Mauricio Macri was sworn as the new president of Argentina on December 10, 2015. He confronts enormous economic challenges. He received a country with an inflation rate estimated at between 15 to 27 percent, foreign reserves at a ten-year low, plus a decade-long series of struggles with holders of defaulted debt. One of his highest priorities is to grapple with the nation’s currency controls. Also, he has vowed to end corruption, poverty and drug trafficking.
To achieve these formidable objectives, the new president will have to shift from obsolete paradigms and reengineer many of Argentina’s policies and government business processes. His administration would be wise to use technology, such as Bitcoin and its blockchain to facilitate the reengineering process and to fight corruption.
The good news is that the new president has already revealed his support for Bitcoin-related activities. Indeed, while he was mayor of Buenos Aires, his administration organized the First Bitcoin Forum, in July 2015.
Argentine Economic Challenges
Mr. Macri’s priority is to free the economy and improve the relationship between Argentine authorities and investors, which has been confrontational for the last 12 years.
Government monetary controls have been enforced for several decades in Argentina. As a result, it is tough for citizens as well companies to obtain dollars. Companies cannot buy the goods and services required to sustain production. And, transnational corporations cannot easily repatriate their earnings. For example, American Airlines stopped accepting payments in Argentine pesos. This moved was triggered because of Argentine government currency controls, which make it difficult to convert pesos into dollars to repatriate earnings.
However, the currency controls have not prevented the flourishing of a parallel currency exchange market and the fall of the peso. Indeed, the fall of the Argentine pesos against the U.S. dollar has been relentless for many years, as shown in the chart below, courtesy of Barchart.
Of course, nobody expects overnight miracles from the new administration. The transition to a healthier economy is going to be long and painful. To minimize the pain of the unavoidable upcoming austerity measures, the country must first obtain international financing. But to do that, Mr. Macri must first smoke the peace pipe with bondholders, who are presently holding US$10 billion in judgments against Argentina. Otherwise, “It is virtually impossible for the country to raise debt abroad at a time when the country’s foreign reserves are dwindling,” reports the Buenos Aires Herald.com.
Blockchain the Weapon to Fight Corruption
Mr. Macri in his inauguration speech delivered at Congress laid out the three main objectives of his administration: to fight drug trafficking, strive to achieve zero poverty, and tackle corruption.
Obviously, the most critical of these three objectives is to defeat corruption in Argentina. If corruption cannot be reined in, the battles to eradicate poverty and drug trafficking are lost at the outset.
To succeed, the Macri administration may wish to consider using Bitcoin and its blockchain as a weapon to crack down on corruption.
The Bitcoin’s blockchain is a distributed, permissionless digital ledger. This ledger continuously records Bitcoin transactions and maintains the records of all the Bitcoin transactions that have ever occurred. Core attributes of the blockchain include the following:
Reliability and availability: Because the blockchain is stored in thousands of nodes, distributed all over the world, it is safe from a single point of failure. If one node fails, all the other continue to work. Each node contains a copy of the blockchain.
Transparency: All participants can see all the transactions in the blockchain.
Immutability: Undetected changes in the blockchain data cannot occur.
Irrevocability: Transactions can be irrevocable.
Digital: Documents and assets can be cryptographically expressed.
The attributes listed above are most relevant to the control of fraud. In effect, smart contracts, smart assets, and other applications using these blockchain attributes could be created to ensure that a) transactions are auditable; b) chain of custody of assets can be verified; c) government transaction records cannot be altered; and d) malicious parties cannot dispute the veracity of records.
Smart contracts are computer algorithms that, without relying on human intervention, can verify, execute, and enforce the terms of a business agreement. A smart property is a property whose ownership is controlled by means of smart contracts.
Argentine President Macri and Bitcoin
It is reassuring to know that the new Argentine president already has a relationship with Bitcoin. In effect, the First Bitcoin Forum in Argentina was organized by the government of the city of Buenos Aires, in July 2015, when Mr. Macri was the mayor of Buenos Aires. The Bitcoin Forum’s venue was the auditorium of the Buenos Aires city hall. Mr. Macri’s then-Minister of Modernization of the Government of Buenos Aires, Andrés Ibarra, gave the Bitcoin Forum’s opening speech.
The Bitcoin Forum’s agenda included, among other topics: “The Worldwide Regulatory Landscape”; “Best Practices for Regulating Virtual Currencies While Maximizing Innovation and Prosperity;” and, “The Legal Framework in Argentina.”
Interestingly, President Macri has just created a new national Ministry of Modernization. And, he immediately appointed as the Minister of Modernization none other than the man who organized and participated in the First Bitcoin Forum in Buenos Aires, Mr. Andrés Ibarra.
So, big problems require big solutions. New government, new opportunities. If the big problem is corruption, the big solution is transparency and accurate record keeping. Fortunately, in this regard, Bitcoin and its blockchain technology can help enormously. Indeed, the new Argentine government has now an excellent opportunity to use these technologies and design new business processes to ensure that government transactions are transparent, accurately recorded, and permanently kept.
What are your thoughts on governments using Bitcoin and its blockchain to fight corruption? Let us know in the comments below!
Images courtesy of Pixabay, Wikimedia (Casa Rosada: Author Diana2803)