The Peso and the Euro, a Purposeful Comparison

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When the Argentinean peso was pegged to the US dollar in 1991, it seemed a good option to force monetary discipline to their otherwise indomitable Government.

Unfortunately, during the 10 years of their Currency Board, some prices’ inflexibility, mainly wages, and other relative price changes like the commodities prices plummeting in the external market, the foreign capital afflux to the privatization program and the euro devaluation against the US dollar (E.U. is Argentina’s main commercial partner) turned the Argentinean products less competitive in the international market.

To regain competitiveness main institutional changes should have been made, but they were not. The institutional changes would have required political support and they did not get it.

The Government was forced to use reserves in hard currency to pay for its expenditures, with the currency board not backed for reserves the investors lost confidence and what followed is history now.

The euro, the new European currency, was introduced in 1999 and since then exchange rates among Euro zone participants (the 12 countries that adopted the euro as a single currency) have remained unchanged.
At the beginning of 2001, all the currencies in the Euro zone were replaced by the euro. And what is now? The circumstances of those countries from now on are almost the same as what Argentina

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