The Wall Street Journal-20080213-Dollar s Weakness Burdens Latin America

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Dollar s Weakness Burdens Latin America

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I found Mary O'Grady's column "Fallout From the Fed" (Feb. 11) very good. I take exception, however, to her statement that "by outsourcing monetary policy to the Fed, Salvadorans left themselves vulnerable to Mr. Bernanke's weaknesses as a central banker." This gives the impression that El Salvador is more vulnerable to the dollar's weakness than the rest of Latin America in terms of key monetary variables, such as inflation and interest rates, because it is formally dollarized. In fact, at 4.9% in 2007, the Salvadoran rate of inflation was the fourth lowest in the region. The regional average was 8.5%. Moreover, at 7.7%, its lending rate of interest was the lowest in Latin America. The regional average was 14.9%. These facts show that El Salvador is less, not more, vulnerable to international instability because the Fed's excesses are not multiplied by those of the local central bankers.

Manuel Hinds

Former Minister of Finance of El Salvador

San Salvador, El Salvador