics. There are two possibilities. The first is to revive the bill of Senator Connie Mack of the year 2000, which raised the reimbursement of the lordship to those countries that adopted the dollar. The second is easier to implement in the short term. This is a proposal made by two economists from the Chicago Federal Reserve in 1999 when Argentina seriously contemplated a dollarization. This alternative would simply require an agreement with the US Treasury Department and/or the Fed. Basically, Argentina would deposit dollars of the BCRA reserves equivalent to the monetary base in a “Escrow” account in a neutral country (for example, Switzerland). The funds in this account would be invested in US Treasury titles. Simultaneously, the Fed would send to Argentina dollar bills for a sum equivalent to the entire monetary base. While the dollar is legal tender in the country, the State will receive interest on the deposited funds, which at the current rates would be equivalent to $ S1 billion per year. This is basically the admission for lordship. In the event that another legal tender currency was introduced, the “Escrow” funds would be transferred to the US Treasury.
- In parallel, It would negotiate a US contingent financial support pack for a nearby sum S25,000 million that could include the exchange Stabilization Fund and the repo and SWAPS lines of Fed coins. The mere announcement of its existence significantly reduces the risk that these contingent lines must be activated.
- But how many dollars are in the BCRA?: On September 2, 2025, gross reserves amounted to Au $ S39,879 million. This figure includes the currencies corresponding to the deposit in the Popular Bank of China, which must be eliminated as well as the net debt with that entity (approximately US $ 5,000 million). The rest of the liabilities in foreign currency are enforceable, but it is not necessary to cancel them. If the SWAP is eliminated (ideally it would be replaced with another with the Fed), to that date the gross reserves amounted to about US $ 27,000 million.
Under an agreement with the US, this is the sum that would be deposited in the “Escrow” account. “Assuming an interest rate equivalent to 4% would mean annual income of almost US $ 1,000 million for the national government. At the same time, Argentina would receive from the US the equivalent sum that would serve to withdraw the weights in circulation when they were presented for their exchange, which to the current change rate equals au s17.5 billion,” says Ocampo.
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For Ocampo, a law is not needed to dollarize
As for his legality, the economist points out that a law to dollarize would not be necessary, since under the proposed format it would be perfectly constitutional. “A DNU of the Executive Power would give legal course to the dollar and set the conversion parity (Obviously, the risk of this strategy would be greater if Congress approves the modification to the DNU regime). The weight would continue to have legal course and continue to circulate. The Secretary of Finance would proceed to re-denominate all the debt called in dollars to dollars. Nor would it be necessary, although convenient, immediately eliminate exchange restrictions applicable to legal persons. All BCRA liabilities will be transferred to the National Government. ”
For its part, the BCRA would announce that it would not issue more weights (the monetary base in pesos would be frozen ad eternum) and establish the dollar as the banking unit of the banking system. People could freely redeem their weights for dollars at the exchange rate fixed without paying commissions. All bank transactions will be made in dollars. The pesos deposited in the banks would automatically redeem for dollars. Weights would continue to circulate in the economy for cash transactions. For six months all prices should be expressed in both currencies at the fixed exchange rate. Those previously agreed in pesos would become dollars to the fixed parity. This scheme is based on Salvadoran experience. Later, he would proceed with a banking reform by law of Congress to make the BCRA a superintendence of banks and redesign the scheme of operation of the banking system to prevent a future government from using banks to finance their deficits.
“It is evident that the risks of executing this strategy have increased significantly due to the events of recent weeks. The question is: in the current circumstances there is any other strategy that has better chances of success? The financial aid of the United States would allow the elections to be reached and in case of a favorable result would be the time to advance”concludes Ocampo.
Source: Ambito
