Could the Dominican Republic be a candidate for dollarisation? It
shares some obvious characteristics with El Salvador, which
recently adopted the dollar: most notably a high dependence on the
US, particularly in terms of a heavy flow of remittances and trade.
The Dominican economy is in some ways even more awash with dollars,
owing to its massive tourism industry.
Yet the country does not appear to be highly dollarised. Only
around a quarter of all bank lending is in dollars, for example.
Hugo Guiliani Cury, secretary of state for industry and commerce,
says he is a firm advocate but recognises it is not an idea that
has so far been welcomed in the country. “I do not think at the
moment there is much chance,” he says. “Most of the leaders of the
country – politically and in the private sector – are not prepared.
It is a question of time.”
Francisco Guerrero Prats, governor of the central bank, says a lot
of the advantages of dollarisation can be achieved in any case, as
long as the Dominican economy adopts the correct measures: central
bank autonomy, no injections of money that aren’t backed by
reserves, a freely floating and unified exchange rate, and stricter
banking regulations.
He also points out that the country does not have a tradition of
high inflation. The desire to stamp out hyperinflation is one of
the factors that has weighed heavily in some other attempts to peg
local currencies to the dollar or dollarise entirely.
“With the maintenance of healthy and coherent macroeconomic
policies, the Dominican economy can manage in the short and medium
term without needing to dollarise,” says Guerrero. “Of course, we
live in a changing and uncertain international environment. We must
pay attention to what happens to countries like ours where they
have implemented this type of regime.”