March 8, 2000
The president of the Federal Reserve Bank in Dallas said Tuesday he favored Latin America adopting the US dollar as their own currency. "On an entirely personal basis, I am in favor of dollarization," Robert McTeer told reporters shortly before finishing two days of talks on the subject at the bank's headquarters here.
Proponents of replacing the national regional currencies with the US dollar, a process dubbed "dollarization," say it can put developing economies on a fast track toward stability and economic growth. Detractors, however, say that dollarization is a false remedy that attacks the symptoms, but not the root of economic problems.
McTeer, who is a member of the Fed's Open Market Committee which formulates the US banking policies, said a Fed department's studies on the issue recommended dollarization. However, he noted that the committee has taken no official position on subject, passing responsibility over to the US Treasury.
McTeer said his support of dollarization in these emerging economies, especially in Latin America, was contingent on a process that did not impose greater financial or other responsibilities on the Fed.
The global financial crisis that touched off in Asia in 1997 slammed Brazil's economy and forced Argentina to consider a dollarization plan.
Former Argentine president Carlos Menem, who also attended the two-day conference here, defended greater dollarization, saying that it did not equate to a loss of sovereignty for the countries. "Sovereignty would be strengthened (under dollarization) with a solid economy and better quality of living conditions" for the country, Menem said, rejecting an argument by a California economist that such a move could have profound psychological effects on a country.
An attempt to dollarize Ecuador's economy resulted in the ouster of its president Jamil Mahuad in January. His successor, Gustavo Noboa, is nevertheless pushing forward with the plan.
