2023-11-25 23:26:10
Javier Milei, the ultra-liberal who will be president of Argentina from December 10, imagines a country where the official currency is the dollar and without a central bank, as a way to ward off chronic inflation.
There are several Latin American countries that have officially or de facto turned to the dollar, some in search of solving hyperinflationary phenomena – or almost -, and in all cases with the hope of achieving economic and financial stability that they did not provide. their coins.
(See: Would dollarizing the Argentine economy keep it away from devaluation?).
Inflation
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Dollar
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Balboa currency in Panama and the dollar
PHOTO: iStock
Panama is the Latin American country where the dollar has been circulating as official currency for the longest time, on par with the balboa, the local currency.
The North American banknote has been used since 1904, shortly following the country became independent from Colombia and approached the United States with the construction of the Panama Canal, under Panamanian control only since 1999.
Only cash coins and not banknotes are minted for the balboa, and the public sector uses this currency only for accounting purposes.
Panama, with 4.2 million inhabitants, registers inflation levels below 3% annually.
(See: The dollar skyrocketed and rose more than $100, following GDP data and statements from Petro).
Venezuelan Bolivars
Venezuela has had informal dollarization since the end of 2018, when the government relaxed the strict exchange controls as an escape valve from the acute crisis.
By then this country of 28 million inhabitants was going through its first year of hyperinflation, with a shortage of the local currency, the bolivar.
“There are a set of general factors that had to do with de facto dollarization. Structurally it was high inflation, but there were also other drivers such as the situation of the electricity crisis,” recalled economic analyst Henkel García, from Albusdata. Without electricity, card payment points stopped working and given the shortage of bolivars in cash, the dollar was the natural alternative.
The sharp loss of value of the bolivar made large volumes of cash necessary to pay for goods and services.
Four years later, the country emerged from hyperinflation, but continues with one of the highest rates in the world. Until September, interannual inflation was 317%, according to the Central Bank.
Paradoxically, the greenback, a symbol of “American imperialism” and considered an “enemy of the revolution,” has become the “most widely circulated” currency, according to economists.
(See: What would come for Colombians in rates, inflation and the dollar in 2024).
‘Bimonetary’ economies
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