Latin American Central Banker Start Crusade Against the Dollar

Why one Latin American nation is betting big on its local currency—and what it means for the global dominance of the US dollar.

The Campaign to Ditch the Dollar

In a bold challenge to decades of financial tradition, the President of the Central Bank of Uruguay, Guillermo Tolosa, has begun a public and policy-driven crusade to wean one of Latin America’s most dollarized economies off the US currency. With over two-thirds of bank deposits held in dollars, the task is monumental. Tolosa argues that this “old habit,” born from past instability, is now a costly gamble for savers and a drag on national economic sovereignty.

This strategic shift, reported by Bloomberg on December 26, 2025, is more than a local policy change—it’s a microcosm of the growing international debate over the future of the US dollar’s global dominance.

Why Is Uruguay So Attached to the Dollar?

Uruguay’s deep dollarization is a historical scar. During periods of hyperinflation and sharp currency depreciation in the latter half of the 20th century, Uruguayans sought safety in the stable US dollar. Today, this legacy persists:

• ATMs dispense both pesos and dollars.
• Major purchases like real estate and vehicles are priced in USD.
• The dollar functions as a parallel, trusted currency.

Tolosa contends that the country has “outgrown” this need. With inflation now under control, clinging to the dollar, he says, is like holding onto a “pacifier.”

Tolosa’s Two-Pronged Strategy

The central bank’s plan involves both carrots and sticks to promote the Uruguayan peso.

1. Regulatory Pressure on Dollar Use

• Higher Capital Requirements: Banks will face stiffer capital requirements for certain dollar loans, making them less attractive to issue.
• Peso Incentives: Reserve requirements for some peso deposits will be eliminated, encouraging banks to lend more in local currency.

2. Building a Peso-Based Financial Ecosystem

• A key long-term goal is developing a deeper domestic capital market in pesos, which would lower borrowing costs for the government, corporations, and individuals.
• Policies under consideration include mandating businesses that list prices in foreign currencies to also display prices in pesos.

The Crucial Challenge: Public Trust

Policies alone won’t suffice. Tolosa must convince Uruguayans that the peso is a reliable store of value. He’s making a direct economic argument: “Your purchasing power when you invest in dollars is going to be very volatile. Investing in dollars in a context like this is a form of gambling, like a casino.”

He backs this with data, noting that dollar-denominated checking accounts have lost half their purchasing power over the past 20 years.

Economists like Aldo Lema of Vixion Consultores agree, stating that lasting success requires Uruguay to adopt and consistently meet a lower inflation target (around 3%, down from 4.5%) for years to come.

A Tale of Two Strategies: Uruguay vs. Argentina

Uruguay’s de-dollarization push stands in stark contrast to its neighbor’s approach:

• Uruguay: Promoting the peso, reducing dollar dependency.
• Argentina: Under libertarian President Javier Milei, proposed labor reforms would allow salaries to be paid in dollars. Milei has even floated the radical idea of eliminating the peso entirely and adopting full dollarization.

This divergence highlights the lack of a regional consensus on how to achieve monetary stability in Latin America.

The Bigger Picture: A Crack in the Dollar’s Armor?

Uruguay’s domestic efforts mirror a subtle global shift. While the US dollar remains the world’s dominant reserve currency, its share has slowly eroded—from about 71% of central bank reserves in 2000 to nearly 59% in 2024 (IMF data). Geopolitical tensions and US fiscal policies have prompted nations to consider diversification.

Notably, under Tolosa, the dollar’s share in Uruguay’s own central bank reserves has already fallen from 90% to 84%.

Sector Impact: Real Estate and Construction

The shift could transform key industries. Fabián Kopel, a housing developer, notes that about 75% of construction costs are already in pesos. Pricing in the inflation-indexed Unidad Indexada (UI) could protect margins and make homes more affordable.

However, Kopel points out a major hurdle: public familiarity. “The only way this will happen is if it becomes mandatory,” he told Bloomberg, emphasizing the need for a unified market shift.

Conclusion & Key Takeaways

Guillermo Tolosa’s campaign is a definitive test of whether deliberate policy can reverse deep-seated financial dollarization. Its success hinges on:

1. Sustained low inflation to build trust in the peso.
2. Effective public communication to change consumer behavior.
3. Careful banking regulation that doesn’t stifle credit.

If successful, Uruguay could provide a blueprint for other semi-dollarized economies. If it fails, it will reinforce the daunting power of incumbency that the US dollar holds. One thing is clear: the world is watching this Latin American laboratory of monetary sovereignty.

• Guillermo Tolosa, President of Uruguay’s Central Bank, is launching a strategy to reduce dependence on the US dollar.
• New banking regulations will encourage peso lending and discourage dollar-based savings and loans.
• Uruguay’s push contrasts sharply with Argentina’s dollar-friendly policies under President Javier Milei.
• This move reflects a broader, global reevaluation of the US dollar’s role in national economies.

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