DOLLARISE OR DIE

Now that Brazil has abandoned its pegged exchange rate, a dollar-zone may come to be an attractive idea for both emerging economies and the US alike. Currencies are a bit like windmills. Absolutely fixed exchange rates - such as Hong Kong's or Argentina's currency boards - have so far survived speculative gales. The second alternative - freely floating rates - have at least avoided full-blown currency crises. Everything in between - managed floats, exchange-rate targets, and so forth - have been wrecked. Having seen its pegged exchange rate destroyed last week, Brazil yesterday announced it would choose the second alternative: a float. But the question raised by its devaluation - and by the experience of Latin America since Mexico's devaluation in 1994 - is whether any independent currency regime is sustainable in the region in a world of free capital mobility.