Middle management executives had one hundred thousand-dollar salaries when converted at the peg. Then the country devalues. This says nothing of the impact on the less fortunate. Then the cycle begins again with U.S. Treasury and IMF financial support and pledges to reform. The above is a simplification of the adjustment mechanism that Dr. Alcena alludes to in his analysis.
Several questions remain.
It probably is. The country has high business operating costs compared to its international competitors and fiscal deficits have become a way of life. No one knows for sure. A capital inflow adds to the exchange reserves and this limits an exchange correction that otherwise would be needed. Possibly a high-sustained level of foreign investment could eliminate completely the need for any exchange rate adjustment.