ARGENTINA'S government has severed the link between its country's currency and the US dollar in a bid to drag the economy out of a crisis - but Bermuda should not think of following suit, according to Opposition Leader Grant Gibbons.

Dr. Gibbons said devaluation of the Bermuda dollar would give the island's economy an initial boost as the island would effectively become cheaper to visitors and thus more attractive as a tourist destination.

But the United Bermuda Party leader and Shadow Finance Minister predicted that this would be followed by an inflationary backlash, as imports became more expensive and wages came under strong upward pressure.

Like the Bermudian dollar, the Argentine peso has been linked on a one-to-one basis with the US dollar by law for the last decade.

Some economic experts believe the dogged pursuit of that policy has been at the heart of Argentina's economic woes, with a four-year recession and 18 per cent unemployment leading to riots on the street in recent weeks.

This week the week-old government now in charge of South America's second-largest economy announced itsr intention to enforce a currency devaluation of nearly 30 percent, which will see the peso pegged at 1.40 to the US dollar.

Dr. Gibbons, widely credited with masterminding Bermuda's smooth passage through a recession in the early '90s at a time when he was Finance Minister in the United Bermuda Party Government, warned against any temptation to devaluate the Bermuda dollar.

"My general sense is that there would be very little advantage in devaluation and I think overall, the effect would be negative," said Dr. Gibbons.

"Initially, tourism might benefit because one effect of devaluation would be that it would make things slightly cheaper here.

"But the flip side is that wages would be worth less and the Bermuda worker would find that his wages would have much less purchasing power.

"Most of the goods sold in Bermuda are imported and there would be an immediate increase in the cost of most things, like food, cars and clothing. We would find wages going up to replace the loss of purchasing power. And any 'benefit' from devaluation would soon be lost because of the detrimental effects."

Inflation would be an inevitable consequence of devaluation in Bermuda, Dr. Gibbons added.

"In larger, more agricultural countries, there would be a slower catch-up effect, because many goods are grown or manufactured there," he said. "But Bermuda is so dependent on imports and travel to other places that devaluation would be followed by inflation.

"Look at Canadians. Their dollar is worth considerably less than the US dollar and when they go abroad, things are very expensive for them. Devaluation would automatically make things more expensive for Bermudians abroad."

He felt there was much to be learned from the case of Argentina, which has defaulted on huge debt repayments.

"I think there are some interesting lessons to be learned from what has happened in Argentina," said Dr. Gibbons. "When you allow your debts to get out of hand and you can't pay the debt service or repay the debt, then devastating things happen."