Dollars for pesos? the politics of dollarization in Latin Amercia

Vol. 21 No. 1 (2001)

Jan-Mar / 2001
Published January 1, 2001

How to Cite

Starr, Pamela K. 2001. “Dollars for Pesos? The Politics of Dollarization in Latin Amercia”. Brazilian Journal of Political Economy 21 (1):65-81.

Dollars for pesos? the politics of dollarization in Latin Amercia

Pamela K. Starr
Instituto Tecnológico Autónomo de México – Departamento de Estudios Internacionales – ITAM, México, DF.
Brazilian Journal of Political Economy, Vol. 21 No. 1 (2001), Jan-Mar / 2001, Pages 65-81


The capacity of dollarization to generate stable growth in Latin America despite occasional instability in the international financial system has been the subject of significant economic analysis in recent years. Yet very little attention has been afforded to the politics of the issue. This paper attempts to fill this void by looking at both the political and the economic factors which influence the policy effectiveness of dollarization. The paper reviews the theoretic and policy debate within which the dollarization question is situated and then develops an informal model of the political and economic variables which influence the viability of dollarization. It concludes that although dollarization may be the correct policy choice for some Latin American countries, it is unlikely to benefit the majority. Most Latin American countries would benefit more from directly addressing the forces know to promote economic instability.

JEL Classification: F33; F31; O19.

Keywords: Dollarization monetary policy regimes