Page 47 - ARUBA BANK

12 Antilliaans Dagblad Dinsdag 18 juni 2019
Curaçao

Dollarization:

still a bad idea

and interest rates which bene-
OPINIE
fits international trade and
By Alex Rosaria foreign investments. However,
33-year old bad idea is some of the tasks of the Central
being dusted off to be Bank of Curaçao and Sint Maar-
A presented again: dollari- ten (CBCS), especially the func-
zation. And again, it’s supposed tion of lender of last resort for
to be the ultimate economic local banks that are experien-
cure-all. cing financial stress, will disap-
Dollarization - the use of the pear. The CBCS will also have
US dollar (USD) as legal tender to buy back the ANG for which
in place of the Netherlands large quantity of USD is needed According to Alex Rosaria it is not a good idea to change the guilder into dollar.
Antillean guilder (ANG) - is not plus reserves to help support
new. In 1985, facing economic economic shocks. Dollarization tackling structural pone these changes, the more minister van Economische Zaken
downturn (devaluation of the will also eliminate seigniorage shortcomings don’t produce painful the consequences will en staatssecretaris van Financiën
Venezuelan bolívar, ending of earnings, which is the income vote, so we keep voting for those be. (Fiscale Zaken) voor Partido
the tax treaty with the US and of the CBCS from issuing the who promise ‘no more measu- Nashonal di Pueblo (PNP) en
the Shell pulling out), the Cura- ANG minus the cost of printing res’ no matter how bad the Alex Rosaria is thans freelance later partijleider en fractievoorzit-
çao financial sector presented it, which leads to less income to situation is. People need to consultant in Azië en de Pacific. ter van de door hem opgerichte
dollarization as a ‘wundermittel’ the government. realize that the longer we post- Voorheen was hij onder meer partij PAIS.
which would force politicians to Only a handful of countries
bring about structural changes have dollarized because of eco- Advertentie
such as reducing spending, nomic crisis, among them
improving productivity, cutting Ecuador, El Salvador and Zim-
red tape and modernizing im- babwe. Studies have yet to con-
migration. The Central Bank of clude if it has brought about
the NA (BNA) sent this plan not welfare to these countries.
once, but twice to the Interna- In fact, faced with fiscal deterio-
tional Monetary Fund (IMF), ration, Ecuador forced banks
which cautioned that dollarizati- and financial institutions to
on would not result in a turna- adopt a new electronic currency
round. The University of the in 2015, an apparent move to
Netherlands Antilles (UNA) de-dollarize.
also warned against blind faith I digress. Again, we are fa-
in the USD and stressed that cing very hard times. Unfortu-
not dollarization, but structural nately, again the same argu-
changes were necessary for ments made three decades ago -
economic recovery. dollarization being the savior of
In 2008 the BNA caught our problems - are being recy-
everyone off guard by proposing cled. Those in favor of dollariza-
dollarization on a very short tion also claim that it will redu-
term. When asked, BNA ma- ce the size of CBCS, which they
nagement told me that dollari- consider too large and the costs
zation was necessary because it of maintaining the ANG too
didn’t trust the politicians with much for such small islands.
our finances in the wake of the Yet, Aruba which is much smal-
disintegration of the NA. Yet, ler than us, has demonstrated
just a few years earlier the same that a good track record of
BNA had jumped on the maintaining the fixed exchange
bandwagon in favor of Curaçao rate of a local currency with the
becoming part of the EU as USD together with a credible
an ultra-peripheral region Central Bank, makes dollarizati-
(UPG). What’s curious is that on unnecessary.
without exception all UPGs There is no urgency to make
use the euro. Was the BNA the much-needed structural
betting on two horses? Slowly adjustments. We seem more
dollarization talk, like in focused on finding the magical
1986, disappeared from the wand, be it the USD, UPG,
headlines. Guangdong Zhenrong, oil and
Why dollarization? In theory gas off our coasts and what not.
it could lower transaction costs Politicians know all too well that