(*) Alfredo Calcagno and Sandra Manuelito, are Economic Affairs Officers with the Economic Projections Centre of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). Paper presented at the Seminar on the 'role of Central Bank Under-Dollarization', organized by the Central Bank of Ecuador, Quito, 22 and 23 March, 2001. The views expressed in this document, which has been reproduced without formal editing, are those of the authors and do not necessarily reflect the views of the Organization. Summary Latin America has had a great deal of experience with anti-inflationary policies based on different types of exchange-rate 'anchors'. However, the Argentine convertibility as well as dollarization in Ecuador go further in this direction, adopting a very strict monetary rule in the first case (which would bring additional strength and credibility to the peg), and giving up the emission of its own currency, in the second. The economic effects of these 'Hard peg' regimes go well beyond the (more or less successful) control of inflation, since they have major consequences on the functioning of the economy in the medium and long run. This document aims at identifying the effects that the convertibility system has had on Argentine economy, especially on growth (both its rate and its instability), on the balance of payments and the foreign indebtedness, on the structure of relative prices, and on the functioning of the banking system. For each of these aspects, the extension to which Argentine experience is relevant to the Ecuadorian dollarization process is evaluated. In particular, the risks and imbalances that might arise in Ecuador are highlighted, as is the role that the economic policy, and particularly the Central Bank of Ecuador, might have to prevent or to cope with them. Contents: - Introduction - Economic activity and the external sector - Relative prices - The working of the banking system - Final remarks