The father of Convertibility spoke about the bimonetarism project that Javier Milei anticipated and explained how it will work and what role the Central Bank will have in that context.
The president, Javier Mileispoke about the elimination of the stocks and the implementation of the monetary system of currency competition and the former Minister of Economy, Sunday Cavallo, He referred to his statements. “These are auspicious announcements,” he noted. And he explained how this mechanism will work and what to expect from the evolution of the official exchange rate in the transition.
“We must remember that Milei talked about a fully dollarized economy and eliminating the Central Bank (BCRA), but then he became convinced that moving forward on that path was not so feasible and embraced the idea of currency competition. Today, the first idea has almost been ruled out,” Cavallo said.
And he explained how this new bimonetary system would work. “The dollar and the peso would be the two legal tender currencies and would coexist. This mechanism works very well in the world, as in the case of Peru, which despite the exchange rate instability, has good results,” said Cavallo. He explained that, in this context, the dollar will fulfill the same function as the peso, so banks would have to function with the same characteristics in both currencies. For them, the peso and the dollar should be convertible without any impediment.
“In that case, the BCRA will play the role of managing the expansion of domestic credit in pesos and dollars. It could issue pesos, if necessary, but above all it has to do so in order to meet the needs of the economy and can control the legal reserves on deposits in dollars, which do not have to be equal to those in pesos,” explained the former minister.
Source: Ambito
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