For the economists

Joseph NY2STI

Well-known member
Mar 22, 2020
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With tourism at record numbers, cruise ships backed up half way across the Atlantic, infrastructure projects going hot and heavy, and lots of foreign investment, why does the DOP continue to weaken?

A few years ago when the exchange rate was about 50, I mentioned to a friend how great the exchange is. I've never forgotten what she said: "Good for you, not for us".
On my first visit to D.R. it was high 30's. Today it's at 61. Naively I ask: Why?
 
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AlterEgo

Administrator
Staff member
Jan 9, 2009
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South Coast
I don’t know why, but my Dominican in-laws (business owners who import) mentioned how bad this is for them.
 

Gadfly

member
Jul 7, 2016
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Because the dollar has been strong and getting stronger against foreign currencies.
 

NALs

Economist by Profession
Jan 20, 2003
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The Dominican peso is actually controlled by the Central Bank as it doesn’t allow it to freely float. It’s on a downward slide to increase competitiveness of Dominican exports by making them cheaper abroad. The BC doesn’t want exports to fall too much for various reasons including agriculture for export and manufacture for export (mostly free trade zones productions) employs a large segment of the population. It also impacts other things such as increasing international tourism in the DR and tourism too employs another large segment directly and indirectly.
 

josh2203

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Dec 5, 2013
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I don’t know why, but my Dominican in-laws (business owners who import) mentioned how bad this is for them.
If DOP is weaker and you import, everything would be more expensive to buy, so the business owners would lose on profit. If previously they have spent 50 and something pesos to purchase something, now they would spend almost 60 pesos. Unless of course all their incoming and outgoing transactions are in USD/EUR. Like NALs pointed out above, the effect for export and tourism is the exact opposite. We have currently all our funds in EUR and therefore anything in the DR is much cheaper for us at the moment than it was a few years ago.
 

Northern Coast Diver

Private Scuba Guide
Feb 23, 2020
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If DOP is weaker and you import, everything would be more expensive to buy, so the business owners would lose on profit. If previously they have spent 50 and something pesos to purchase something, now they would spend almost 60 pesos. Unless of course all their incoming and outgoing transactions are in USD/EUR. Like NALs pointed out above, the effect for export and tourism is the exact opposite. We have currently all our funds in EUR and therefore anything in the DR is much cheaper for us at the moment than it was a few years ago.
As the dollar gets stronger, prices here in the DR have increased. But doing the math, most products cost about the same as 10 years ago, if you calculate the cost in dollars.
 
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windeguy

Platinum
Jul 10, 2004
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The Dominican peso is actually controlled by the Central Bank as it doesn’t allow it to freely float. It’s on a downward slide to increase competitiveness of Dominican exports by making them cheaper abroad. The BC doesn’t want exports to fall too much for various reasons including agriculture for export and manufacture for export (mostly free trade zones productions) employs a large segment of the population. It also impacts other things such as increasing international tourism in the DR and tourism too employs another large segment directly and indirectly.
NALs do you recall PICHARDO? He stated that if the peso were free to float it would be at 28... His silliness is missed, but he did provide some insights into the PLD at the time.

Hey, a cheaper peso works for me, but isn't the best thing for most Dominicans.
 

NALs

Economist by Profession
Jan 20, 2003
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NALs do you recall PICHARDO? He stated that if the peso were free to float it would be at 28... His silliness is missed, but he did provide some insights into the PLD at the time.

Hey, a cheaper peso works for me, but isn't the best thing for most Dominicans.
The alternative is to many of those employed to lose their jobs. I don’t think it’s much better for people to not have any income or increase further informality.
 

cavok

Silver
Jun 16, 2014
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Cabarete
In general, countries prefer to have more exports than imports. Devaluing the currency makes their good cheaper and supposedly boosts the economy.
 

DrNoob

Active member
Aug 10, 2024
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This would work if there are domestic alternatives to imports. The DR is too small to have all such domestic industries to supplant imports made expensive by various means (including tariffs). India, Brazil, China have done so but DR lacks the resources to do so and it is way too easy to import from China and the US (and to an extent from India for the motos)
 

chico bill

Silver
May 6, 2016
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This would work if there are domestic alternatives to imports. The DR is too small to have all such domestic industries to supplant imports made expensive by various means (including tariffs). India, Brazil, China have done so but DR lacks the resources to do so and it is way too easy to import from China and the US (and to an extent from India for the motos)
Not to mention that the failed utility companies can't provide enough electricity nor water for the country.

No one is rushing to build a factory in a location with no water, no electricity, crumbling roads and political warfare being waged against citizens, using basic needs, as the crudgel.
Economy 101.
 
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