Interview with Marcos Falcone
On dollarization, Venezuela, and Borges the anarchist
Marcos Falcone is an Argentine political scientist and writer based in Washington, D.C. He looks at Latin America through an Austrian lens, analyzing free-market ideas across the continent for the Cato Institute and teaching at Universidad del CEMA in Buenos Aires. By the end of our conversation, I was wondering if Borges would support dollarization in Argentina.
You mentioned Argentina, and how the Argentine central bank is politicized — for many Argentine analysts and intellectuals, it’s a weak point of the Republic. Could you give me a broad survey of central bankers across Latin America? How well are they fulfilling their role, and where do they fall on the spectrum that runs from Argentina on one end to Peru on the other?
Marcos Falcone: There is a clear divide across Latin America. On one side you have Peru under Velarde and Chile, with central banks that combine operational independence, credible frameworks, and solid reserves. On the other you have Argentina’s central bank, which, as I was saying, has been a fiscal appendix for most of its history; Bolivia’s, which until recently was much the same; and Venezuela’s, which in recent years has ceased to function as anything other than a printing press.
The overall trend is concerning, because political pressure on central bank independence is a real risk across the region. In Mexico, for instance, the Banco de México has maintained its formal independence, but the Morena governments — first López Obrador, now Sheinbaum — have repeatedly signaled their displeasure with tight money. Brazil is another case: Lula attacked Roberto Campos Neto, the central bank president until 2024, and attacks of that kind send a poor signal to current central bankers across the region.
In some cases, I believe the solution is not better central bankers but removing discretion altogether — and here I am thinking of Argentina and Venezuela. In those countries, dollarization could be a durable alternative to recurring vulnerabilities, as Ecuador shows. Ecuador dollarized its economy because it understood that any promise to change course on its own would not be credible, and the results have been impressive over the past quarter of a century.
Do you think Venezuela should consider dollarization?
Yes, I think Venezuela should definitely consider dollarization — and I’d argue that the de facto dollarization of Venezuela is an underappreciated story. After the hyperinflation that the Maduro regime caused in the 2010s and early 2020s, the only way out for Maduro was to allow informal dollarization. If you walk into a supermarket in Caracas now, you’ll find prices listed not in bolívares but in something called the “ref” — the reference price for one dollar. Because it is forbidden to talk about dollars, and some transactions cannot legally be conducted in them, people use dollars informally as a way to protect the value of their savings. Dollarization has been the way out of chaos for the Maduro regime itself.
Whatever ends up happening with Venezuela — and we can come back to that later — the country will face an enormous credibility problem, both with Venezuelans themselves and with foreign investors, about how to ensure that Chavismo, the dictatorship, and the economic collapse do not happen again. They could of course try to rebuild confidence in the bolívar, but recent history shows that people do not want that. People want the dollar. And if they want the dollar, then the government should consider dollarizing the economy formally.
Are the experience of the Plano Real, and the Bolivian fight against inflation from 1985, important reference points for Argentine economists — or not really?
I’ve seen people in Argentina refer to the Plano Real of the 1990s as a way the country could rebuild trust in its currency, because Brazil faced much the same problem about thirty years ago that Argentina faces now. Brazil is certainly a country Argentine economists pay attention to, since the trade relationship between the two is significant — even if, culturally, there are real differences, and the mutual understanding between Argentina and Brazil is not as close as it can be between Argentina and Uruguay. But yes, for those who want to save the peso, the Plano Real is certainly a model to follow.
Why do you support dollarization in Argentina?
I think the case is even stronger now than it was when Milei first ran on it. Dollarization would deliver something Argentina has consistently failed to produce: credibility — a credible, irrevocable commitment that the government cannot inflate. The costs typically invoked against it — the loss of seigniorage, the transition problem — are trivial compared to the benefits.
Argentina has had de facto dollarization across large parts of its economy for decades. If you ever ask an Argentine what currency they save in, they will say dollars without hesitation. So the question isn’t whether Argentines use dollars — they already do. The question is whether the state gets to keep violating private property by extracting seigniorage through the peso, while everyone is trying to get out of it. Milei’s sequencing of reforms so far is understandable — fiscal consolidation first, then a gradual loosening of capital controls. But the risk is that without dollarization as a binding commitment across time, the next government will reverse Milei’s monetary gains, along with the rest of his reforms.
Argentina’s problem, again, is not one bad central bank governor. It is a century of using the central bank as a fiscal instrument, and changing that requires a deep institutional commitment, not just a temporarily more responsible policy. Ultimately, as a libertarian, I believe the goal should be free competition between currencies, not simply replacing the peso with another government’s fiat money. But the truth is that dollarization is part of the spontaneous order in Argentina. It is the second-best solution that eliminates the worst abuses, and it could propel the country into rapid economic growth.
Ecuador is a good example of how dollarization can protect people’s savings even under a bad government. Ecuador went through about ten years of Chávez-style “socialism of the 21st century” under Rafael Correa, who did a great deal of damage — but throughout his terms, one thing remained more popular than he was: the dollar. He was unable to de-dollarize the Ecuadorian economy, and that allowed people to protect their holdings, their wages, and the value of what they had. That is a good thing. I obviously don’t want Peronism in Argentina to come back, but if they do, dollarization is a powerful hedge against them — which is why I believe Argentina should still consider it, despite Milei’s progress so far.
In one of your articles, you argue that Peronism is the main culprit behind Argentina’s long economic decline. But famously — especially for outsiders, people from Europe or the US — Peronism is a somewhat vague term, one whose content has shifted over time. What is Peronism?
I argued in a recent article in The Independent Review that Peronism is Argentina’s variant of fascism. I use that word analytically, not as an insult. Applying a specific typology developed by Stanley Payne, who studied fascism a few decades ago, Peronism satisfies every defining criterion: in its negations — anti-liberal, anti-communist, anti-conservative — but also in the way it organizes itself, through the cult of personality, mass mobilization, and the use of political violence, and in its positive ideology, whose core is the corporatist organization that the state defends, along with the nationalism it pursues. Perón himself trained in Italy under Mussolini, and he admired him; he said so in the letters he sent home from Italy in the late 1930s. The ideological source for Perón was clearly Mussolini.
What makes Argentina’s case unique, in my view, is that Peronism survived its founder — which is not what happened in Italy or Spain. Peronism outlasted Perón’s exile, his return, and his death. The Peronist party today still retains, to my mind, the same ideology, the same symbols, and the same organizational style as it did in 1946. That is historically extraordinary. You don’t find it anywhere else in the world.
The second step in my argument is to draw out the economic consequences, which I believe follow directly from this persistence. Peronism created a system of concentrated benefits — for monopoly unions, protected industries, and political machines — at a diffuse cost to everyone else. The beneficiaries are organized and vocal; the losers are dispersed and silent. Every attempt at reform runs into the same wall, again and again. The central question for Argentina today is whether Milei can finally break this equilibrium — what Minister Sturzenegger calls Argentina’s Bermuda Triangle. My cautious answer is yes: structurally, it can be done, but only if the institutional changes are deep enough that the next Peronist government — which is inevitable, because Peronism remains popular in Argentina — cannot simply reverse them. That is why I emphasize deep reforms rather than provisional policy changes.
You mentioned that you had a conversation with Sturzenegger recently. In your view, why hasn’t Argentina dollarized already?
I think the Milei administration is trying to stabilize Argentina’s economy while retaining the ability to conduct monetary policy — which, for most countries, is a sensible approach. Many countries have managed to tame inflation and stabilize their economies through a combination of fiscal and monetary policy, and that could be a good idea here too, if Peronism were out of the question — if Argentina had a responsible opposition that did not promise unbalanced budgets and did not promise to conjure money out of thin air. But that is not the case, which is why I believe the Milei administration should dollarize.
A monetary policy consistent with Milei’s fiscal policy can hold as long as Milei is in office, but he will not be in office forever. That is the reason I advocate for dollarization. I think the administration is perhaps too optimistic that the reforms it is implementing will outlast it. I am not so sure. In that regard I am more conservative, if you will. I believe there is a real risk — a real danger — that Peronism comes back and tries to undo all the gains the Milei administration has achieved over the past three years. That is why I want dollarization.
Do you think that dollarization is still on the table or not?
Dollarization is under-discussed in Argentina right now. We are trying to foster a conversation on it — not just for Argentina, but also for Venezuela — because we believe the benefits of dollarization are underappreciated in both countries.
That was quite a diplomatic answer. In one of your pieces, you also argued that Argentina and other countries should leave Mercosur — that Mercosur is a kind of corset, a system of constraints imposed on Latin American countries. Why is that?
Mercosur is a corset, and not just for Argentina. The bloc was originally intended to evolve into a free trade area open to the rest of the world, but it was designed as a managed-trade arrangement with a common external tariff that has, in effect, kept consumer goods expensive, shielded inefficient industries, and blocked member states from negotiating bilateral agreements with third parties. That last constraint is the most damaging.
Argentina is the clearest case today. The country is undergoing a serious market-oriented reform, trying to eliminate distortions across the board, yet it cannot eliminate or reduce many tariffs as much as it would like, because Mercosur rules prevent it from unilaterally opening its economy. Mercosur is one of the more protectionist blocs in the world, and it prevents exactly that kind of unilateral opening.
The EU–Mercosur deal will certainly help open the bloc up, but it will not solve the core problem, which is that Mercosur’s internal logic prioritizes managed outcomes over open competition. Brazil’s industrial lobby in particular has been able to block any real opening for decades, because it is the chief beneficiary of the bloc’s relative closure: Brazilian firms can export to Argentina, Paraguay, and Uruguay with artificial advantages. There is no reason to believe that Brazil, which benefits the most from Mercosur as it stands, would want to turn it into a free trade area open to the rest of the world.
So I believe the case for dismantling Mercosur — at least in the long term — remains strong, if members cannot exit the common external tariff. The best realistic outcome would be a free trade area without a common external tariff, but that is not going to happen, because Brazil does not want it to. And Brazil is by far the largest economy in the bloc. So, yes — I still believe Mercosur is, overall, bad for Argentina’s economy. It is better than it was a year ago, but it is still a bad thing.
You mentioned Brazil again, and I’d like to pivot in that direction. Tell me whether my mental model of Brazil is right or not. My reading is that it doesn’t really matter whether the leader is Bolsonaro or Lula — Brazil has, in its DNA, a drive toward strategic autonomy, and no matter the political reshuffling, it will retain its position as a geopolitical swing state. Is that a correct reading, more or less? What is your take?
Yes, I would say Brazil has pursued strategic non-alignment as a matter of foreign policy for as long as we can remember. I do think both Lula and Bolsonaro have been more ideological about it implicitly, but the instinct to position Brazil as a bridge — between North and South, between the West and the BRICS — is genuinely bipartisan, simply because of the sheer size of Brazil’s economy.
The question is whether that is sustainable in a world where US–China competition continues to intensify. Non-alignment worked when the great powers weren’t actively demanding that countries pick sides, but that is changing. Brazil’s deepening trade and investment ties with China, combined with its formal alliance structures and military training relationships with the US, create a tension that will become harder to manage. Economically, China has clearly become Brazil’s largest trading partner. Lula knows this. Any position that seriously threatens that relationship will face opposition from agribusiness and the extractive sector, so I think Brazil will try to preserve it.
In the Western Hemisphere specifically, Lula has been quite ideological with respect to Venezuela, Cuba, Nicaragua, and authoritarian regimes in the region more broadly. His refusal to call Maduro a dictator is a perfect example. That may preserve diplomatic relationships, which might well be Brazil’s goal, but at some point it comes at the cost of moral clarity and credibility — and it is an ideological choice.
You’re talking about ideological choices. At the level of declarations, we see that Milei is quite close to Donald Trump and the current US administration, but on the other hand there are significant trade and investment ties with China — infrastructure and other areas as well. Do you think the current US administration’s sustained focus on the region will result in a rollback of Chinese influence there, or is that not going to happen?
I’m not sure it will. All of Latin America faces the same basic issue: China’s trade and investment footprint has grown steadily over the years, while US economic influence has receded. So if the US comes back to the Western Hemisphere and demands that countries pick sides, it will have to offer something that replaces what China currently provides to the region — money, through trade, through investment, through currency swaps like the one with Argentina’s central bank. The reason no one wants to break with China is that China’s importance has grown; its relevance to Latin American economies is real.
That said, if Trump insists on US primacy in the Western Hemisphere, Chinese influence may roll back somewhat. But that will depend on what the US actually has to offer. If what the US offers is tariffs, there is no way Chinese influence will recede — it makes little sense to deepen ties with a country that is trying to sever ties with you.
You’re in Washington — maybe you can give me a sense of the climate of opinion there. Is there any appetite, any intention, to implement a more activist American policy along the lines you mentioned: more involvement in investment in Latin America, more swap lines, that sort of thing?
I think so far it has been more about rhetoric than anything else. The US came to Milei’s help last year, for example, even though in practice it didn’t have to do much — it only had to stand by him, essentially, so that markets would believe in him. Then of course you have Maduro’s removal from power, but that was a very swift, very contained operation. The US does not want to be militarily involved in Latin America, and in Venezuela in particular.
What the Trump administration is after, I think, are quick results at low cost. That explains two phenomena that look very different on the surface — Maduro’s removal and the support Milei received last year — but that have something in common: both were low-cost ways of achieving a US foreign policy goal. Two goals, in fact: the removal of a dictator and the support of an ally. Beyond that, there is a rhetoric that the US should prevail in the Western Hemisphere — its backyard — but I don’t see any real steps being taken to make that happen in the way it did in the past.
On the transition in Venezuela: in Poland, when we moved from socialism to capitalism, we had a reformer named Leszek Balcerowicz, who developed the concept of “extraordinary politics” — the idea that a certain window for reform opens, and that you have to use it wisely and quickly. I have the same view of Venezuela. After Maduro’s removal, there was a collective feeling that could have sustained the reforms that should have been implemented. This week I read an article in the Miami Herald in which, for the first time since Maduro’s removal, optimism about Venezuela really seemed to deflate. So I wanted to ask you about this. How much time does Venezuela still have to reform? And what should the sequencing be — democracy first and then economic reforms, or the other way around?
My take is that the regime will not leave voluntarily. You see this with Delcy Rodríguez, with the colectivos, with the military high command, with the intelligence services — they all have too much to lose. They have every incentive to hold on by whatever means are available, and Trump is helping them do so. I don’t think the Venezuelan people will stay silent for long, though. A genuine transition could still come from a crack within the regime, because not everyone there thinks the same way. They may have an incentive to hold on, but they may also come to believe that some figures within the administration are likely to betray others. And you can expect sustained opposition mobilization if elections are not held soon. That, I think, is what should come first, because the regime has to go.
Venezuelans are overwhelmingly opposed to the regime. The fact that it has a new head does not change that. If President Trump believes he has the Venezuelan situation under control, I think he is mistaken even in the short term, because opening up to some oil companies will not silence Venezuelans, and it will not even have the intended economic effect of improving the economy. As long as there is so much uncertainty about the future, foreign investment — and local investment, for that matter — will be extremely limited.
In that regard, María Corina Machado is clearly the right person to lead Venezuela through this change. She is not only a proven leader with real popular support — you have seen this in elections, you have seen it in polls — but a genuine classical liberal who understands the need to introduce free markets, restore the rule of law, and dismantle the oil-state monopoly that has caused Venezuela’s downfall. I don’t think María Corina will stay silent for long. I can assure you of that. So things may seem quiet in Venezuela right now, but I don’t think they will remain so for long.
What would you say to someone who argued that pushing for elections now would trigger political volatility that could undermine any effort at economic reform in the short to medium term — that the current US administration should instead press and constrain Delcy Rodríguez’s government into implementing reforms first, while the situation is relatively stable? What would you say to that?
I would say two things. First, the economic improvement of Venezuela cannot come first, and it will not come first — because as long as the regime is in power and is hated by everyone, there is no credibility, and there cannot be any significant improvement or any meaningful investment in that scenario. Second, you have to weigh on the other side of the scale the growing unrest of Venezuelans if elections are not held.
If elections are held, yes, you may have a problem: the regime would be forced out, and the regime does not want to leave. You might see negotiations with figures trying to find an exit that spares them from facing the judiciary for the crimes they have committed. You might see clashes with colectivos. But if elections are not held, and people continue living under a dictatorship they despise, then what? What happens to those people? Are they simply going to stay silent? I don’t think so.
There is another element worth considering. So far, the regime has somewhat relaxed its authoritarian practices, but they have not disappeared. There are still hundreds of political prisoners in Venezuela. People are still under heavy pressure when it comes to expressing their views freely. The intelligence services are still out and about. That is violence being inflicted on Venezuelans right now — so why would that violence be preferable to whatever violence might arise from an election? I do not see why we should prefer one over the other. I believe the regime has to go, that nearly all Venezuelans want it gone, and I hope that will happen soon.
Do you think a pro-growth, pro-capitalist tide is possible in Latin America? We have Milei, we have Kast, and we will have others soon…
There are promising signals, but I think it is too early to call it a tide. Milei in Argentina is certainly the most dramatic case. He is a genuine libertarian, and he is trying to implement structural reforms that go beyond anything else seen in the region in decades. Chile under Kast promises to be more market-friendly than any recent president there. We also have some smaller economies: Paraguay has maintained a comparatively stable, low-tax environment, and Bolivia is trying to come back from two decades of socialist devastation, though it will not be easy. Neither of those administrations is libertarian — they are moderate, not left-wing, if you will.
But the left is far from finished. Mexico has an increasingly authoritarian left-populist government, which is not just bad for business but also very bad for civil liberties and democracy. Mexico’s story is understudied. Current political and economic developments there are not being reported as widely as they should be, and they are deeply worrying. Colombia and Brazil are also still very much in the hands of leftist governments that are not promoting pro-growth policies, and that occasionally show worrying authoritarian tendencies1.
So I would not say there is already a pro-capitalist tide in Latin America. What could get us closer to one is economic results — that is the structural driver of any genuine libertarian tide. If Milei delivers sustained growth, falling inflation, declining poverty, and stability, that could transform the political and economic landscape of the region. If reform does not work, it will hand the left a narrative for the foreseeable future. The stakes are that high. This is why what is happening in Argentina is not just an Argentine story: it is relevant for Latin America and for the rest of the world, because there is currently no other libertarian president anywhere — and the global context is one of increasing contempt for economic and political liberties. That is why the Argentine story is more than just about Argentina.
Who is your favorite Argentine writer?
Borges, obviously. He was a genius, literally. And a very versatile writer too. I’m not able to read poetry as I would like to; I would like to be more attentive and focused when I read it, but I can’t. But besides being a poet, Borges also wrote short stories, essays, gave talks on the radio, held conversations with journalists, and was able to express himself in very different registers. All of them, at least the ones I know, were the work of a genius.
He had a way of looking at things that turns them around in your head, that makes you see them differently each time. I like that. I like being challenged in that way. And of course Borges was ultimately an anarchist. He did not believe in government, he did not believe in the state. He once joined the Conservative Party, saying that he was the only gentleman who believed in lost causes — or something to that effect. But that was because he hated government. He didn’t believe in politicians; he believed in people. And I share that with him.
Is this anti-government tendency the most Argentine thing about him?
There is an essay called Nuestro pobre individualismo where he says something like this: for Argentines, the state is a fiction. We can only conceive of personal relationships, but the state is impersonal, so we cannot imagine ourselves having a relationship with it. And therefore robbing the state through tax evasion is not something we can consider wrong, because we cannot conceive of non-personal relationships. He wrote that in the 1930s or thereabouts, and I think it is still very much true in Argentina today. It strikes me as a sociologically precise observation — so specific and so accurate. It makes me think he was a true Argentine, for sure.
This interview took place before the Colombian elections in June.