Argentina should avoid dollarization as it can trap the country in Ecuador-like economic morass, one economist says
- Any move to dollarize Argentina could see the nation get stuck in an Ecuador-like economic morass, one economist said.
- "Some in Argentina romanticize Ecuador's dollarization. Reality is different," Robin Brooks said in a post on X.
Argentina could get stuck in a prolonged period of economic weakness, similar to what Ecuador has experienced, should Buenos Aires choose to adopt the US dollar as its currency, according to one economist.
"Some in Argentina romanticize Ecuador's dollarization. Reality is different. US Dollar is the strongest currency globally. By hitching its wagon to that, Ecuador locked itself into chronic low growth and has underperformed its LatAm peers for a decade. Argentina must NOT do this!" Robin Brooks, chief economist at the Institute of International Finance (IIF) said in a Monday post on X.
A collapse in the Argentine peso has worsened the nation's hyperinflation and debt problems, prompting some calls for the country to replace the local currency with the greenback. The dollar has surged some 240% against the peso since the end of 2021. Annual inflation in the South American nation measured 113%, according to the most recent data.
Argentina's presidential candidate Javier Milei has urged the nation to scrap the peso and dollarize in a bid to tame triple-digit inflation. Economist Steve Hanke recently said dollarization is the only way Argentina can stop the "death spiral" eating the economy.
The currency crisis has largely been fueled by a shortage of the US dollar after an ongoing drought struck the country's agricultural exports.
IIF's Brooks recently suggested that it might be better for Argentina to peg its exchange rate to the Brazilian real, instead of of the US currency.