In Quito and Harare, advice and warnings about dollarization for Argentina
By Tito Correa, Nyasha Chingono and Miguel Lo Bianco
QUITO/HARARE/BUENOS AIRES (Reuters) — From Zimbabwe's capital Harare to Quito in Ecuador, green bills circulating on the streets and in shops with images of U.S. presidents reflect a big choice that has been made: picking the dollar over the local currency to bring economic stability.
The two countries offer a lesson — and warnings — for Argentina, the latest nation globally to toy with the idea of ditching an embattled local tender in favor of the greenback, a signature campaign pledge of President-elect Javier Milei.
Dollarization or the part-way option of a peg to the dollar have generally been triggered as a last-ditch option to tame hyperinflation and loss of confidence in the local currency, as was the case in the 1990s with crisis-ridden Ecuador and in El Salvador in the aftermath of civil war.
In Argentina, self-described anarcho-capitalist Milei, elected on Sunday into the country's top office, sees dollarization as a way to tamp down inflation heading towards 150%, which has pushed four-in-ten people into poverty.
Zimbabwe abandoned its currency in 2009 to combat hyperinflation, opting for a multi-currency system centered on the U.S. dollar. The government reintroduced the local currency in 2019, but it rapidly lost value. Most transactions are currently in greenbacks.
Zimbabwe's dollarization story is as full of warnings as it is with promise. Many people watched as their savings were erased when the dollar was adopted in 2009.
«We just woke up and there was nothing in the account anymore,» banker Bongiwe Mudau told Reuters. «This included my life assurance and medical aid. All was gone in just a day. Dollarization wiped out everything I had saved.»
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