Economy The economy will be dollarized soon... it has to be.

[CarlosVoler]

Somebody with a Visa Card is going to stand out on the corner and make purchases with a U.S. Visa card for people who don't have one And somebody will do it for next to no premium....making very little. But rest assured...someone will do it. Net result...dollarized economy.

 

[MarcosTos]

Somebody with a Visa Card is going to stand out on the corner and make purchases with a U.S. Visa card for people who don't have one And somebody will do it for next to no premium....making very little. But rest assured...someone will do it. Net result...dollarized economy.

Maybe I'm dense but can you explain the advantage of this? People who have dollars can convert at the cuevas and get a better rate than what Visa offers

 

[FrancoJust]

The thing is, Argentina is already dollarized, as Cristina noted in her speech the other night. For any purchase over say USD 5000 in value, you're going to be quoted Dollars (secondhand cars, ffs). The Peso just lubricates day to day business.

Having lived in countries that dollarized, formally like Ecuador, and informally like Venezuela, I can only laugh at twits like Milei who want to take the last, most unrewarding, degrading step of actually physically using that shitty currency here.

 

[earlyretirement]

NOPE. It will NEVER happen. Anyone thinking there is a chance of it ever happening again should read this entire article. It's well written and spot on target.

This is an excellent read - https://www.thestreet.com/economoni...ization-of-argentina-revival-of-a-zombie-idea

At the beginning of each semester, the Nobel Prize-winning economist Simon Kuznets used to say to his Harvard students: “There are four kinds of countries in the world: developed countries, undeveloped countries, Japan, and Argentina.”

 

[earlyretirement]

Somebody with a Visa Card is going to stand out on the corner and make purchases with a U.S. Visa card for people who don't have one And somebody will do it for next to no premium....making very little. But rest assured...someone will do it. Net result...dollarized economy.

But people that already have their savings in US dollars will simply go to a cueva or blue/black market and get many more pesos to purchase that item in pesos on your credit card.


For the everyday person (majority) that make their salaries in Argentine pesos and paying for things inside Argentina in pesos this doesn't benefit them having you purchase the item for them. Using an example of a pizza that might cost 4,600 pesos. That's around $10 US dollars at the MEP rate. So using this example, what would you propose you do for this person? You buy them the 4,600 pesos pizza on your credit card. You are charged around $10 US dollars on your foreign credit card. Then what? How much would you ask them to pay you back?

I have many really great friends in Argentina. Some like family and I did get extra credit cards for them from the USA. But they never use it INSIDE Argentina. They use it when they are making purchases abroad outside of Argentina. When they want to spend pesos inside Argentina they just exchange on the blue market for usually around a 15% premium.

 

[FrancoJust]

I don't know about Euro or American overlords, and I don't think it's even the most pressing problem if Argentina is dollarized. I've lived for several years each in 2 countries that dollarized, Ecuador and Venezuela, and neither makes an attractive long-term case.

Ecuador is the more orderly of the two cases, as you'd expect, with dollarization coordinated with the US. Dollarization has turned it into a high-cost base country, with little FDI, Prices inflate due to the difficulty in finding small change, they get rounded (up, of course) to the nearest 1 or 5 USD. The banknotes deteriorate rapidly (I'm sure, due in part to the low quality), so the Ecuadorean central bank has the added expenditure of taking the damaged ones out of circulation and sending them all to the US to be replaced.

Venezuela's case is a mess, with no coordination with the US, so there's no mechanism to replace damaged notes, it's your loss if you've got one. The country has inflation in both USD and Bolivar, and is quite possibly already the most expensive Latin American country to live in (people survive with foreign remittances, "caja CLAP", and various subsidies. Low denomination banknotes are almost unavailable, again all prices are rounded up, contributing to inflation.

To link the huge pool of Argentinian dollars kept under mattresses here, plus dollarize the money in circulation, would be an enormous undertaking, and it can't really be done without official coordination with the US, which might very well not be forthcoming. Would the US like to add some $300bn, plus $50bn Peso circulation to the active USD circulation (I'm not sure how much of that is actually physically hiding under the mattresses here)? Where would we get small change from (nobody uses anything other than $100 notes here)? Plus, the tsunami of counterfeits courtesy of our friends in Peru would be a sight to behold. Before Venezuela stopped printing paper money, the almost worthless banknotes were scooped up, transported to Peru, washed, and reprinted as Dollars (a literal case of the currency being worth less than the paper it was printed on). If the Argentinian banknotes are retired, where would they go?

Milei & Co. just want soundbites, nobody is thinking this through.

 

[TemonNow]

The “problem” with the Chinese model is that it is just another IMF however with far sharper teeth, it uses the essential infrastructure it finances and that the host state depends upon to power its economy as collateral which literally ends up mortgaging the state. It also doesn’t tend to create many local jobs as workers are usually imported on a temporary basis while a big chunk of the concessions profits get exported as soon as they are made. You can already see what happens when countries can’t sustain or keep up with the massive Chinese government infraestructure loans in cases like Montenegro or Sri Lanka - it ends up taking the same toll on the concept sovereignty if that is one’s actual concern. It’s certainly not the lesser of evils when compared with the US or even comparable to using the US (or any other foreign currency), especially when it comes with an pro-authoritarian tendency. It is just another form of states doing business with other states in the bigger parties own best interests.

Anyway, the idea of dollarization (or more to the point what Millei is actually proposing, freedom of commerce, where you choose how you do business if in euro, pounds, yuans, yen, whatever’s…) conceptually serves to promote political discipline in order to get the house in order. When you can’t print it, you can’t abuse it and need to learn to live within your means. Here (for the past decades/ century or more) the local peso printing press is used to steal billions from the state each year, buy ill-deserved votes and run up unsustainable levels of debt just to keep afloat. As always Argentinas biggest “enemy” has always been Argentina. A culture of political discipline needs both times and tools to achieve it - and the ability to print money or not is the single biggest tool it has.

 

[earlyretirement]

The “problem” with the Chinese model is that it is just another IMF however with far sharper teeth, it uses the essential infrastructure it finances and that the host state depends upon to power its economy as collateral which literally ends up mortgaging the state. It also doesn’t tend to create many local jobs as workers are usually imported on a temporary basis while a big chunk of the concessions profits get exported as soon as they are made. You can already see what happens when countries can’t sustain or keep up with the massive Chinese government infraestructure loans in cases like Montenegro or Sri Lanka - it ends up taking the same toll on the concept sovereignty if that is one’s actual concern. It’s certainly not the lesser of evils when compared with the US or even comparable to using the US (or any other foreign currency), especially when it comes with an pro-authoritarian tendency. It is just another form of states doing business with other states in the bigger parties own best interests.

Anyway, the idea of dollarization (or more to the point what Millei is actually proposing, freedom of commerce, where you choose how you do business if in euro, pounds, yuans, yen, whatever’s…) conceptually serves to promote political discipline in order to get the house in order. When you can’t print it, you can’t abuse it and need to learn to live within your means. Here (for the past decades/ century or more) the local peso printing press is used to steal billions from the state each year, buy ill-deserved votes and run up unsustainable levels of debt just to keep afloat. As always Argentinas biggest “enemy” has always been Argentina. A culture of political discipline needs both times and tools to achieve it - and the ability to print money or not is the single biggest tool it has.

SO excellent and spot on target. This is why Argentina will never dollarize.