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In 2022, a small majority of Colombian voters acted against their better judgment and allowed Petro to hold power. A large majority is now firmly opposed to his government. The question is whether the republic itself will withstand Petro's imminent constitutional onslaught.

Without moves to dollarize soon, a lasting return to the model of freedom which Milei was elected to restore will become out of reach.

Javier Milei's flagship campaign proposal was the full dollarization of Argentina's economy, together with the permanent closure of its central bank.

Although analysts speculate Maduro will not invade Guyana, there is no denying he has several strong reasons to do just that.

Today's election in Argentina can be seen as a referendum on the future of Latin America itself.

If Milei wins the election on Sunday, Argentina's dollarization can be a major step toward an enlarged, Latin American "dollar zone," which can spur extraordinary opportunities for wealth creation across the region.

The Economist misunderstands the most fundamental aspects of Milei's plan to dollarize Argentina and shut down its central bank.

If dollarization has been a regional anomaly hitherto, Argentina's official adoption of the dollar could be a hemispheric watershed. Could this explain why the anti‐​dollarization camp has become so vocal of late?

In this post, we attempt to refute some of the most salient myths about dollarization in Latin America.

Argentina's rising political star is a very different sort of politician.

Contrary to polling forecasts, neither side obtained the largest percentage of the vote in Sunday's mandatory presidential primaries. Instead, the overall winner—with 30 percent of the vote— was Javier Milei, a free‐​market economist who was first elected as a Congressman for a newly created party—Liberty Advances— in November of 2021.

Daniel Raisbeck


Any American who smoked pot in the 1970's likely came across Colombian marijuana. In 1979, in fact, Colombia was providing "roughly two‐​thirds of all the pot smoked" in the United States, according to Time Magazine. The industry certainly was illegal, but it also arose from an exemplary instance of bicultural exchange and bilateral trade. It was, after all, American Peace Corps volunteers who came across the legendary "Santa Marta Gold" strain on Colombia's Caribbean coast, thus kicking off the country's decade‐​long "marijuana bonanza."
The boom times for Colombian pot came to an end due to the onset of the War on Drugs—which President Nixon officially declared in 1971— and the rapid rise of indoor cannabis farming in the fifty states. Today, with nearly half of U.S. states having legalized recreational consumption, and with the end of federal prohibition perhaps in sight, is there any chance that Colombian cannabis can regain its former glory days—this time legally— in the American market? Much depends on if, when, and how federal prohibition is repealed, but also on Colombia's capacity to reform its own byzantine drug laws.
A law approved in 1986 (no. 30) defined any quantity up to 20 grams of marijuana as the "minimum dose" for personal consumption, and it applied a series of criminal charges for its possession. In 1994, however, Colombia's Constitutional Court ruled that no individual could be penalized for carrying said minimum dose. However, the law, which is still in effect, makes it a criminal offense to possess or carry a narcotic, "whatever its quantity, for the purpose of distribution or sale."
As I wrote in Foreign Policy, the minimum dose rule provides a good example of Colombia's trademark legalism: unless one grows cannabis oneself (more on which later), the only way to obtain a legal gram for personal consumption—or 20—is by buying it, illegally.
Eventually, local drug warriors would have their say. In 2009, former president Alvaro Uribe passed a Legislative Act (no. 2) which altered Article 49 of the constitution so as to prohibit "the possession and consumption of narcotic or psychotropic substances, unless prescribed by a medical doctor." The following year, Uribe's government introduced a bill (Law 248) that sought to regulate the legislative act and criminalize the minimum dose. The objective, professors Hernando Londoño and Adrian Restrepo argue, was to bolster the war against the drug cartels by targeting internal consumption. This latter initiative failed and the minimum dose was maintained. Nonetheless, by enshrining drug prohibition in the constitution, Uribe made any future reform of the country's drug laws extremely difficult.
In 2015, when the government of former president Juan Manuel Santos sought to legalize medical marijuana, it had to resort to a decree (2467) that expanded on Law 30 of 1986. The decree regulated cannabis production for "strictly medical or scientific purposes." While legalizing the medical use of marijuana was a step in the right direction, the local industry has been saddled by red tape.
For instance, physicians still are allowed to prescribe only manufactured cannabis‐​based products, not dry cannabis flower. Also, the use of CBD—a multibillion‐​dollar industry in the U.S.—is not allowed in Colombian food, beverages, supplements, or veterinary products. Since the local market has not been allowed to develop, local cannabis firms—including a few that raised funds in the U.S. and are even listed on the Nasdaq—are on the verge of bankruptcy. Potential investors, meanwhile, are eyeing other markets, and rightly so.
The black market, however, has thrived, not least because the 2015 decree allowed the "self‐​cultivation" of up to 20 cannabis plants for personal use without a license from the Health Ministry. Since each plant can produce around a kilo of marijuana, massive amounts of pot are grown legally, only to be transported and sold illegally. Which is to say, Colombian lawmakers have created the worst of all worlds for consumers and legal producers alike, this in spite of the industry's immense potential to generate profits, jobs, and tax revenues.
But Colombia's Congress now has a chance to unravel the marijuana muddle. A new Legislative Act, introduced by Representative Juan Carlos Losada, a member of the Liberal Party, seeks to insert an exception for adult, recreational cannabis consumption into Article 49 of the constitution. This would create a legal market to buy, sell, and distribute marijuana in Colombia. After being approved in seven debates in Congress, Losada's project faces one final hurdle in the Senate on Thursday, June 15.
Legislators should approve the measure. Colombian conservatives should keep in mind that extreme leftist Gustavo Petro, the current president, did not bring forth the initiative (despite his supposedly revolutionary stance against the drug war). Hence, supporting marijuana legalization does not involve supporting the government. Center‐​right politicians also should remember the words of the great Alvaro Gómez, the conservative leader who warned as early as 1976 that the war on drugs was doomed to failure.
Regulating marijuana use for adults, on the other hand, implies seizing the local market from violent, criminal gangs and leaving it in the hands of the legal, regulated businesses that can assure quality, safety, and transparency. Eventually, when the United States and other countries open their markets to cannabis products from other latitudes, Colombia can regain its standing as a global exporting powerhouse. Far more than foreign aid handouts, the country could use a legal marijuana bonanza.

Daniel Raisbeck


Less than a year ago, I wrote of the almost certain regret that awaited the prosperous, urban, multiple‐​degree‐​holding types who voted for Gustavo Petro, Colombia's Chavista president. They thought they had supported a Nordic‐​style social democrat—failing to notice that they had helped to elect a tropical socialist who, given his past as a guerrilla group member and Hugo Chávez supporter, was also a potential autocrat. Caveat emptor (or rather suffragator) indeed. But I never thought that voter's remorse would set in so quickly. Or so extremely.
According to poll data from June 1, 2023, only 26 percent of Colombian citizens approved of Petro's performance as president. And this was before the scandal that shook the country's political scene last Sunday evening, when Semana magazine released a series of WhatsApp audio files sent by Armando Benedetti, Petro's former ambassador in Caracas, to Laura Sarabia, the president's former chief of staff.
Among the least bombastic revelations is Benedetti's claim that Alfonso Prada, Petro's former interior minister, "stole the whole ministry with his wife." This implies massive levels of corruption around Petro, who came to power with an anti‐​corruption agenda (quite cynically given his disreputable political alliances). Prada proceeded to sue Benedetti for libel.
Petro's dwindling number of supporters may dismiss this as a politician's petty slander against a rival in the cabinet. Far more concerning for them—and for Petro—is Benedetti's matter‐​of‐​fact assertion to Sarabia that he himself obtained COP $15 billion (around USD $3.58 million at today's exchange rate) for Petro's 2022 presidential campaign, during which he served as the former candidate's right‐​hand‐​man and main political handler. Petro's campaign did not officially report any donation nearly as large. Its declared funds consisted mostly a series of bank loans, which were meant to be paid with the "reimbursement" sum that the Colombian state guarantees to candidates for each vote received in an election.
In many countries, an insider's admission of how millions of undeclared dollars flowed into the president's campaign coffers would bring down the government. Alas, Colombia is not one of them. This is not due to a lack of unashamedly corrupt presidents; as I wrote recently in The Wall Street Journal, the opposite has been the case. Rather, since the 1950's, the Colombian elite's idiosyncratic approach to presidential corruption has followed the maxim, attributed to journalist Hernando Santos (1922–1999), that the trouble with overthrowing a president is that he may fall upon those doing the toppling.
Already in Petro's case, the three‐​member House of Representatives commission created to investigate Benedetti's statements includes two members of the president's own party. The enquiry will be a charade, which is a pity since the source of the undeclared campaign money is as important as the sum itself. In an interview, Benedetti told Semana that the money "did not come from entrepreneurs," meaning the legal business community. Suspicion has fallen on the Marxist guerrilla groups and other drug trafficking organizations, but also on the Venezuelan regime of Nicolás Maduro. Anonymous, the hacker group, claims that Maduro financed "part of the campaign of the current president of Colombia," but has not published evidence hitherto.
What is certain is that, in regional terms, the Maduro regime has been the principal beneficiary of Petro's election. To begin with, Colombia recognized Maduro's presidency after a three‐​and‐​a‐​half‐​year hiatus, and Petro himself has met Maduro four times since his inauguration. His government, which opposes any future hydrocarbon exploration in Colombia despite dwindling reserves, has promoted the idea of importing Venezuelan natural gas.
While Petro wages a political war against Colombia's key petroleum industry—crude oil has been the country's main legal export for decades—he lobbied President Joe Biden to end American sanctions against the Maduro regime. This would imply renewed Venezuelan oil exports to the U.S. market (even if socialism devastated Venezuela's oil industry well beyond immediate or even medium term repair). Petro's "shoot yourself in the foot / prosper‐​thy‐​neighbor" policy is devoid of any rationality. Unless, of course, Colombia's increasingly authoritarian president is somehow subject to the Venezuelan tyrant.
Petro's eco‐​fanatical crusade against the hydrocarbon industry is but one example of how his government is bent on destroying the few areas of the Colombian economy that are functional. Other examples include his plans to put the state in charge of centralized funding for the healthcare and pension systems, both of which are efficient—although certainly not perfect—thanks to private sector involvement and some degree of consumer choice. Where things are already problematic, Petro's policies would make them worse. For instance, he wants to make a rigid, overregulated labor market even less flexible and more hostile to businesses.
Then there is the matter of rising insecurity, an old problem that, until recently, appeared mostly solved, only to resurface dangerously in the last year. Under Petro, illegal armed groups have expanded their power as they launch constant, deadly attacks against the armed forces and police. It all brings to mind the dark era of the late 1990's, when Colombia was on the verge of becoming a failed state as it came under siege from the FARC guerrillas, which are still up in arms despite the much‐​touted "peace" agreement of 2016.
Usually, a crisis in government breeds economic instability. Under Colombia's current government, however, the opposite has been the case. Since the Benedetti scandal broke, the peso rallied to reach its highest value against the dollar since mid‐​2022, when Petro was about to win the presidential election. In October, two months after he took office, the peso reached an all‐​time low against the dollar. Amid the current political turmoil, forward‐​looking markets are anticipating the failure of Petro's legislative initiatives in health care, pensions, and labor law. Which is to say, there is speculation that Colombia's institutional framework has already survived Petro's statist onslaught. The weaker his position, the thinking goes, the less likely it is that non‐​leftist parties will lend him their support, which he needs to obtain congressional majorities.
I fear, however, that markets may be getting ahead of themselves. The Colombian congress is minimally ideological and highly transactional. There is still a good chance that, issue by issue, Petro's government can negotiate just enough votes to have his "reforms" approved, in which case only the courts will stand in the way of his agenda.
Not that Petro is respectful of any check or balance. This week, he propounded the theory that, since he was elected, his government represents "the will of the people," meaning that any opposition to his political project—including from the news media—is part of an illegitimate, "soft coup." The onslaught, in other words, is far from over.
In my view, the worst part about Petro's election victory is that, at this time last year, Colombia was in need of radical reforms. Above all, a chronically sluggish economy required budget discipline, public spending cuts, drastic debt reduction, a strong currency (ideally through dollarization), far lower taxes, labor market deregulation, subsoil privatization, school choice, and an end to non‐​tariff barriers. By electing Petro, however, voters decided to do precisely the opposite on all fronts. As warned, most already regret it.

Daniel Raisbeck and Gabriela Calderon de Burgos


For the first time since 1991, Argentina suffers from annual inflation rates above 100 percent. As voters prepare to head to the polls on August 13, the date of the presidential primaries for all parties, a majority thinks—regardless of ideology— that inflation is the country's most pressing problem. Meanwhile, a significant minority—29 percent according to one poll— now considers that the best way to tackle inflation is to get rid of the Argentine peso altogether and adopt the U.S. dollar as the official currency. They are absolutely right.
As we explain in a new briefing paper out today, dollarization works because it deprives the local ruling class of all control over the national currency. This protects ordinary people's purchasing power from the excesses of chronically profligate politicians and often subservient—or simply incompetent—central bankers. Along with Peru, a semi‐​dollarized economy, Latin America's three fully dollarized countries—Panama, Ecuador, and El Salvador—have had the region's lowest inflation levels during the past 20 years (and much longer in the case of Panama). Unlike many countries in the region, the dollarized trio did not see double‐​digit inflation in the aftermath of the Covid‐​19 pandemic. Steve Hanke, a Johns Hopkins University economist, puts it well: dollarization is equivalent to instituting the rule of law in the monetary sphere.
Dollarization is often compared to the convertibility system that Argentina implemented in the 1990s, a monetary regime consisting of the Central Bank maintaining unlimited convertibility between its currency and that which it is pegged to at a fixed exchange rate. That system ultimately fell apart because it deviated from following orthodox rules. But because dollarization simply replaces a local currency with a foreign one, it does not depend on a promise from the political class to abide by a certain set of rules and it has proven much harder to undo. As we explain in our policy brief, this does not imply a country's surrender of its monetary policy to the United States:
"As economist Juan Luis Moreno‐​Villalaz argued in the Cato Journal in 1999, Panama's banks, which have been integrated to the global financial system after a series of liberalization measures in the 1970s, allocate their resources inside or outside the country without major restrictions, adjusting their liquidity according to the local demand for credit or money. Hence, changes in the money supply—which arise from the interplay between local factors and the specific conditions of global credit markets— and not the Federal Reserve, determine Panama's monetary policy. Fed policy affects Panama only to the same extent that it does the rest of the world".

In Argentina, opposition to dollarization comes from critics on both the left and the right. The former usually claim that adopting the dollar is a costly affront to national sovereignty (the cost pertaining to the loss of seigniorage). The latter tend to argue that local technocrats will be left without monetary tools with which to steer the national economy. Neither side has come to terms with the reasons why an overwhelming majority of Panamanians, Ecuadoreans, or Salvadoreans wouldn't dream of ditching the dollar in favor of weak national currencies. In fact, minimal inflation rates are but one benefit of dollarization. The others include far lower interest rates, longer loan periods, and an intrinsic hard budget constraint on governments and parliaments alike.
Despite such advantages, dollarization is certainly no guarantee of fiscal discipline or sustained economic growth, as the recent experience of both Ecuador and El Salvador can attest. Nonetheless, dollarization is worth it simply because it leaves politicians and bureaucrats unable to devalue a local currency or monetize the debt, thereby limiting the magnitude of the potential harm. During the 2010s, radical left‐​wing governments in both El Salvador and Ecuador were unable to get rid of the dollar despite their anti‐​dollarization rhetoric. The pros of dollarization may be difficult to grasp ex‐​ante; once it is instituted, however, dollarization's benefits in daily life are so palpable to a large majority that the greenback has become demagogue‐​proof in a region ripe with demagoguery.
The loss of seigniorage, it turns out, is an infinitesimal price to pay for the advantages of dollarization. Manuel Hinds, a former finance minister in El Salvador, likens giving up seigniorage to paying a small insurance premium for protection against the very high risks of maintaining a local currency. Nor is a lack of large dollar reserves an excuse not to dollarize.
In Ecuador, the mere announcement of dollarization in January of 2000 led to a massive increase in deposits in dollars previously held abroad or under mattresses. This was the case even though the beleaguered banks were offering negative interest rates.
As we discuss in our briefing paper, adopting the dollar can also help solve Argentina's serious problem with short‐​term liquidity notes, the debt of which is more than twice as large as the monetary base. This is yet another reason why Argentina's next government should dollarize, albeit taking seriously the technical challenges that dollarization presents.
The Argentinean peso no longer provides the basic functions of money. Argentineans already use the dollar as a unit of account and—if they can overcome multiple legal obstacles and afford significant transaction costs—as a store of value and a medium of exchange for important transactions. Dollarization would democratize the latter two essential functions of a sound currency.