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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.