What Dollarization Supporters Deliberately Neglect to Mention

Photo: Osservatorio Balcani e Caucaso

It’s inevitable that, in our desperate situation, some consider a desperate solution, especially if the solution is easy to sell. In the middle of hyperinflation, and in a country where it’s ever more common to quote prices in dollars, nothing looks as sexy as dollarization.

Even if it doesn’t make sense.

Do you want to earn in dollars?

In Venezuela, who doesn’t?

Selling dollarization is now the task of Henri Falcón’s top economics guy, Francisco Rodríguez, who is in the midst of a press tour. We’re talking about the same Francisco Rodríguez, Chief Economist of Torino Capital, who advises bondholders owed billions by the Venezuelan government.

I’m not going to relitigate the dollarization debate; I already wrote about it and my views haven’t changed. Furthermore, Rodríguez isn’t engaging in a debate about its pros and cons in the long term; he’s mostly talking up its benefits in the very short term. It’s all about Year 1 of a hypothetical Falcón presidency.

Let’s focus on Year 1 then.

Rodríguez accepts that dollarization on its own doesn’t work. You need other reforms, which I’ll call A, B and C. These reforms would be part of any successful stabilization that doesn’t include dollarization, which begs the question, if you always need to do A, B and C, why dollarize if you don’t need to?

To answer that, Rodríguez is focusing on three benefits. First, dollarization could bring down inflation fast; second, it could lend much-needed credibility to a stabilization plan and, third, an economic adjustment with dollarization would be expansive, while one without it would be contractive.

Ecuador is not an outlier in South America. Whatever dollarization did for Ecuador against inflation, can be done without it.

He’s right on the inflation-stopping powers of dollarization, although it might not work very fast. The “immediate single-digit inflation” promise of dollarization promoters is actually uncertain. In Ecuador, during the first year of dollarization, inflation was 96% (it was 52% the year before, and 36% and 12% the next two years). It took them three years to reach single-digit inflation. More importantly, you can also stop high inflation without dollarization, as other countries in the region did. Bolivia and Perú have Ecuador beaten in this field.

Since then, and up to 2017, Ecuador’s accumulated inflation is 170%, and I’m being kind: that number doesn’t include the first 11 months and 3 weeks of dollarization in 2000, with its 96% (otherwise, it would be 430%). Between 2001 and 2017, several non-dollarized countries, like Bolivia (127%), Chile (169%), Colombia (127%), and Peru (75%), beat Ecuador in inflation. Brazil and Paraguay are a bit above, and only Argentina, Uruguay and Venezuela surpass 200%. Ecuador is not an outlier in South America. Whatever dollarization did for Ecuador against inflation, can be done without it.

The second benefit mentioned by Rodríguez is that the dollarization straight-jacket would lend credibility to a stabilization program, and would signal the government is serious about changing course. I believe the credibility problem is so massive that dollarization would help very little, to the point where the sacrifices aren’t worth it.

Dollarization is not a “perfectly credible monetary policy”, as Rodríguez said recently. You still need A, B and C, remember? Being credible in A, B and C (things like keeping spending under control) is what matters the most. Without that you fail, dollarized or not.
Furthermore, it won’t matter if we enshrine dollarization in the Constitution through a referendum, or if President Falcón tattoos a dollar in his forehead. A Falcón presidency would exist under the threat that chavismo (radically opposed to dollarization) will return quickly. What’s more, according to Rodríguez, Falcón could negotiate a cohabitation with chavismo, which is a bit of realpolitik that’ll damage Falcón’s credibility: is he really different from chavismo? Is he serious about reform?

And if you believe chavismo will behave responsibly and commit to keeping dollarization, I have a cryptocurrency to sell you. It’s backed by unicorns.

A Falcón presidency would exist under the threat that chavismo (radically opposed to dollarization) will return quickly.

The chavismo threat means that, after dollarization, the reasonable thing to do for Venezuelans would be to take their money out of the country immediately — better get those dollars out before Falcón changes his mind, or he’s replaced, especially if dollarization is carried out with very little dollars (a scenario floated by Rodríguez).

We arrive then to the part Rodríguez hasn’t mentioned, because it would be terrible publicity: after a dollarization with poor credibility, the government will most likely have to impose capital controls, to prevent people taking their money out of the country in a rush (and to protect banks). Greece imposed capital controls in 2015 that are still in place, and let’s remember Argentina’s infamous corralito.

These controls won’t need to be as strict as today’s exchange controls, but it’s important to mention it, and let go of the fantasy that dollarization would mean an immediate lift of capital controls.

Something that would help with credibility is unrelated to dollarization. We need a huge pot of money — tens of billions of dollars —, and the cheapest (and likely only) source for that is the IMF. In past years, Rodríguez was notoriously reluctant to agree to it (and I asked him about it), but he’s fully on board now. Having money, and the backing of the IMF, would help with credibility, and it’s needed even without dollarization.

On Rodríguez’ third point, I have to agree with him. But not with the Francisco Rodríguez of the last couple of weeks, but the Francisco Rodríguez that wrote in October 2017 that an adjustment could be expansive. The most important factor to achieve that, he wrote, would be getting a pot of money large enough. And he didn’t mention dollarization back then.
Dollarization means giving up on valuable policy tools for something that either we don’t need, or won’t actually change the odds significantly. Just think, why are we to do this?

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  1. You forgot to mention how any scheme to keep capital from flight will engender its own version of RECADI/CADIVI type corruption.

    Regardless of the scheme, capitals have to flow back and forth and there will always be someone to piggyback on to them and charge a premium for it.

  2. The problem with FRod today is, that he’s desperately trying to dig up his best populist act to hide what you mentioned, that he’s being paid to be part of falsón’s team, the same falsón that’s a cuban sock puppet that will negotiate a cohabitation with chavismo (A thing that threw all his little credibility down the drain.)

    No matter what FRod proposes at this point, everybody knows he still works for Torino Capital and the chavista boli-manure garbage-hunger bond holders.

  3. Currency, just like the system of Weight and Measures is a social construct in order to facilitate transactions and storage of economic value. That is its main function and purpose, its raison d etre.
    It has been many Economists that have lost sight of that initial fundamental concept and have transformed Currency in just another tool for Macro Economy and a bad, crude one at that.
    If you gave many Economists free reign many won’t hesitate to exploit also the system of weight, measures and possibly even time!! as new “creative” tools for macro economy.
    The reason to adopt the Dollar is for its relative stability in value and for its established reputation as de-facto international trade currency.
    Why make things more complicated that it needs to be?
    The moments you declare that you need the “flexibility” to play with your proprietary currency’s value for whatever policy you are implemented that is the very moment that I won’t trust your currency.
    I want my 100 Bs to be 100 Bs today, tomorrow and for the next 5 years, otherwise i change it to a more trusted and stable currency.
    BTW, you conveniently forgot to mention that Argentina is still struggling with double digit inflation after implementing similar suggestion you would have for Venezuela.
    The Ecuador minor inflation after Dollarization was the result of the initial organic adjustment Peso-Dollar value. That is the most critical piece when starting the process of Dollarization.
    Many reputable and experienced economists other than the only one you cite support Dollarization as a reasonable economic policy. So this is not like a “desperate idea” as you put it.

    • Ex-post postum – or whatever. I wrote but did not post what’s below. You picked up on it, so here’s the same conclusion, or whatever. The exception is in vocabulary, that “… dollarization as a reasonable economic policy” is a “fiscal policy”. An economic policy would be, for examples, guarantees of private property rights, an end to price fixing, policies to guarantee freedom of imports of parts and supplies.

      Fiscal policy is part of it, but the production is the core of it. No fiscal policy is going to work without production, and the most effective way of getting production is to establish inviolable private property rights.

      People become fixated on money. Money is only a medium of exchange. The actual products and services are the dog that wags its bushy little money tail. If you produce more, you get more. Except in socialist countries, where, if you produce more, you get less. That’s why I decry socialism as the greatest fraud ever perpetrated on mankind.

      • Gringo, you hit the nail on the head:

        “Fiscal policy is part of it, but the production is the core of it. No fiscal policy is going to work without production, and the most effective way of getting production is to establish inviolable private property rights.”

        It all boils down to production.

        For example: if farmers are confident their fincas will not be invaded by escualidos or expropriated by the government; that there is security (and I would add a right to bear arms) and scum will not steal their crops on the farm or to market; and farmers can earn a profit because there are no longer price controls then we will have agricultural production in Venezuela.

        Finance is a part of it, but it is not a magic bullet…and I have a hard time believing these Chavistas or closet Chavistas will engage in “Shock Therapy” in terms of liberalizing the economy. Most all of the politicians (Chavista or la MUD) are at heart “Rentistas” and at worst populist and rentista.

        What we need are two new parties, both fiscally conservative. One a Christian Conservative party and the other a Libertarian party (fiscally conservative, socially liberal). Need to drive a wedge between the rentistas and the anti-rentistas.

        I welcome the dolarization debate, but lets realize that Production and Productivity is the heart of the matter…well besides the fact that you need about 10 million brain transplants because it will hard to make Kleptozuelans change overnight. Hopefully that will be covered under any IMF package.

      • Gringo, agree with you. I would also add that when using a no trusted currency you run the risk to have your money “stolen” by the government when they decide to devaluate.
        I know many people don’t see it that way but a 50% currency devaluation means that the government has taken half of your liquids, an effort of many years of savings have disappeared overnight.
        Who in the right mind would trust the Venezuelan currency even after the Dictatorship is gone?
        What are the mechanism the author of this post is proposing to sustain the currency value for many years to come?
        That is why Dollarization seems to me and many others the right path for Venezuelan recovery, at least for a good 10 years until the Venezuelan economy is back to normal and trust has been earned.

  4. What’s more difficult to steal? That’s the only consideration you need in Kleptozuela.

    Dollarize that sucka, or Pompeo will.

  5. Pedro,

    You say that the confidence factor of dollarization is negligable. I’m having some trouble understanding why.

    It seems to me that money printing is one of the mist destructive policies we’ve seen so far. Setting aside the possibility of an imminent return of chavismo proper, it does seem to me to increase trust in what Falcón himself might do while he holds the reins.

    That is, I think the fear that FRod seeks to mitigate is the fear that Falcón himself might continue current destructive policies.

    • Eñe (and waltz, below),

      My point is that credibility starts at the A, B and C reforms and policies, which include (among many things) property rights, keeping spending under control, not printing money, lifting price and currency controls, a plan to recover PDVSA, political stability, and a very long etc, all stamped by the IMF. Dollarization won’t be credible if you’re not doing those things. And if YOU ARE doing those things, you have credibility… then why do you need dollarization? Once you’re doing A, B and C, which are necessary for dollarization, the added-value of dollarization in terms of credibility isn’t worth the sacrifices you’re making. And on top of that, you would have to impose capital controls.

      Greek euroization stopped being credible when it became apparent they were spending more than they should. Argentina’s dollarization-light lost credibility when the fiscal hole became too large.

      • Pedro, thanks for the reply. Part of your concern regarding dollarization is capital flight, should not you be just as concerned with FDI, would dollarization have a positive or negative impact?

        I understand that the Venezuelan economy is already tied to commodity cycles and being able to control monetary policy is important mid/long term. As the spiral continues downward the question becomes when bottom is hit how best rebound most quickly. Dollarization may assist this recovery at expense of future monetary sovereignty, then again it may not.

      • I’m in principle against dolarization, but I struggle to understand: What are you really losing by giving up monetary policy? The ability to devalue (not good for the people), to raise and reduce interest rates (not good if the interest rate is not paid with production). What else am I missing here?

        Spending is unlimited so long as you can print money, and there will always be money printing, its the easy way out. If you can’t, you can’t. So you are forced to do A B and C, what other option do you have? would we have to reach rock bottom for that to happen as you argue in your 2016 post? well, how much worse can it be? Why is it so much worse to reduce a pension from Eur1300 to 830 through telling people you now get 830 instead of you get to keep 1300 but your 1300 are now worth 830 anyway? I fail to get your point!

        • marmota,
          Your comment makes me think that you really wanted to write that you are emotionally against dollarization. You don’t seem to offer any rationalization of why retaining the status quo is preferable.

  6. So, Quico has admitted to being friends with FROD and now I read that FROD is advising Falcon on monetary policy.

    Ok, now I understand Quico’s piece on giving up and taking in all of Chavistas for the sake of a peaceful future, or something to that effect.


  7. Say a, b and c correspond to price controls (subsidies), currency controls and a balanced budget. The IMF will “impose” these policies as a requirement for funding. This leaves the question of confidence, my opinion, dollarization will go a long way in this regard. Obviously the guarantee of property rights is essential. True you give up a bit of sovereignty in the medium/long term but the IMF will be taking that away anyway.

    This is the same guy who argued the AN (the legitimate one) should cooperate with Maduro in legitimizing the issuance of new debt. Most seem to have no faith in Falcón and the election will not be recognized by the international community, this article should be more general about the benefits or lack there of dollarization for the future without bringing these two characters into it.

  8. Dollarization is a is a distraction. It may appeal to the people that have no concept of how markets work.
    For starters, where will the Dollars come from?
    The obvious answer is from exports. Venezuela is producing a fraction of the oil that was once available for export. Agriculture and almost all manufacturing has deteriorated to the point that there is nothing available for export. There is not enough production of anything except oil to meet domestic needs. The ever declining oil revenues do not come close to what is needed for import of basic necessities.
    The IMF will not fund any bailout of Venezuela, even if Falcon is elected President.
    The US, Canada, The UK and the rest of the EU all consider the ANC an illegal entity. This extends to the elections that the illegal ANC has called and will extend to whomever (Maduro) is declared the winner in the rigged elections.
    When the ANC is dismantled and free and fair elections are held under international observation,the new legitimate government will be able to begin negotiations with the IMF.
    Perhaps Falcon’s intention is to make the people believe that they will all have Dollars if he becomes President. Good for him. Anything that removes this regime or makes the people mad enough when the election is stolen from them, to do what is needed, I’m all for. He should also promise them new cars, I phones, HDTV’s, yachts, and new houses. Whatever it takes to get the Venezuelan people to actively oppose this regime and continue until the criminals are gone from power.

  9. Interesting conversation. But as we say in the US, The horse has already left the barn. There is no other option anymore. Anyone who had a nice pile of Bolivars has already exchanged it and export it. Anyone who didn’t now has nothing.

    Your reform steps A,B, & C are predicated on dollarization. So if the economy isn’t dollarized, then you will get nowhere and things will get worse.

    If dollarized, AND steps A,B,& C are not executed, then VZ will end up with a US dollar based cash-and-carry economy. Is that worse that how things are today? No. It will be that way for a while anyhow. Eventually things like credit, bonds, and such will come back.

    The fear that is the Chavestas will reverse the dollarization. Yea. Good luck trying. How many people are going to give up their few greenbacks to those fools again? Do you think the junior officers and the enlisted ranks in the military want to paid in funny money after getting paid in greenbacks? Hell no.

  10. Dollarization initially happened independently of government control in Zimbabwe. It happened by the local currency no longer having any value, with a government that was not prepared to act on any solution, and so the decision was taken out of their hands.
    Venezuela has so many parallels to that situation.
    Venezuelans in the end can not be trusted with their own currency management. Their corruption is of legendary nay mythical stature now.
    Economists opinions more often than not are not worth the paper that they are written on, fact.

  11. “Fiscal policy is part of it, but the production is the core of it. No fiscal policy is going to work without production, and the most effective way of getting production is to establish inviolable private property rights.”

    I’ve read countless articles here about how the country might recover once this regime is ousted and have yet to see one that really focuses on production. Heck, even Leopoldo Lopez’s answer seemed to rest in the hands of PDVSA and yet another massive give-away scheme.

    While I’m biased because of my love of the land and what it can produce, I don’t think I’m way off base to say that the fastest way for this country to recover post-chavismo would be a MASSIVE, well-coordinated, well-funded investment in the agricultural sector. The country is starving afterall and I believe actually capable of exporting food.

    Arable hectars in Venezeula in 2014 were calculated at 2,700,000 by the World Bank.

    Definition: Arable land (in hectares) includes land defined by the FAO as land under temporary crops (double-cropped areas are counted once), temporary meadows for mowing or for pasture, land under market or kitchen gardens, and land temporarily fallow. Land abandoned as a result of shifting cultivation is excluded. https://tradingeconomics.com/venezuela/arable-land-hectares-wb-data.html

    From my personal, local experience, countless hectars sit idel, with at most a few scrawny cattle turned loose to try to control weeds. I recall being told there was a time when one could drive from El Tejero to La Ceiba, at least a 45 minute drive for me, and there was corn planted on both sides of the road the entire way. Today, one would be lucky to see a few hundred hectars under actual cultivation. The agricultural sector is in shambles, almost totally destroyed by chavismo.

    If I were king, PDVSA would be at least fifth or sixth on my list of things to fix, banking would not be far behind agriculture.

    • All true. A Canadian Embassy agricultural attache once told me that if Canada owned Venezuela they would produce three crops/year. But, even since Romulo, massive Govt. investment in Ven. agriculture in successive Govt. plans has mostly been ripped-off/stolen, with only nice Venezuelan Hacienda manor houses (one was used in a popular telenovela), and Miami residences, to show for it….

    • I expressed my thoughts here before about Lopez’s nutty policies based on his recent writings and interviews.

      I’m just chalking it up to politics. He’s gotta do what he’s gotta do to in case of by chance of a miracle, he can run and he and his devoted family can lay their heads down in peace upon I incredible beds in Miraflores.

      Fucking Venezuelans have a man greater than Bolivar in front of them and they can’t even see it.

      • Unlike the US, the president of Venezuela works at Miraflores and sleeps in La Casona.

        La Casona is located very close to Parque Del Este.

        Currently Chavez’ daughters illegally occupy La Casona.

  12. Effective dollarization requires physical dollars in sufficient quantity, which Venezuela does not produce, now nor for the visible near future, and which can only be sourced by the IMF, which will require a legitimate democratically-elected Government with functioning institutions/laws/etc. etc. (a through z). Effective dollarization is a long way off/only with a major Government upheaval/return to rational free market/capitalistic laws/norms without contrary political interference.

    • Net is right, how are you going to get the dollars if you want to dollarize??? Big Big question.

      Dollarization is NOT the magic bullet. It can be part of a solution, but lets not get the proverbial cart before the horse.

      Indeed, the IMF can pump some dollars in once the ANC is abolished, but you have to also earn dollars through exports and other means (e.g. reducing imports through domestic production and tourism), thus gains in productivity is the only long term solution.

      Yes, dolllarization solves the problem of taking control away from corrupt central bankers who have proven their incompetency over and over again. But you also must tackle the problem of productivity immediately (and MRubio gave a great example above): which means massive liberal reforms of the economy ASAP!

      • Two responses: Stop subsidizing Cuba and PetrolCaribe. Float the current rate for gasoline in the domestic market and lift price controls. Pedro is correct. My suggestion would be to clear the market by selling ALL the Reserve. It creates a market flucation that may spike inflation. But at this point it is doubtful there will be a notable impact on Purchasing Power Parity.

  13. I agree with you in theory. If you look at the literature, dollarization has a huge long term cost. And doing A, B and C (and E, F… through to Z) should be enough for the IMF, hedge funds, institutional investors, oil companies, etc that will be needed to rebuild the country. What that doesn’t take into account, however, is the impact on the average Venezuelan. Dollarization sends a clear symbolic message that fiscal responsibility, property rights, fair courts (aka A, B, and C) never will to the “venezolano de a pie”. Have you considered that in your evaluation of whether to dollarize or not?

    • What’s the clear message?

      About 99% of the bad things a government without dollarization can do, a government with dollarization can still do.

      Yes, governments of dollarized countries should be extra careful about fiscal responsibility. But dollarization will not stop them from spending too much if they so wish. They will lack one tool (printing money), but they’ll still have other ways to misbehave. They can borrow too much, for example, as Greece did. They can run deficits even in times of booms, instead of saving money, like Ecuador did.

      • Pedro,

        Yes, all of that is true. But it’ll take some time to see where we end up. To me the message would be that real change is happening, and you are a part of it. I’m not talking for economists, I’m talking for your average Joe. Could dollarization be the most visible sign of a much needed coordinating device, stating that things have changed and will get better? Also, by dollarizing, could you have the average worker more invested in the economic changes that need to happen (i.e. change in labor laws)?

        I’m not making a case one way or another, I’m just trying to understand if this is considered as part of the debate.

        Everyone knows that taking the local price of gasoline to international levels is important, but we consider the effect on the local psyche before making the decision. Are we doing the same for dollarization?

        Would love to see where you and others stand. I used to be 100% against dollarization, but after talking to so many people that see it as an important step, I’m thinking that the symbolism should not get lost in the theoretical debate.

      • I did not realize that unfettered printing of money was a no biggie, thanks for clarifying that.
        So much endemic corruption that has laid waste to Venezuela has been brought about by capital exchange through Cadivi, Sitme Concoex etc etc. Dollarization will diminish that.
        I am also not convinced that many fiscal organizations will be queueing up to borrow huge sums to the BCV, so i think the Greece example is a bit rich, excuse the pun. The dollar is not the Euro with its associated straight jacketing by the ECB, and you are still able to set your own interest rates.
        Lets not be silly like Argentina!

  14. Dollarization? We need governments that earn the right to govern us the hard way. Share out all net oil revenue dollars equally among all Venezuelans residing in Venezuela, and let the Venezuela Central Bank offer bolivars against these dollars, and then we are talking.

    By the way, to have someone who knew how criminally bad government used our oil revenues, yet by pushing loans helped it to make it all much worse, now becoming an advisor to someone who says he wants to correct it all, is just too hard for me to understand and accept.


  15. This must be The Twilight Zone:

    People actually believing that Maduro is going to allow himself to lose, and wasting their time speculating on the policies of another impossible scenario.

    This ain’t a real election folks.

    Get it?

    • Jejejejejejejeejjeejeje well said Ira

      We all want to talk about dollarization till the cows come home, but we will never arrive to that point in the near future because Maduro is going to steal the elections–no matter what!! That is the real issue some numb nuts cannot wrap their minds around. Falson and the Panama Papers Preacher are just a smoke screen…

      Now if you can explain to us some grand conspiracy of how Maduro is going to “take a fall” whereby Falson or Bertucci will assume the presidency (thus allowing all the high priests of CastroChavismo golden parachutes) and an otherwise peaceful transition…Please inform us if you have any credible inside information.

      As of now this just looks like a high stakes game of chicken and we just have to deal with the looming head-on collision that will be Venezuela in a few months. Thats what I am preparing for.

      • This is the whole thing, your last two paragraphs.

        I too await news confirming or seriously pointing to the Grand Conspiracy, but come on. That’s not happening for a myriad of reasons.

        In VZ these, it’s the fucking million LITTLE conspiracies where the money is, and staying under the radar.

        But Falcon isn’t going to win. And he will ONLY win if that Grand Conspiracy theory IS true.

        So just because we don’t have the hard evidence, that doesn’t mean it didn’t happen.

        • Exactly Waltz, and “That is the real issue some numb nuts cannot wrap their minds around.” Including the editorial board of The Arepa.

      • “Now if you can explain to us some grand conspiracy of how Maduro is going to “take a fall” whereby Falson or Bertucci will assume the presidency (thus allowing all the high priests of CastroChavismo golden parachutes) and an otherwise peaceful transition…Please inform us if you have any credible inside information.”

        This is the answer to falsón, EVERYTHING related to falsón screams NICARAGUA:


        • And unfortunately this article does not end on the obvious conclusion: EVERYBODY, INCLUDING THE MUD AND WHOEVER NEED TO BOYCOTT THIS FRAUDULENT ELECTION!!!!

          This is coming down to energy sector sanctions, pulling out diplomats and a possible humanitarian intervention. Time to stop playing the rules of the Chavistas. Have to go for the choke hold and cut them off of all of their oxygen. That is what we need to start organizing towards. These scum need to know their game is up and we are not going to put up with them anymore. Wont be fooled again.

          Yes, we all have to be ALL IN to pull this off. And obviously most of us will NOT rally around FALSON. Sorry Quico and the rest at The Arepa. Only solution is a massive boycott of this fraud.

  16. Ira, you said it all in that “In VZ these, it’s the fucking million LITTLE conspiracies where the money is, and staying under the radar.” That is pretty much what is up here.

    I like to troll English left wing sites, pretty much where Judi Lynn gets her news, and anytime they talk about Venezuela and it is like a cat toying with a mouse. They all try to explain Venezuela as a victim of external pressures (you know el imperio, la misma mierda) but really the kleptozuelans plundered Venezeula far worse than the gringos could in 100 years and that is the cold hard truth. Crybaby suburban pukes in Che Guevara shirts are at a loss for words because understanding Venezuela as Kleptozuela does not fit into their ideological paradigm.

    And to think, Rodrigo Torrez was talking about the CADIVI scam and throwing down a witch hunt against the businesses who stole billions and bringing that back to Venezeula…and at the begging of the same interview he was talking about how he was friends with godgiven hair jejejejejejejejejeje RodTorrez, please come to Margarita and try to explain the boom in high dollar centro commerciales (American style shopping malls) during the worst economic crisis in Venezuelan history. Whatever.

    This shit gets stranger by the minute

    • Quite right, and every street corner is getting a brand new minimarket, selling at $ prices, all courtesy of our ‘Arab friends’, Margarita running as its own microcosm.

  17. I am not an economist, but it seems to me that the “inflation” referenced in Ecuador after Dollarization is not inflation of the currency, but prices rising as a result increased demands for labor and goods as the economy improved.

    If Venezuela were dollarized today, would you expect that wages would continue forever at $6/month? Of course, not. Assuming the other necessary economic reforms were made, we would expect several years of adjustments as the economic distortions that currently exist in the economy resolve themselves.

    So, I don’t buy that part of your argument.

    For me, the best argument against dollarization is that the monetary policy of the United States is not necessarily the correct one for Venezuela.

    The best argument for dollarization is that Venezuela cannot trust their own government with something as critical as monetary policy.

    Take your pick of the two. I could be convinced either way.

  18. Ok, you have convinced me that dollarization is not going to cure everything that is wrong with the VZ economy. And you rightly point out that, yes, dollarized countries like Ecuador, Panama and El Salvador no longer have monetary discretion and cannot do things like race other LATAM currencies to the bottom in a bid to compete for exports.

    BUT: I would pose this simple question: Are any of these dollarized countries now clamoring to dump the dollar and go back to their own, central bank issued currency? And in the case of VZ, does anyone have a better idea?

    • I read Omar’s article before writing mine, and I also heard his debate with Francisco Rodríguez in the radio (on CMR program). If our arguments look the same, it’s because they’ve been the same, for years. It’s a subject on which we agree. I have written twice about dollarization before (once here at CC, which is linked above, once in Spanish in my personal blog https://segundomejor.wordpress.com/2013/12/27/dolarizacion-para-venezuela-la-falsa-panacea/), both years ago, and my arguments remain the same. Omar has written about it before as well.

      The focus of this post is on the very short-term side of dollarization precisely because I believe that others have written very good articles recently about the subject, and there’s no need for me to write the same (because I agree with them!). Omar’s article is one of those, the other is Ronald Balza’s https://prodavinci.com/sobre-la-propuesta-de-dolarizacion-de-francisco-rodriguez/

      Because of this, I purposely left out issues such a GDP growth, poverty, salaries, the “$3 billion dollarization”, which Omar and Ronald discussed, and instead focused on issues that I believe have been a bit overlooked (such a the political economy side of things and the threat of a chavismo return, and the stamp of approval of the IMF).

  19. Dollarization would be so retarded and harmful that i am sure that it is the way our own retarded and harmful policy makers will try to resolve the crisis. We can only go from on mephistotelic agreement to the next, independence never, local industry never, autonomy never. Just two sides of delusional jalabolas and comemierdas, the gringo side and the Cuban side

    The middle class sucks up to the US in the same retarded way chavistas suck up to Cuba, They dream with US bombs and US currency even to their own detriment. They think only chavistas would be affected or that the US economy is a charity organization that runs on good christian values and good deeds.

    There is zero logic behind all this, suddenly everything would be marvelous after the US meddling because reasons. Even after a history US leaving countries permanently fucked and crippled for life.

    Venezuelans are shit eaters with no identity , always dreaming with foreign affairs and foreign systems, they think with dollars they´ll live like gringos and will become gringos. Thats malinchismo induced by too much Hollywood trash , too much Call of Duty and Warner comedies.

    • Hey Vero! It sounds like you live in Western Europe. In one of those countries the US left permanently fucked and crippled for life.

    • Looks like a gringo ignored some insult you spat years ago and that left you with a neverending rancor and a disgusting chavequito streak, as now you gleefuly charge against the “middle class that’s guilty of everything”

      You know what? YOU ARE THE S**T EATER, big time, the first jalabolas of the gringos you despise so much are the same scum that praise the cubans, the same miserable bastards that after stuffing their asses with stolen dollars fled Venezuela and now pretend to live in other countries as if they haven’t broken a plate, whining all day long because the honest venezuelans that were kicked off their country won’t stop scrathing them.

      Take your imbecilic anti-american speech and stick it with your head where the sun doesn’t hit, you miserable wretch.

  20. Dollarization does one thing for Venezuela: keeps the crooks from screwing around with the currency.

    The rest of the economic turnaround is up to the crooks…

  21. The answer is ridiculously simple:
    Venezuela, as a society is not mature enough to manage its own monetary policy.
    Our politicians and economic elites are like teenagers alone at home. As soon as they reslize they control the house the WILL party hard, they WILL get drunk.
    What are you going to do to prevent the next populist from running for president, taking power, control the Central Bank and repeat the age old formula, kill him/her? Ban all socialist parties and the likes? Draft a law (lol)?
    We need a couple generation of reasonable rule of law to recover the sanity necessary to let our political and economical elites have any influence on the issuance of the money used by the Venezuelan people.

  22. What people forget is that with conditions as they are now, doing nothing but printing larger denomination of currency will only make things worse. And it will get much MUCH worse before it gets better.

    Dollarization alone fixes nothing. The idea that a massive agricultural project could turn back the tides of starvation are a dream. The nightmare has a long way to go still.

    Just planting crops and tending to the fields that were active 8 years ago would be a massive improvement. But highly unlikely. I recall reading here a story of a family Campo that fell into complete disrepair and being abandoned. Not for lack of trying, but lack of resources. Both human (everyone was stealing from them, even the fencing) and political (no way to even purchase seeds for crops).

    The biggest export is drugs after you look at oil. Then it’s people.

    And everyone in gubmint is so horribly corrupt. My pastor said as he was leaving last fall, it’s not that you can’t find an honest cop, but that nobody even tries anymore. It is simply degrees of grafting.

    • Not only chavismo printed much larger denomination notes (500, 1000 and so on), but again, they did so in the most awkard numbers to make it fit the best with the usual communist social control component of chavismo, as most of the notes were of 500, that coupled with the corralito unleashed the cash scarcity on the country.


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