The number 1 reason to not dollarize is that you lose economic autonomy.
Your economic policy is, or would be, set by the US Federal Reserve, with little regard for the specific economic needs of the country.
Respectfully,
Playacaribe2
- Thread starter pinonuevo
- Start date
The Dominican Peso will be 1:1 with the US Dollar Again?
Your economic policy is, or would be, set by the US Federal Reserve, with little regard for the specific economic needs of the country.
Respectfully,
Playacaribe2
The peso has so far held up remarkably well against the USD.............perhaps too remarkable.
For those watching, the Euro has recently plunged from 115 to trading today at low of 103 to the USD and the Japanese yen is at a 20 year low against the USD.
Yet the peso holds steady.........at least for a bit longer.............then.......................
Respectfully,
Playacaribe2
For those watching, the Euro has recently plunged from 115 to trading today at low of 103 to the USD and the Japanese yen is at a 20 year low against the USD.
Yet the peso holds steady.........at least for a bit longer.............then.......................
Respectfully,
Playacaribe2
With Dollarization that would be true.............but then the USD is not immune from inflation either.......albeit at a slower rate than the peso.
If Dollarization was the answer to many countries financial problems, many would have done it long ago.
While Dollarization would spur foreign investment (no foreign currency exchange risk), it would deprive those countries Dollarizing of their secret weapon...............seigniorage..............
Respectfully,
Playacaribe2
I think that an example would be Panama. From appearances, they're doing well. But I don't know any details about how they're going.
The DOP "IS" pegged to the USD "just as" HKD or SGD are (different barrios interests rule that) ....let's just say the other cousin, the MXP is at times left to be on it's own (float), yet the DOP, as a "little distant cousin" gets a break. DOP will ride the wave along (behind) the world's surfer while the wave (and direction) lasts...and there are many conflicting waves occurring right now, yet the DOP does only care about the wave the USD rides since it has no choice!
Tambo is the pro ... if he cares to comment.
Tambo is the pro ... if he cares to comment.
"Pegging" implies a Central Bank decision to maintain a tight correlation to another currency. The trading range is generally in a narrow band. The Chinese Yuan or Renminbi is pegged to the dollar. HKG is also pegged. The SGD is not (although at one time it was pegged to the GDP (British Pound). MXP has been free floating since the 90's and has gone through a number of severe devaluations.
The DOP is not pegged to the dollar (certainly affected by it, but not pegged) as witnessed by its demise since the 1980's from 1:1 to its current status.
For a more broader view;
Annual Report on Exchange Arrangements and Exchange Restrictions 2019
The Annual Report on Exchange Arrangements and Exchange Restrictions has been published by the IMF since 1950. It draws on information available to the IMF from a number of sources, including that provided in the course of official staff visits to member countries, and has been prepared in close...
www.imf.org
Respectfully,
Playacaribe2
Thanks for this. Very interesting led me to a quick Google search and this background that much of I was unaware. Interesting history"Pegging" implies a Central Bank decision to maintain a tight correlation to another currency. The trading range is generally in a narrow band. The Chinese Yuan or Renminbi is pegged to the dollar. HKG is also pegged. The SGD is not (although at one time it was pegged to the GDP (British Pound). MXP has been free floating since the 90's and has gone through a number of severe devaluations.
The DOP is not pegged to the dollar (certainly affected by it, but not pegged) as witnessed by its demise since the 1980's from 1:1 to its current status.
For a more broader view;
Annual Report on Exchange Arrangements and Exchange Restrictions 2019
The Annual Report on Exchange Arrangements and Exchange Restrictions has been published by the IMF since 1950. It draws on information available to the IMF from a number of sources, including that provided in the course of official staff visits to member countries, and has been prepared in close...www.imf.org
Respectfully,
Playacaribe2
"DOP (Dominican Peso)" https://www.investopedia.com/terms/d/dop.asp
I am not sure you can say it is gaining ground as much as you can say it gained ground.
Remittances in dollars were extradordinary. November/December saw excellent tourist numbers. Price of gold moved up nicely. All of those contributed to its International Reserves. Ditto all of its bond borrowings in dollars.
However, the headwinds are obvious and approaching, such that the President has taken the extraordinary step to warn the country that tougher times are in front of the DR.
Externally, those headwinds include worldwide inflation, the war in Ukraine etc.
Internally, the DR has been raising salaries of workers across the board and has been subsidizing both the family basket and oil imports, all of these are inflationary or lead to inflation.
Tourism has dialed back, and while good, has slipped below pre-pandemic levels.
I see no reasons the peso can gain (strengthen) against the dollar, but a myriad as to why it may begin to slip (weaken).
Hopefully, the decline, if it comes, is orderly. What has happened to the Euro and Yen recently was a quick and sharp decline in their value vis a vis the dollar, and while they can to a large extent absorb it without to much pain.................the DR does not have that luxury.
Respectfully,
Playacaribe2
History for you all:
The DR peso was at parity versus the US dollar on oficial Exchange. On the streets you had to pay 15 to 25 cents to get them to accept it when using it as payment outright (no exchange houses then, only banks).
The exports were stagnant for years on end, due to the high cost of DR goods, based on the purchase parity of the dollar vs the DR peso.
The nascent tourism industry at the pilot level, required a much lower DR Peso if it was ever to attract masses. The free trade zone was dead.
The gov, bankers, investors, tourism industry, etc… got together and hatched out their grand plan to devalue the DR peso via independent money exchangers. Which could buy and sell them based on a weekly rating issued by the CB.
There started the artificial devaluation of the DR peso to the dollar ever since. Remark artificial…
DR is only competitive if the Peso is devalued vs the Dollar. Now exports will suffer and tourism will be affected as well due to the purchasing power drop.
There’s no way for the DR to continue to drop the value as it used to, since It now allows the private exchange sector to play along as well.
Watch the DR peso gain up to 12 - 15% value over the dollar by year’s end.
As things stand, the US is on a recession train.
Once the EU and US used their currencies as weapons, others took heed of it and are shielding their economies as best they can for the long haul.
The DR will see this as a short term revaluation of the Peso but a crisis for exports and tourism as we know it. We are still far from being truly competitive at anything.
The cat is out of the bag and there’s no going back.
The DR peso was at parity versus the US dollar on oficial Exchange. On the streets you had to pay 15 to 25 cents to get them to accept it when using it as payment outright (no exchange houses then, only banks).
The exports were stagnant for years on end, due to the high cost of DR goods, based on the purchase parity of the dollar vs the DR peso.
The nascent tourism industry at the pilot level, required a much lower DR Peso if it was ever to attract masses. The free trade zone was dead.
The gov, bankers, investors, tourism industry, etc… got together and hatched out their grand plan to devalue the DR peso via independent money exchangers. Which could buy and sell them based on a weekly rating issued by the CB.
There started the artificial devaluation of the DR peso to the dollar ever since. Remark artificial…
DR is only competitive if the Peso is devalued vs the Dollar. Now exports will suffer and tourism will be affected as well due to the purchasing power drop.
There’s no way for the DR to continue to drop the value as it used to, since It now allows the private exchange sector to play along as well.
Watch the DR peso gain up to 12 - 15% value over the dollar by year’s end.
As things stand, the US is on a recession train.
Once the EU and US used their currencies as weapons, others took heed of it and are shielding their economies as best they can for the long haul.
The DR will see this as a short term revaluation of the Peso but a crisis for exports and tourism as we know it. We are still far from being truly competitive at anything.
The cat is out of the bag and there’s no going back.
PICHARDO! Long time no see. I recall a post by you stating the peso would be 28 to 1 USD if allowed to float.
Let's revisit that prediction at year's end about the 12% to 15% gain in the DR peso.
53.32 today at https://www.xe.com/currencyconverter/convert/?Amount=1&From=USD&To=DOP so mid 40's on December 31, 2022?
Let's revisit that prediction at year's end about the 12% to 15% gain in the DR peso.
53.32 today at https://www.xe.com/currencyconverter/convert/?Amount=1&From=USD&To=DOP so mid 40's on December 31, 2022?
Ambitious target to say the least. You are then implying a move to under 50:1.
What are/is your catalyst(s) for such a drastic move.
Technical recession as defined by NBER..........yes.........but it is hard to make it feel like a real recession with a US 3.5% unemployment rate. I believe the Euro Zone to be a better candidate for recession near term........if not already.
Respectfully,
Playacaribe2
- 1984 US$1 to RD$1.45
- 1993 US$1 to RD$5
- 1998 US$1 to RD$8
- 2002 US$1 to RD$20
- 2003 US$1 to RD$37.5
- 2004 US$1 to RD$46.7
- 2006 US$1 to RD$32
- 2007 US$1 to RD$35.29
- 2008 US$1 to RD$34.93
- 2009 US$1 to RD$36
- 2012 US$1 to RD$40.5
- 2013 US$1 to RD$40.4
- 2016 US$1 to RD$45
- 2022 US $ 1 to RD $53.00 (Sept 1)
- Will it get to 50.00 by December and January?
Because the FED is inflating the dollar by generating ("printing") at a higher rate than the Banco Nacional does with the Peso.
Both, Peso and Dollar, loose against Bananas, Big Macs and services, currently the Dollar is loosing faster.
Another effect might be that lots of dollars are not being used anymore in big international trades and are flooding the circulation. The more the amount of money in circulation increases compared to the increase in products and services, the more the currency declines.
Alexander
Quite unlikely, as the peso is linked to the dollar, and there is no "transition to Socialism" in the US. The dollar has held its value better than the pound or the Euro.
The US is absolutely transitioning to Socialism.
9 years and 342 days left in a 10 years span since I posted that comment.
Time will indeed tell.
It would be worse for Dominicans that doesn't receive Divisas Americana...
I know somes that will be happy.
JJ