Henry C.K. Liu
"R. Magellan" wrote:
> The article that is reproduced below substantiates a recent interview with a
> leading Brazilian economist, César Benjamin, about the coming adoption of a
> colonial-like currency board scheme by Brazil. The Argentinan peso is
> already pegged to the US dollar. The next step would the complete
> dollarization of both countries and, as a necessary consequence, the rest of
> the Americas as well, including Mexico (and what about Canada?).
>
> It is well known that the new president of the Brazilian Central Bank, the
> former Soros agent Arminio Fraga, endorses the dollarization proposal. This
> is the most serious menace to the independence of Latin America since the
> wars for independence in the early XIX th century.
>
> As soon as I can I intend to translate a summary of that interview into
> English after obtaining the proper authorization. It is written in
> Portuguese, and so those who have a good command of Spanish may read it
> (twin languages), asking for it either from Benjamin himself
> <cesarb at nutecnet.com.br> or from me.
>
> In solidarity,
> Roberto Magellan
>
> ###################################################
> Date: Thu, 25 Feb 1999 From: Louis Proyect <lnp3 at panix.com>
> Subject: After Puerto Rico, statehood for Argentina and Brazil next?
>
> NY Times, February 25, 1999
>
> Buck Doesn't Stop: Now Argentina May Adopt it
>
> By CLIFFORD KRAUSS
>
> BUENOS AIRES, Argentina -- A month after President Carlos Saul Menem first
> floated the idea of trading the Argentine peso for the U.S. dollar, U.S.
> and Argentine officials are considering the complexities of making the
> Federal Reserve the central bank of both countries.
>
> But officials of both countries say there is a long way to go before
> negotiations take hold and actually produce a treaty. Still, no one is
> completely dismissing the idea that dollars could become the currency of
> Argentina and the Fed could become the lender of last resort.
>
> Menem also went a step further by suggesting that neighboring Brazil
> resolve its economic crisis by pegging the value of its currency one-to-one
> to the dollar, just as Argentina did in 1991. That, too, would be a move
> toward replacing Brazil's currency, the real, with the dollar.
>
> Argentine officials say that once Argentina and Brazil converted their
> currencies to the dollar, they could move the entire Western Hemisphere
> decisively toward a regional currency like Europe's new euro. More than
> likely, the officials say, Mexico would also follow Argentina's lead, and
> the hemispheric currency would inevitably become the greenback.
>
> "It's a shocking novelty for a country like Argentina to make this kind of
> a proposal," said Carlos Fedrigotti, president of Citibank in Argentina.
> "President Menem has started the debate and it has to do with the future of
> not only Argentina but of the entire continent, which will have to
> eventually fall under the influence of the dollar in trade, capital flows
> and ultimately in geopolitics."
>
> The dollar is already omnipresent in Argentina. Most cab drivers and
> restaurants accept dollars. ATM machines offer both dollars and pesos.
> Virtually all mortgages and apartment rental contracts are drawn up in
> dollars. Even cellular phone bills are stated in dollars and customers are
> free to pay in in either U.S. or Argentine currency.
>
> As of Feb. 15, $36.9 billion in Argentine certificates of deposit were
> denominated in dollars compared with $13.6 billion in pesos. Nevertheless
> Menem's proposal to totally replace the peso with the dollar has been
> greeted by sneers by much of the Argentine opposition and the news media.
> Brazil has said it has no interest in the idea, although that could change
> if its currency continues to slide.
>
> Federal Reserve chairman Alan Greenspan has expressed skepticism. Argentine
> private sector enthusiasts and government economists say the idea is
> probably years away from fruition, even as they argue that replacing the
> peso with the dollar would lower interest rates and boost foreign trade and
> investment.
>
> But with only 10 months remaining in his term, Menem has made what he calls
> "dollarization" of the economy his top economic and diplomatic priority.
> Senior Argentine officials have begun informal talks with officials at the
> U.S. Treasury Department and Federal Reserve, and Deputy Treasury Secretary
> Lawrence H. Summers has encouraged the Argentines to make a formal treaty
> proposal.
>
> "Dollarization could be just a good idea that disappears in a few months
> because of politics," Miguel A. Kiguel, Argentina's undersecretary of
> finance, said in an interview. "Or, it could be a good idea that will
> generate its own positive momentum. My guess is Argentina could be a very
> important pilot case that would open the door to other countries, mostly in
> Latin America, to adopt the dollar."
>
> Today only Panama and Liberia, two tiny countries with long historical
> attachments to the United States, use the U.S. currency as their own.
> (Panama ran short of the greenbacks several years ago but generally it has
> had enough of them to go around.) And in no country in Latin America is the
> dollar exchanged anywhere nearly as freely as it is here.
>
> Argentine economists note that in technical terms, converting Argentina
> into a dollar economy would be no large feat. Under the 1991 convertibility
> scheme, all peso notes issued by the Argentine central bank are backed by
> dollar or gold reserves. In the last year, all government bonds, even those
> sold on local markets, have been denominated in dollars.
>
> Menem has asked his senior economic advisers to draw up plans to pay
> government employees in dollars and collect taxes in dollars, moves that
> would speed a transformation to a dollar economy.
>
> Argentines became attached to the dollar in the 1980s, when inflation
> galloped so fast that people converted their paychecks to dollars as fast
> as they could. Of the $5 billion in Argentine bank accounts in April 1991,
> when the peg was installed, nearly 40 percent were in dollars. The peg
> virtually ended capital flight, and Argentine bank accounts have grown to
> $78 billion, 57 percent of which are now held in dollar accounts.
>
> "Our people already can freely choose whether they deal in pesos or
> dollars," noted Sen. Domingo Cavallo, a former economy minister.
>
> But by publicly raising the issue of a future replacement of the peso with
> the dollar almost immediately after Brazil devalued the real six weeks ago,
> government officials said Menem was sending a powerful signal to the
> international investment community that Argentina had no intention of
> following Brazil's example. They said Menem would convert Argentina into a
> dollar economy by emergency decree should the peso come under a severe
> speculative attack.
>
> Menem's move succeeded in reducing the difference in interest rates between
> Argentine bonds and the lower rates on U.S. Treasury bills over the last
> month. And in another sign of renewed confidence, Argentine commercial bank
> accounts have accumulated funds since Menem first spoke of "dollarization."
>
> Argentine officials said they want to negotiate a treaty with the United
> States that would make the Federal Reserve the lender of last resort in
> case an Argentine bank should fail. They also want the U.S. government to
> compensate the loss Argentina would sustain of $750 million in yearly
> interest earned from the U.S. Treasury bills the Central Bank currently
> holds. That interest would be automatically lost once the Central Bank sold
> its dollar reserves to the public to take pesos out of circulation.
>
> To entice Clinton administration officials -- and eventually U.S. senators
> whose approval would be needed for any treaty negotiated -- Menem's
> advisers are drawing up a series of proposals. One would give the Federal
> Reserve a strong supervisory role over Argentine financial institutions.
> Another would guarantee that the Argentine government would control its
> fiscal and current account deficits. And a third would liberalize the
> Argentine private sector's ability to fire employees to make local
> businesses and products more competitive on international markets.
>
> "The Fed and the Treasury," Kiguel, the undersecretary of finance, said,
> "are taking an interest."
>
> Copyright 1999 The New York Times Company
>
> #################################################
>
> Date: Thu, 25 Feb 1999 13:09:58 -0600
> From: Erik Toren <etoren at stcc.cc.tx.us>
> Subject: Re: After Puerto Rico, statehood for Argentina and Brazil next?
>
> Hola A Todos:
>
> So scarily simple for the evergrowing presence and control of multinational
> corporations upon international communities. Still, though Mexico has not gone
> far down the road as Argentina, Panama, or Liberia, there have been rumbles of
> doing the same. At least in certain areas of the Texas-Mexico border (Reynosa,
> Nuevo Laredo, Matamoros, and Nuevo Progreso), the Dollar is used in
> transactions rather than the Peso. One extreme example is the tourist town of
> Nuevo Progreso, Tamaulipas where any visitor is assumed to be a U.S. tourist
> thus everything is advertized, sold and bought with Dollars. You will get an
> annoyed look if you ask how much in Pesos. In less extreme forms, Nuevo
> Laredo and Reynosa, Tamaulipas, in stores where tourists go, the Dollar is the
> monetary use. There also some instances where local landlords will ask for
> rent to be paid in US Dollars.
>
> erik toren
> way, way down South Texas yonder
>
> ###########################
>
> Date: Fri, 26 Feb 1999 From: "Alan Bradley" <alanb at elf.brisnet.org.au>
> Subject: Re: After Puerto Rico, statehood for Argentina and Brazil next?
>
> From: Louis Proyect
>
> " Buck Doesn't Stop: Now Argentina May Adopt it
> To entice Clinton administration officials -- and eventually U.S.
> senators whose approval would be needed for any treaty negotiated -- Menem's
> > advisers are drawing up a series of proposals. One would give the Federal
> > Reserve a strong supervisory role over Argentine financial institutions."
> (...).
>
> Naturally.
>
> Of course, Argentina could forget any delusions of being a sovereign state
> it may ever have held.
>
> It's funny, I was just reading an article on the history of Trotskyism in
> Argentina. One of the main lines of debate in the early days was whether
> or not there was a need for 'national liberation' in Argentina. Well, if
> this goes ahead, Argentina would just be a plain colony of the US.
>
> Maybe Argentina and Brazil should become US states? It would probably do
> wonders for US politics, and it would be better than this kind of
> dependence. And there's no US embassy in Washington....
>
> Alan Bradley
> alanb at elf.brisnet.org.au
>
>