Dear Editor,
Yesterday it was announced that a new Antillean currency will be introduced by the Central Bank of Curaçao and Sint Maarten, replacing the current Antillean Guilder in 2021. This measure is and execution of a 'decision in principle' already taken in 2010 (source: website radio station Dolfijn FM from Curaçao and Bonaire, www.dolfijnfm.com, October 15th, 2019).
The question, however, is if the world 10 years after this 'decision in principle' is still the same, justifying such an investment (because the introduction and change of the currency is a costly operation). It determines us to ask ourselves how the financial world nowadays is compared to 10 years ago, what the financial developments and circumstances are now and might be in the future, in the Caribbean and neighbouring regions. Is a new currency still the best option?
At least this is – again - a moment to reflect, evaluate and analyse the pros and cons related to other options. One option is just to quit fully with local currency, for example by just dollarize. I wrote about that already several times in earlier letters to the editor in The Daily Herald some months ago. In that perspective, somebody sent me the interesting text below, published July 15th, 2019 at www.stlucianewsonline.com. It can be used as tool to start thinking about the future; therefore, I publish it integral below
“The former governor of the Central Bank of Barbados, (CBB), Dr. Delisle Worrell, is urging regional countries to seriously consider using the United States dollar as their national currency, after initially arguing that Caribbean currencies served a crucial purpose when they were first introduced, but they have now become a nuisance in today’s digitized world.
Writing in the July edition of his Monthly Economic Newsletters, the economist said the one question which always surfaces in response to his call to retire all Caribbean currencies is about national sovereignty. “Most people seem to believe that sovereignty is “lost” with the retirement of the local currency. On the contrary, replacing domestic currency and deposits with US currency and deposits gives everyone in the country wider access to goods and services. “With domestic currency you can buy only local goods and services; with US dollars you can purchase from anywhere in the world, wherever you can get the best value for your money,” Worrell wrote, adding that the fact of the matter is that the US dollar is sovereign in international transactions “and there is nothing than can be done about that”.
He said even China, the world’s second largest economy, with 15 per cent of global gross domestic product (GDP) to the US’s 24 per cent, accepts payments in US dollars. “A Jamaican travelling to Haiti, a Guyanese to Suriname, a Dominican to Guadeloupe, a Trinidadian to Barbados, all take US dollars with them. All hotel rates and oil and commodity prices are quoted in US dollars.
“Ironically, having a domestic currency in today’s digital world may make a country more susceptible to US sanctions than a fully dollarized country would be,” he said, arguing that Washington’s sanctions against Cuba and Iran “are effective because Cubans and Iranians earn in a local currency whose value continues to fall because the country’s access to US dollars is limited. “The US reaps tremendous benefit from the fact that its currency is in universal use. Countries which have their own currencies all maintain a reserve of foreign exchange at their central banks with which to protect the value of domestic money. Those reserves are mostly held in US treasury securities, and constitute a loan to the US government.
“However, a country like Panama which has no currency of its own does not have that problem,” he noted. “The bottom line is that rather than impairing national sovereignty, replacing the domestic currency empowers the country and its citizens by giving access to the world’s goods and services, to the full extent of their incomes. Moreover, the country has no need to offer credit to the world’s wealthiest nation, in order to maintain the value of domestic financial assets.”
Earlier, Worrell had said Caribbean currencies should be replaced because the present world of commerce and finance bears no resemblance to the world for which Caribbean currencies were devised. “Up until the 1960s in most Caribbean countries, all retail transactions and many wholesale transactions were settled with notes and coins. The means of payment were always scarce in those days, because our countries are so distant from the European capitals that issued the world’s major currencies.” He said nowadays, currency notes and coin, mostly of uncertain value in terms of purchasing power of the everyday goods and services countries need to source abroad, are little used domestically.
“Mostly we use electronic transfers, cheques and credit cards. Since these are all computer records, it is immaterial how they are denominated, so long as both ends of every transaction match. There is no reason to link the denomination of the electronic transactions to the value of notes and coins.” He said replacing the Barbados dollar with the US dollar for all transactions, domestic and foreign, enhances the range of choice open to the country and its residents, in all international commerce. International transactions are conducted in US dollars or in currencies that are convertible to US dollars.
In contrast, with Barbados dollars you cannot buy or sell anything outside of Barbados, not even in nearby St. Lucia, much less in the rest of the world. The GDP of Barbados in 2018 was about US $5 billion, but the country had access to less than US $3 billion of international goods and services, because that was the total availability of US dollars and other foreign exchange from exports, tourism and other services, and foreign financial inflows.” (end quoted text)
Note that I am not saying dollarization is a must, because besides pros, there are also some cons to it, but again, please decision makers, use the current and foreseeable financial developments to rethink the earlier 'decision in principle' from 2010 and discuss critically if a new currency really is a sustainable measure. Now is the time to set a future proof course in favour of the development of Sint Maarten.
G.B. van der Leest
