80 responsibilities of Buenos Aires province have required the full amount of its actual expansion of its public employment, from only 178,000 workers in 1983 and 239,000 in 1989 to 320,000 in 1995 and 405,000 in 1999 (World Bank, 1990; Tommasi, 2002). Fourth, there would be a general revision of the sharing formula to arrive at a more equitable distribution among provinces, in light of the currently highly skewed distribution in favor of some of the smaller provinces.<sup>76</sup> This is especially the case because the current redistributive pattern appears to be relatively random in its equity impact, as there is no clear tendency for the highest transfers to go to the poorest provinces (Cuevas, 2003, p. 13).

# _D,  Exchange rate regime_

The experience of developing countries in general and Argentina’s experience with the currency board in particular suggest that the choice of exchange rate regime can be a crucial determinant of economic performance in terms of growth, price stability, and sustainability of external debt. Whether or not the final stages of the Convertibility Plan could have been managed in a way that avoided the 3D collapse (and the evaluation above suggests that under a more stable political structure, that might have been possible), going forward there would seem to be little if any prospect that Argentina can return to a currency board for at least several years. Just as in 1990 the institutional memory of the floating exchange rate was one of a close tie to hyperinflation, in 2003 the institutional memory of the Convertibility Plan would seem inevitably tainted by the default, devaluation, and economic collapse. It seems reasonable, then, to rule out the adoption of a new currency board at a new exchange rate.

Instead, two principal options seem most relevant to Argentina now and for the next few years at least. The first is a regime of managed floating, ideally with careful attention to a target real exchange rate, and also within a framework of inflation targeting as the monetary rule. The second is dollarization – outright adoption of the dollar as the currency in circulation. Currently the odds are that the new Kirchner government will pursue a managed float, which is fortunate considering that the case is much stronger for floating than for dollarizing. Somewhat more likely than dollarization is some form of at least informal agreement with Brazil that in the two countries’ managed floating regimes, both will seek to keep their currencies within some target range relative to the dollar, to avoid the extreme swings in their bilateral rates that occurred in the late 1990s.

FLOATING WITH TARGETING OF THE REAL EXCHANGE RATE AND INFLATION --Within the past few years several of the major Latin American economies have adopted a managed floating exchange rate regime within a framework of inflation targeting, including Chile (in 1990), Mexico (1995), Brazil (1999), Colombia

> 76 Tommasi (2002) notes that whereas in aggregate the 22 provinces obtain 44 percent of their revenue from own-tax sources and 56 percent from federal revenue sharing, 15 of the provinces obtain only 30 percent of their revenue from own-tax sources.  The larger provinces, in particular Buenos Aires (including Buenos Aires city), Santa Fe, Cordoba, and Mendoza, comprise 80 percent of the economy and 70 percent of the population, but receive a much smaller combined share of total shared federal revenue-sharing funds.