The Government Adopted The Convertibility Plan

On April 1, 1991, Argentina’s Congress, with Domingo Cavallo as Minister of Economy, enacted the Convertibility Law (or Ley de Convertibilidad) legally adopting the currency board (Hornbeck, 2002). This legislation essentially pegged the Argentinean peso to the U.S. dollar. The government guaranteed the convertibility of the peso to U.S. dollar at a one-to-one exchange rate, limiting the printing of pesos to only those necessary to purchase dollars in the foreign exchange market. Thus, the central bank was required by law to hold foreign reserves to cover its peso liabilities (Hanke and Schuler, 2002). With this fixed exchange rate, the Argentinean government was hoping to preserve the value of their currency and stabilize inflation. The peg was initially successful, as it cured hyperinflation that occurred at the end of the 1980s and provided price stability needed for economic growth in the early 1990s. However, by the late 1990s,

The impacts of globalisation have dramatically reduced Brazil’s rates of inflation in the past two decades. The inflation rate in Brazil averaged 390.85% from 1980 until 2014; however, the competitive pressure brought forth by globalisation as well as the associated increase in efficiency and output has served to keep inflation rates low in recent years. The current inflation rate is 6.59% in Consumer Price Index. However, Brazil’s reliance on FDI inflows has resulted in the elevation of inflation rates by 4.5% following the Argentinean Economic Crisis, which saw the depreciation of import prices.

There is perhaps no other political issue in our contemporary society that is more pertinent, pervasive, and encompassing than a nation’s economy. From the first coins used in Greece and the Asia Minor in the 7th century BCE, to the earliest uses of paper money, history has proven time and time again that the control of a region’s economy is absolutely crucial to maintaining social stability and prosperity. Yet, for over a century scholars have continued to speculate why the United States, one of the world’s strongest and most influential countries, has one of the most unstable economies. Although the causes of this economic instability can be attributed to multiple factors, nearly all economists agree that they have a common

The relationship between the United States of America and Latin America nations has been turbulent since the beginning of colonization. The United States had withheld a sense of superiority since its inception. Their view of Pan-Americanism is only shared by them; Canada and most Latin American nations do not share this view. They viewed Latin America’s struggle for independence as a necessity, but did not pledge their assistance until it coincided with American interests and objectives in the area. The author mentions Latin America’s one-crop economy, but they do not emphasize the role the US played in their economies or how much they were involved in their own politics. Recent events, in regards to Cuba, have made certain parts of the chapter

Dollar Diplomacy, moral imperialism, the Canal Zone in Panama, and Fourteen Points all relate to the historical theme of Work, Exchange, and Technology. Each of these terms relate to how innovations and government policies have shaped the economy. To begin with, Dollar Diplomacy is a title given to describe a policy distributed by President William Howard Taft that invested money

The culture and political structures of Panama as we know it today has evolved from an incredibly diverse and interesting history. Geographically, Panama lies on an isthmus, a strip of land that essentially connects the greater landmasses of North and South America. It is believed that volcanic activity in the late Pliocene era closed the former Central American Seaway that had separated the two continents. The climatic implications of this landform are incredible, allowing for the redistribution of oceanic currents and the formation of the Gulf Stream of the Atlantic of today.

In 1974 the decline of the west was already predictable and U.S president Nixon made a deal with Saudi Arabia. In return for buying oil in dollars, the U.S would guarantee military security and the petrodollar was born. This guaranteed a steady supply of income for the U.S, as the Federal Reserve is a conglomeration of private companies taking a percentage of every dollar used. Rivero’s fascinating insight into the how the dollar plays a key role in U.S foreign policy explains the reasons behind many U.S actions today.

At the start of the 19th century, just a few years prior to the end of the Spanish-American War, Latin America was left with a poor economy and in debt. The United States believed that they could help Latin America, while helping themselves out at the same time. The “Dollar Diplomacy” was introduced in 1904 by the United Sates and went into place in 1909. It was used mostly during presidency William Howard Taft’s from 1910 to 1913

One of the areas that suffered the most was Central America. The key close location to the US territory, its politic-economic weakness, and the financial relevance of the Panama Canal and companies such as the United Fruit Company forced some administrations to put special emphasis in foreign relations at the isthmus. Local elites, military groups, and the conservative wing of the church enjoyed the additional attention and aimed for support from the US to maintain the status quo.

The situation in Panama in 1989 had been the result of a vacillating sense of national pride at odds with an eighty year old American imperialist presence. Panama had been the bearer of imperialist tensions since the turn of the century solely because of its strategic location and possible economic advantages that such a location would yield. Panama is a country that occupies the isthmus dividing North and South America. With its passage way saving sea-farers 5,000 miles of additional sailing around the tip of Tierra del Fuego, it is no wonder that Panama had been so highly sought out, and so strictly guarded.

Panama is an isthmus or a land bridge in Central America that links North America to South America. The Atlantic Ocean (this includes the Caribbean Sea) lies north of the country while the Pacific Ocean is to the south. Panama borders the Republic of Columbia to the east and the Republic of Costa Rica to the west. (See Figure 1 in Appendix: Map of Panama). Approximately, 3.86 million people live in this country and 1 million live in its capital Panama City. Major cities to consider entering the business market are: Panama City (its largest city and capital) on the pacific side and Colon, located on the Atlantic side, is the second largest free zone in the world, “which has become a vital trading and transshipment center serving the region

With the economy constantly changing, we are starting to see drastic changes in our dollar. A countries currency determines their strength in the market and their inflation rate. With a higher inflation rate, they are able to buy more and do more for a cheaper price. To help us better understand the difference between the weak dollar and the strong dollar, we will go in depth with both weak and strong dollars and its advantages and disadvantages, the currency monitor, the causes of the weak and strong dollar, and how it fluctuates and affects operations.

Galeano portrays this moment in Latin American history as the instant U.S investors took control over the industries. He details the dangers they went through when producing one item to export for the benefit of foreigners, and how they later imported the processed goods from those same foreign countries, injecting money only overseas. The fact that Latin America needed imports to survive initiated the imperial link the U.S has upon it. As stated by Galeano, “The growing dependence on foreign supplies produces the growing identification of the interest of U.S. capitalists operating in Latin America with U.S. national security”11, bluntly showing the relationship between the United States and Latin America. “With petroleum, as with coffee or meat, rich countries profit more from the work of consuming it than do poor countries from the work of producing it”12. Because profit was not being retained in the Latin American countries, nationalization of the industries became of importance. The United States offered intervention in order to protect everyone’s interests with the proposal of free trade, but this was no more than another manipulation to continue having power over Latin America and its resources: “Latin America’s big ports, through which the wealth of its soil and subsoil passed en route to distant centers of power, were being built as instruments of the conquest and domination of the countries to which they belonged, and as conduits

Such a process can be very time consuming and imprecise, without, of course, having a market currency price to begin with. The exchange-rate system is an important topic in international economic policy. Policymakers and journalists often seem to treat the choice of exchange-rate system as one of the most important economic policy choices that a national government makes, on a par with free international trade. Under most circumstances and for most countries, a system of freely floating exchange rates is likely to be a better choice than attempting to peg the exchange rate.

dollar. In dollarization, the country abolishes its own currency and uses a foreign currency, such as the U.S. dollar, for all domestic transactions. 6. Emerging market exchange rate regimes. High capital mobility is forcing emerging market nations to choose between free-floating regimes and currency board or dollarization regimes. What are the main outcomes of each of these regimes from the perspective of emerging market nations? There is no doubt that for many emerging markets a currency board, dollarization, and freely-floating exchange rate regimes are all extremes. In fact, many experts feel that the global financial marketplace will drive more and more emerging market nations towards one of these extremes. As illustrated by Exhibit 2.5, there is a distinct lack of “middle ground” left between rigidly fixed and freely floating. In anecdotal support of this argument, a poll of the general population in Mexico in 1999 indicated that 9 out of 10 people would prefer dollarization over a floating-rate peso. Clearly, there are many in the emerging markets of the world who have little faith in their leadership and institutions to implement an effective exchange rate policy.