Argentina has a very sad history in monetary matters. The inflation and the Constant destruction of purchasing power and savings had devastating consequences on the country’s economic history. When you review the last decades you understand the disorder and monetary catastrophe that is going through us: since the creation of the Central Bank of the Argentine Republic Back in 1935, the destruction of the value of the currency has been a constant for practically the 88 years of existence of the monetary institution.
The BCRA had a first victim, the “National Currency Peso”: This currency has had a period of certain stability that lasted several decades – it still holds the record of being the monetary unit that has survived the longest in the Argentine delirium. It ceased to exist in December 1969, giving way to the “Law Weight” which made its debut having taken away the first two zeros from its predecessor.
The “Ley Peso” would not suffer the same fate as the “National Currency Peso”: it was valid for 13 years – between January 1970 and May 1983 – culminating in its replacement by the “Argentine peso”. This brand new coin once again removed zeros from the coin, this time there were four. Furthermore, the “Argentine Peso” has two sad records: it was the monetary unit with the highest denomination bill in history – that of 1,000,000 “Argentine pesos”- and he was also the one who had the least life: he only lasted with us for about two years, barely serving as the opening act for the «Southern», a new monetary sign that also began its journey with the removal of zeros: this time the cut was three. Maybe it seemed like an eternity, but the “Australes” have survived for a short time with a very sad performance going through two hyperinflations. Towards the end of 1991 it gave way to the “Convertible Weight”but not before going through the pruning of zeros again: this time there were four: 1 “Convertible Peso” became the equivalent of 10,000 “Australes”.
The “Convertible Peso” managed to survive for two decades, which came to an abrupt end on January 6, 2002 when it was transformed almost imperceptibly into a new currency: the «Weight»as we know it today. After just over 21 years, the currency has lost practically all of its value, accumulating inflation close to 34,600% (something like a 31% annual average).
This brief history of the currency in Argentina marks two important points (beyond the strict technical issues) of dollarization: people reject the local currency and experience has made them actually dollarize. Many goods today are traded in dollars: real estate and automobiles are the most emblematic cases. Even one of the most important points of the economy is already dollarized: savings.
Dollarization has a very relevant advantage with respect to a system of own currency (as we have known until now) or that convertibility system of the 90s: going back would be a complex task for politics. Even in dollarized countries taken over by populist governments, it has been impossible for them to exit the dollarization scheme for a simple reason: society rejects returning to an inflationary currency, destroyer of savings, enemy of inflation and, above all, a partner of politics.
The desire to dollarize is the response to a monetary history that has been responsible for defrauding a society that no longer wants to continue losing. In this case, dollarization will be the last step in a host of structural reforms that Argentina needs to emerge from its chronic decline. Everything that involves a step towards savings, investment and stability will also be a step towards the future. We are already dollarized, we just need to finish being honest. Society has already chosen: the “Peso” as we know it has signed its death sentence.
Economic analyst, university professor.