Foreign currency reserves have tripled since 1991. As in Estonia, the economic picture in Argentina is not all rosy. Public sector deficits remain stubbornly high. Low domestic savings also make Argentina too dependent on foreign money to finance the capital investments that are being made. That shift is undesirable because it increases Argentina's vulnerability to capital flight at a time when servicing of the foreign debt already absorbs roughly a fourth of total export earnings.
Several conclusions emerge.
Despite evident advantages, however, there is a danger the currency board idea could be oversold. It is not a panacea, and it should not be expected to solve all macroeconomic problems single-handedly. In particular, both the Argentine and Estonian experiences illustrate that a currency board is no guarantee against potentially destabilizing capital inflows which can bring monetary expansion, inflation, real appreciation of the domestic currency, reduced international competitiveness, and large current account deficits, all of which can generate pressures to devalue and make nervous money managers even more skittish. If private capital inflows are large and if significant portions of them come in the form of short-term loans or speculative portfolio investments, then the potential for destabilizing capital flight can arise irrespective of the receiving nation's monetary regime. It is possible for a nation's monetary regime to be orderly and disciplined under either a currency board or a central banking system.