Download Sheila Blair and Nina Smilow

Sheila Blair and Nina Smilow
The Calhoun School
Economic and Financial Committee
Devaluation of Currency
Bolivia
Currency devaluations in countries with a weak or developing economy is bad for
the economy. As imports become more expensive and exports cheaper, a country slowly
slips into a trade deficit. Bolivia believes that devaluation means inflation. Devaluation
only favors those who are very rich, and who have the majority of their capital in banks
overseas, and those foreign companies who trade/do business with the country (that
devaluated the currency).
Bolivia joins in the idea to create a new regional financial system based on the
Bank of the South, the Bank that will finance programs in South America to support our
economic and social development.
The vertiginous fall of the dollar is a worrisome factor. It happens that the worldwide economy but mainly the one of the impoverished countries, still centers around the
American currency. International trade, credits, payments, savings, all transactions,
everything is handled in dollars.
It is known that at the end of World War II the US was in control of the worldwide economy. The World Bank and the International Monetary Fund were created as
financial organisms of the United Nations, although in fact they were under the directions
of US interests. But those interests are not ours. Bolivia believes the problem of currency
devaluations in less developed countries will disappear if we get rid of the hegemony of
the dollar. The current devaluation of the dollar has only negatively affected our
economies. It is unquestionable that our wealth is measured according to the value of
what we produce. On that aspect, our government has made considerable progress, and
all our economic indexes are positive. However, those indices are expressed in dollars,
because the reserves stay in that currency. Therefore, the products that we acquired cost
more and the products that we sell cost less. The neo-liberalist economic policies
impressed upon us by Washington have done nothing to sustain growth and prosperity in
our country, therefore, we propose new ideas in order to deal with the economic issues
which plague Bolivia.
Furthermore: our reserves run the risk of being reduced as quickly as the dollar.
Consequently, it seemed logical that we make changes and, for example, instead of
dealing in dollars, we do it in euros (they are more stable) or we return to the gold as a
standard. It sounds simple, but the financial authorities say that it is not so easy.
We propose that the World Bank assumes a monetary unit of unalterable value. All the
currencies of the world will have to refer to that unit, and as a result transactions would
be stable.
Another possibility is that the countries of Latin America define a common
currency with which to negotiate with the rest of the world. Meanwhile, because there is
no an immediate solution, countries thinking about devaluating their currency should
increase substantially their reserves of gold and establish, through international treaties,
formulas to maintain the true value of their resources. Overseas holdings or investments
by public firms should be liquidated and the revenues reinvested in upgrading national
productive infrastructure and processing industries. Excessive foreign reserves should be
downsized and put to work in diversifying the economy. Reserves should be held in
diverse currencies and should not be deposited in overseas banks, where an imperial
adversary could hold the funds hostage.