MercoPress. South Atlantic News Agency

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Nobel Prize favors a "flexible exchange rate"

The winner of the shared 2001 Economics Nobel Prize and former US president Bill Clinton administration advisor, Joseph Stiglitz said that the current Argentine crisis with a fixed exchange rate pegged to the US dollar, is evidence of an International Monetary Fund, IMF, misjudgment.

Mr. Stigligtz added he favored a flexible exchange rate and stated he was contrary to a "dollarization" of the Argentine economy, one of the several options under consideration to overcome Argentina's current 40 months recession and 130 billion US dollars sovereign debt.

Talking with Buenos Aires daily, "La Nación", Mr. Stiglitz admitted that the so called "Washington consensus", cornerstone of IMF's policies in developing markets to promote free trade and liberalise markets, lacked a "solid intellectual foundation".

"In Argentina, IMF concentrated efforts in inflation, and forgot other issues such as unemployment and other problems related to the real economy", underlined Columbia University Professor Stiglitz, adding that a fixed exchange rate of one US dollar to one Argentine peso, is not feasible when the country "trades mainly with partners whose currencies widely fluctuate against the US dollar".

Professor Stiglitz indicated that a "strong dollar means a strong peso and that is why Argentina is unable to export to Brazil, and I would describe this as one of IMF's main misjudgments regarding Argentina".

The Nobel prize also stressed that changing the Argentine peso for the US dollar "won't help much since Argentina's trade partners are not directly tied to the American currency".

Further on Professor Stiglitz considered Argentina's situation extremely difficult, but "if everybody believes the country will recover, interest rates will begin to drop, the economy will stabilize and even with export problems, a turn around is possible".

Professor Stiglitz, who is a critic of free market policies regarding poverty in developing countries, was honored for a paper describing the influence of unfair information distribution in financial markets.

Chile promotes local tourism

Chile's National Tourism Service, Sernatur, will promote the country as a