Argentina introduced its “convertibility” system, which linked the Argentine peso to the dollar at a fixed rate, on 1 April 1991. The convertibility system ended in a spectacular economic crash and currency devaluation in January 2002. Most economists asserted that Argentina’s convertibility system was a currency board, with little room for discretionary monetary policy. Armed with that premise, other economists and the financial journalists who followed their lead have concluded that currency boards are inherently dangerous and bound to end in Argentine-like upheavals.

DURING THE PAST FIVE YEARS LATIN AMERICA HAS reaped the benefits of surging commodity prices and low interest rates. Unlike past commoditydriven booms, this one has not been accompanied by fiscal profligacy. Indeed, net public debt issuance has declined sharply, with many countries buying back some of their outstanding debt. Some have also continued down the freemarket reform road toward flexibility and modernization, notably Colombia, El Salvador, Guatemala and Peru.