Sebastian Bensusan on Argentina dollarization
Great to see an article on dollarization! Two things that were not mentioned”
Argentina is already substantially dollarized. Absolutely nobody saves in pesos, so the amount of USD needed to “dollarize” the economy is much smaller than you’d think.
The difference between convertibilidad (90s) and dollarization is less stark than what you’d expect. If it happens:
1. Peronists will win elections again and will likely try to undo it (Zimbabwe undid it).
2. If dollars are in bank accounts, the government can simply steal everybody’s dollars. This is effectively what happened during el corralito. People had USD denominated accounts and those were forcibly converted to peso, and then devalued from 1:1 to 3:1, effectively evaporating 2/3s of everybody’s savings.3. So, the mechanics of a future dollarization matter greatly in making this following sentence from your article true:
But that was a mere promise, and the promise of convertibility was broken rather spectacularly
Because bank deposits are always promises and USD-denominated Argentinian bank accounts would also be promises that would eventually be broken.
Here are some ways to dollarize that would be future-proof:
1. Allow Argentinians to own and transact locally usinn American or foreign bank accounts that are outside of the government’s jurisdiction. This is effectively what parts of Venezuela’s economy have been doing via Zelle.
2. Crypto
Are these two practical? TBD!