In Argentina, 1 million money transfer operations in foreign currency were carried out during April. The figure appears in the latest retail payments report from the Central Bank (BCRA) and represents a total of US$1,589 million. The data specifies that the amount involved represents an increase of 117.6% compared to the same month last year and 95.2% of the total operations in the currency of another country.
While the number of operations is equivalent to an increase of 193.1% compared to the same month in 2023, which indicates that the modality has almost doubled. The data was included in the latest BCRA report. Previously, only transfers were reported in pesos. According to Ámbito, some assume that this decision by the highest monetary entity tries to accustom the public to the idea of circulation of two currencies.
It is worth remembering that, a couple of weeks ago, during the IAEF Annual Congress at the Convention Center of the City of Buenos Aires, the Minister of Economy, Luis Caputo, returned to the idea of currency competition. “It will be the next step,” said the minister, who nevertheless confirmed that the government’s final objective is the dollarization of the economy.
What is the Government’s currency competition plan like?
But what is the program that the Government seeks to implement. He is thinking about a Peruvian-style currency competition scheme. In Peru, it was launched through a constitutional reform that enabled the public to use soles and dollars interchangeably.
Historical data indicate that, at the beginning of the scheme, the economy of the neighboring country was 80% dollarized. After that, as the program managed to stabilize prices, public demand for the local currency recovered.
Currently, in Peru, only 20% of the economy is dollarized and 80% in local currency. In general, the proportion that is in foreign currency is long-term savings.
Economist Carlos Rodríguez, who initially advised Javier Milei, maintained at the time that currency competition schemes are not to dollarize, but to “pesify.” That is to say, whoever implements them does not do so thinking that it is a preliminary step for something else.
Coin competition, an idea proposed by Carlos Melconian
The “coin competition” was part of the economic program that Carlos Melconián presented as candidate for Minister of Economy of Together for Change for the last electoral campaign. He raised a strong idea to counteract Javier Milei’s dollarization speech. With no amount of dollars in reserves to replace all pesos, the alternative of two currencies seems more practical and requires fewer laws.
The BullMarket brokerage company recently circulated a scheme that would make a coin competition possible in Argentina. In this framework, it is considered that the BCRA will maintain a fixed Monetary Base in Pesos equivalent to $13,000 to $15,000 million, with its balance sheet completely healthy. It also estimates that there must be between US$4,000 and US$5,000 million in international reserves.
BullMarket estimates that the BCRA would have US$20,000 million of its own, to which it adds another US$10,000 million for reserve fungibility. If the August-December trade surplus of US$5 billion is added, the firepower reaches US$35 billion.
He also maintains that there must be specific modifications to the commercial code. What is controversial is that the brokerage company led by Libertad Avanza leader Ramiro Marra considers that a law to support this process is not necessary. He estimates that only a few resolutions are required.
The BullMarket scheme considers that when people voluntarily exchange pesos for dollars, the Monetary Base would be converted to foreign currency by up to 50% in 90-120 days. The conversion exchange rate would be between $880 and $1100 today.
