Dollarization and heterodoxy in Latin America

ABSTRACT

Changes in the international financial markets implied new conditions for the financing of Latin American foreign debts. The “dolarização “ of these economies, both in the broad sense (using the dollar rather than the local currency) and strict (capital flight) sense, acquired new importance, intensely affecting the monetary sovereignty of these countries. As a result, new economic policies were instituted in Argentina and Brazil aimed at reducing inflation by imposing a price freeze and a general de-indexation of the economy without causing a recession as well as at maintaining a minimal servicing of their external debts. The author takes into account the external context as well as both the economic structures and the accumulation of capital, which vary depending on the country and moment, as he analyzes the limitations of the measures used to slow down the long-terrn “dolarização” and the main features of the “Austral” and “Cruzado” plans, which were presented as heterodox. Lastly, he presents the possible need to adopt measures that are more heterodox than those foreseen in those plans: success would be a result of a partial moratorium of the payment of foreign debts and a sensible modification of the distribution of income.

KEYWORDS:
Dollarization; stabilization; inflation