Javier Milei won the presidency of Argentina with a radical promise to reverse inflation: abolish the central bank and with it its national currency; just like others have done three Latin American countries.
In this sense, the dollar issued by the US Federal Reserve (Fed) is already in circulation in some Latin American economies for more than a centurymotivated by the northern country’s countless companies across the continent.
Then that is it three Latin American economies who introduced the greenback As a basis, they serve as a reference point for assessing the advantages and disadvantages that this measure would have for Argentina.
In this sense, there is an argument against dollarization Blow to financial sovereignty What it means for the countries that implement it, because it leaves the issuance of currency in the hands of the Fed.
Thus, the amount of cash circulating on the street depends on this how much the Federal Reserve spendswhich represents the interests of the United States before those of any other nation.
On the contrary, it is argued that the above is positive because The dollar is the world’s reference currencydespite the appreciation of the Chinese yuan, and this protects the country’s economy Devaluations.
Panama, the first in history
Panama has used the US dollar practically since its inception. (AP)
Panama opens the list for Being the first nation in Latin America which included the dollar as the current currency 1904shortly after it consolidated itself as an independent state.
However, the country known for its canal that connects the Pacific and the Atlantic has since used it in parallel with its national currency: the Balboa. Both have bills the same market value but the Panamanian is not physically printed.
Panama became independent from Colombia in 1903 This was due to the influence of the US, which financed the construction of the canal, even though the dollar had already been around for 50 years due to traders brought in by the gold rush, the BBC reported.
Ecuador, a cure for hyperinflation
Ecuador chose dollarization to ease its economic crisis. | Particularly
The nation, located right in the middle of planet Earth, went through one Economic crisis at the beginning of the 21st centurywhen inflation rates were approaching one hundred percent (something already exceeded by Argentina).
Jamil Mahuadthen president, made the decision to do so Replace the Sucre with the dollar January 9, 2000. It should be recalled that the measure was not well received at the time and led to his departure from the government.
However, over the years the new currency was well received by the population has not necessarily alleviated the country’s economic problemsas these were caused by factors that were independent of the currency used (e.g Budget deficit).
El Salvador, prerequisite for free trade
National Cathedral of El Salvador in San Salvador (AFP)
This is so far the last country in Latin America to introduce the dollar El Salvador, which adopted the greenback as a condition of the United States to sign a free trade agreement on January 1, 2001.
At first The dollar was used equivalently to the Salvadoran colon, but the second gradually stopped circulating until it disappeared. It is important to mention that the economy of the Latin American country is small compared to other countries in the region.
More recently, Nayib Bukele has introduced Bitcoin as another official currency for transactions in his country due to his project’s neoliberal approach, which prioritizes international trade over internal trade.
In summary, these three economies have made their dollarization official, but there are others who are doing so too They de facto use US currency, due to the devaluation of its own currency. This is the case Cuba And Venezuelaimpoverished by the trade blockade of Washington.
Finally, Argentina needs an effective strategy to stop the devaluation of its currency and the rising prices of products, so that the tide is turning Javier Milei They will keep the rest of the continent’s countries excited about the outcome.
SNGZ