The Dollarization of the Argentine economy He returned to the public debate by the hand of Salvage that US Treasury offered to the government of Javier Milei. The possibility was refloated both by Freedom Members Avanza (lla) During the last days, as by local analysts and experts of American “Think Tanks”. However, They stressed that the decision is not exempt from risks.
“If the opportunity arrives, the Argentines decide to dollarize – which, from my point of view, it would be necessary to call the popular consultation and that it is binding – and we have the financing to do so, it is done,” Milei said on the last Saturday. In addition, on that occasion, he clarified that it is about A “complex” themewhat must have “Social consensus” and that I would sue “About four years”.
A couple of days later, US Treasury Secretary Scott Besentannounced that they are negotiating with Luis Caputo’s economic team a line of Swap for US $20,000 millionadded to a loan via the Exchange stabilization background (ESF, for its acronym in English) and a series of complementary measures, such as Investments of North American companies and purchases of Argentine bonds.
After knowing the novelty, the legislator of the City of Buenos Aires, Ramiro Marraalready away from the ruling party, explicitly requested that the government progresses in the dollarization process: “To fulfill the promise! Dollarization is not just a measure, it is the true reform that the country needs. Although the surplus is an important step, only a reform of this magnitude will make this government in history, “he said.
The opportunity to dollarize?
Consulted by Scopethe Vice President of International Studies and director of the Center for Freedom and Global Prosperity of the Cato Institute, Ian VásquezHe stressed that before Besent’s announcement “It would be a timely time for President Milei to announce that Argentina will dollarize and for the United States to express its support for dollarization. “
He said that “having dollarized before, Argentina would not be going through fears of exchange instability “. And he added that “in any case, starting the dollarization process would now generate a confidence shock to the Argentine economy.”
For its part, in one of its last analysis, the “Think tank “ American Peterson Institute of International Economics (Piie) He recalled that during the presidential campaign “Milei supported the total dollarization of the Argentine economy.” However, “after your choice, The economists of his government opposed the idea because it would imply the loss of an independent monetary policyamong other problems, and the plan was filed. “
“But now Argentina and Milei have run out of options, especially because your political support has practically disappeared“The text written by the expert emphasized Monica de Boellewho said that “if the US decides to support formal dollarization in Argentina, The measure would have economic, political and institutional repercussions“
And deepened: “To start, would weaken the influence of the IMF at a time when the multilateral system is already in crisis. Geopolitically, I could create the conditions for regional confrontation with China. Economically, dollarization is a single way: Once a country adopts a currency other than its own, it faces difficulties in reverse“
How many dollars would it take?
In his latest report, the consultant 1816 He echoed the matter and stated that “If Milei wishes to dollarize the economy, it would be essential that US financial support materializes in foreign exchange (I would not reach in that case with commitments), at least enough to repurchase liabilities in BCRA pesos. “
They estimated that to “rescue the current exchange rate U $ S17.5 billion are necessarywhile to rescue the entire monetary base (so that the deposits in pesos, if they become in dollars, are backed by some cash lace in hard currency) some would require some U $ 30.4 billion“
In any case, they clarified that “given the size of the wide aggregates, to face such a risks for the financial system a stock well superior to that last would be necessary, although difficult to calculate exactly“
In this sense, they estimated that if the largest monetary aggregate is taken, which includes not only cash, savings, participation in monetary market, fixed income values and debt in treasure pesos in non -banking hands, would be necessary an amount that is around the U $ S130,000 million.
However, not everyone advocates because so much money is necessary. Milei’s economic exassor and was nominated to take care of the Central Bank (BCRA) in full electoral campaign of 2023, Emilio Ocampo, had already raised a few days ago to this medium, that the figure could be much lower.
“Under a dollarization, The only monetary liabilities that must potentially be canceled is the monetary circulation held by the publicthat, as of September 19, at the official exchange rate, it was equivalent to U $ S15,000 million (2.2% of GDP), but as I have indicated 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, “Ocampo had sustained.
Source: Ambito
