The key economist in Ecuador’s dollarization assured that Milei can implement it now and at the official exchange rate

“If the president Javier Milei wants to go to dollarization today, I could do it at official exchange rate without any problem,” he told Infobae Francisco Zallesone of the architects of the dollarization that implemented Ecuador more than two decades ago and which is still in force despite the multiple crises that that country has experienced since then.

The stability that this measure would generate, he stated, would imply a increase in the political capital of the Government and a reduction in the negotiating power of the sectors that are against the official course.

The economist denies critics who maintain that progress cannot be made on this path due to the scarcity of reserves in the Central Bank of the Argentine Republic (BCRA)of the problems that monetary rigidity can bring and of being tied to a stronger economy, such as in this case that of USA. These arguments are usually refuted with the experience left by the experience of the Ecuadorian case.

During his time in Buenos Aires, Zalles starred in a talk organized by la Foundation for Intellectual Responsibility (FRI) in which he spoke about a document in which he addresses the possibility of dollarizing in Argentina. His intention was to present this Thursday to Milei that paperalthough the president canceled the meeting due to agenda issues, and now hopes to do so in the coming days.

The President has reiterated on several occasions that he did not abandon one of his main campaign promises. What’s more, days ago he assured “We are getting closer to being able to dollarize.”

“The BCRA has about USD 27,000 million in gross reserves and the stocks of banknotes in circulation in the economy represents less than USD 8 billion. That is to say that at the official exchange rate there are three times the amount necessary to officially dollarize. This replacement does not necessarily have to be immediate. In the case of Ecuador it took 9 months and in El Salvador, 24 months,” explained the seminarian in international finance at the Catholic University of Santiago de Guayaquil.

When asked by this media, Zalles specified what the path that the country would have to follow would be to advance on that path. “First there should be an official announcement that the measure will be carried out at the exchange rate at that time. They begin to give the banks dollars and they the pesos. Another point to take into account is the difference in the interest rate because the BCRA will no longer be able to pay 100% in dollars for the repos. Obviously, the stocks would cease to exist and there would be a unification of bank reserves. From that the supply of credits would increase enormously. As far as I understand, the Government could do this by decree without going against the Constitution.”

The main warning given by the detractors of dollarization is that, in the current context, a massive run could be generated in which the price of the dollar could jump to levels that would lead to an unprecedented crisis for Argentina. These voices speak of the exchange rate could jump above $3,000 and lead to a spiraling of inflation that is difficult to predict, with its consequent social impacts.

For Zalles, the experience of Ecuador is more than enough to show that this will not be the case and he even affirms that it will be a “positive shock.” “As soon as the pesos are converted into dollars, the thirst for dollars is quenched. There is no reason to convert pesos to dollars because they are already dollars. “Why go out to look for water when you have water at home?” He said.

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