The concept of dollarization has been a hot topic of debate in Argentina’s presidential campaign, with many looking to the past for insights and inspiration.

Amidst this fervent discussion, the name of Jamil Mahuad*, the former president of Ecuador, resurfaced as a key figure in the history of dollarization in South America. Mahuad’s unique experience of overseeing the dollarization of Ecuador’s economy has garnered significant attention, prompting his recent interview with the Buenos Aires newspaper La Nación to discuss the proposal put forth by Javier Milei, the libertarian candidate representing the La Libertad Avanza movement.

With the current state of Argentina’s political landscape, where the possibility of adopting the U.S. dollar as the national currency is being fervently debated, Mahuad revealed that he had been contacted by individuals associated with La Libertad Avanza, a movement supporting Milei’s libertarian agenda. Specifically, economist Emilio Ocampo, a staunch advocate of dollarization, reached out to Mahuad, even collaborating with one of Mahuad’s former finance ministers for several months. Though Mahuad did not divulge the minister’s name, it is widely believed to be Alfredo Arizaga González, who played a pivotal role in the decision to dollarize Ecuador’s economy during the final stretch of Mahuad’s presidency.

Argentina’s situation is unique

During his interview, Mahuad took the opportunity to highlight the historical differences between the contexts of Argentina in 2023 and Ecuador at the end of 1999. He emphasized that, in Ecuador, dollarization was not a central theme of the electoral campaign, unlike the current situation in Argentina. Additionally, Ecuador had already operated under a bi-monetary system, and the U.S. dollar was in free circulation, characterized by a single exchange rate, in contrast to Argentina’s complex multi-tiered exchange rate system.

Mahuad also fondly reminisced about the pivotal role played by Domingo Cavallo, the former Argentine Economy Minister, in the Ecuadorian dollarization process. He acknowledged that no country in the world had undertaken dollarization on the scale Ecuador did before, with the closest comparison being Argentina’s convertibility scheme, which Cavallo had implemented during his tenure as Minister of Finance. Mahuad expressed his gratitude for Cavallo’s assistance, noting that without the Argentine experience and expertise, Ecuador’s dollarization process might have encountered far more significant challenges.

When discussing the path Argentina should take if it decides to embark on dollarization, Mahuad was cautious in his recommendations. He stressed the importance of conducting a thorough assessment of the country’s Central Bank reserves, the appropriate exchange rate at which to dollarize, the potential effects on the financial system, and the well-being of the populace. Mahuad emphasized the necessity of a comprehensive national consensus to sustain such a significant public policy shift effectively.

Despite not considering himself a dollarization guru, Mahuad expressed a genuine willingness to assist Javier Milei and Argentina in their pursuit of dollarization. In a heartfelt statement, Mahuad made it clear that he still considered Argentina’s help almost 25 years ago to be instrumental in Ecuador’s financial success today.

“If I can repay the help in some way in what we did, I would love it. It’s like paying off an old debt.”

* In May 2014, Ecuador’s National Court of Justice handed down a 12-year prison sentence to Mr. Mahuad on charges related to embezzlement. The former president of Ecuador has resided in exile in Boston since the year 2000, and currently serves as a Senior Advisor at CMI International Group, located in Cambridge, Massachusetts. He also teaches as Executive Education Faculty on Leadership and Negotiation at Harvard Kennedy School.