Abstract

Technical discussions of stabilization alternatives for Brazil have recently focused
on the utilization of the exchange-rate as a nominal anchor and measures that involve
a degree of dollarization of the economy. The latter would imply official sanction for the increasing
substitution of foreign for national currency, a kind of decision that the experience
of several Latin American countries has shown to be extremely difficult to reverse. Moreover,
exchange-rate based stabilizations have often unleashed balance of payments crises. This
paper reviews Argentina’s recent stabilization program and some of the lessons it may hold
for Brazil. It argues that the Argentinian approach, as well as some of its variations, cannot
be applied successfully in Brazil.

JEL Classification: E31; F31.