Will the pesos be devalued Soon?

swooperman

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The following article is Copied from the Sosua News Nov 14, 2008.

Since Dominicans abroad are sending less money (dollars and euros) home to the families here, tourism is falling slightly, and exports (of bananas to Europe, for example) have dropped, there is less foreign currency in the country. The Dominican Republic imports almost everything, and needs to pay for these items in dollars or euros. As there is less foreign currency coming into the country, this pushes up the peso. In order to buy dollars for imports, companies are now paying more pesos for foreign currency. In order to prevent this, the national bank plans to keep the peso stable (at 35.5 per dollar) by injecting 50-100 million dollars into the market. However, if the crisis continues for a long period, the central bank will not have sufficient funds to continue this strategy. So, at some point, the peso will probably be devalued.
Tourists will temporarily find prices lower, as they get more pesos for their dollars or euros, but, the import situation will mean that prices will rise quickly, and tourists will not really benefit. However, for Dominicans (who are paid in pesos) this will be disastrous - they will see prices in the shops being doubled, but their salaries don't keep up with inflation.
 

mountainannie

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Plenty of Platanos

The following article is Copied from the Sosua News Nov 14, 2008.

The Dominican Republic imports almost everything, and needs to pay for these items in dollars or euros.


From my research-- which is pretty high level coming from the Department of Agriculture and IICA, the DR is essentially food sufficient. It imports only 15% of its food and that is mostly stuff that it WANTS not that it needs. It seems that the main thing that the country imports is OIL and if there were a really forward looking push -- such as attracting a manufacturer of Solar Panels from Germany into the FTZs and taking the country GREEN - using the sugar cane debris for car fuel (which I understand is much more efficient than corn ethanol )-- could move the nation way ahead of the curve.

My understanding is also that the IMF has a lot of control over where the peso sits..... I think the whole planet is in this one together - it isn't just the DR.

And look at the bright side-- fewer cars!!

Wouldn't it be wonderful to see (and not hear!) electric motorbikes?
http://www.electricmotorbike.org/index.php?page=lectra

I know, dream on....

But... well... necessity is the mother of invention and lest we forget, the country actually does have more trees than it did 40 years ago.
 

suarezn

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The peso won't devalue much as long as the government keeps it artificially high...I don't believe they plan to let it float freely any time soon.
 

ExtremeR

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Mar 22, 2006
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No, The Central Bank has worked really hard to maintain the peso as it is right now, almost a month ago they injected US$100 millions to the economy so the peso can stabilize because some banks were speculating with the exchange rate. Interest rates are on the roof and will be there until midyear of 2009 when they will start to lower it gradually to control inflation and the exchange rate.
 

AK74

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Tourists will temporarily find prices lower said:
Memories of the time of 1x50 (even 1x55) are still very fresh and alive in my memory. And for visitors/tourists/expats it was BEAUTIFUL. It was the life it is supposed to be.
Especially for those who buy only local (not imported) products and use local services.

True, it was BEAUTIFUL.
 

mountainannie

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Yes but hell the other way around

Memories of the time of 1x50 (even 1x55) are still very fresh and alive in my memory. And for visitors/tourists/expats it was BEAUTIFUL. It was the life it is supposed to be.
Especially for those who buy only local (not imported) products and use local services.

True, it was BEAUTIFUL.

Yes but the lower the peso, the more the international debt. The debt has to be paid back in dollars, right? So does it work out in the long run? If they can indeed keep the peso stable, isn't it a good thing for the country as a whole?

I know that the hotel owners are pushing for a higher peso exchange but it seems that they are the only ones who benefits...doesn't the rest of the economy suffer? Everything else imported - cars, machines, paper, oil, ink, -- all become more expensive.
 

Castellamonte

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Memories of the time of 1x50 (even 1x55) are still very fresh and alive in my memory.


True, it was BEAUTIFUL.

...and it was HORRIBLE for the Dominicans and most others in the long run. Prices soared on everything from Milk to Concrete and have not gone down as much. I suspect it will happen again, but I feel sorry for those who derive their income in pesos.
 

AK74

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...and it was HORRIBLE for the Dominicans and most others in the long run. Prices soared on everything from Milk to Concrete and have not gone down as much. I suspect it will happen again, but I feel sorry for those who derive their income in pesos.
true.
agree.

there is no such thing that is good for every one.

something that is good for one is bad for another.

only communism teaches otherwise.

in real life if one becomes rich - it is at expence of some one (s)else.
 

jruane44

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A, A
A Dominican that lives in the states sends $100 home every week. The dollar is worth 50 pesos. He has 5000 pesos to spend as he pleases. At 35 pesos to the dollar it only comes out to 3500 pesos. Many Dominican families would love to see the rate go back up to 50 to 1.
 
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MikeFisher

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A Dominican that lives in the states sends $100 home every week. The dollar is worth 50 pesos. He has 5000 pesos to spend as he pleases. At 35 pesos to the dollar it only comes out to 3500 pesos. Many Dominican families would love to see the rate go back up to 50 to 1.

wrong,
because if the peso goes again on 50-1 the prizes for all daily needed goods will go up that way, too, so it would be like it had been the last time, he would have 5000 pesos for his 100 dollars but could buy less milk or rice aso than before for 3500 pesos.
after the last 'high' of the exchange rate went down i did til today not see what rates/products went down in an equal %%%.
at the moment the exchange rate comes close to 40 pesos per dollar we will face the first 40+% of rising rates for all daily needed products, in case it would reach a 50 pesos per dollar i would expect at least 2, maybe 2 1/2-3 times the rates compared to today.
and that would sure be again a disaster for a huge part of the citizens because their working hours would be again worth much less liters of milk/lbs of meat aso aso.
and the 2nd disaster of the same kind in such a short time period will even effect much more than the first.
Mike
 

MikeFisher

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right on your comparison between the US and the Dominican currency.
but such is too simple to have value about the real value of one of those currencies.
look on the differences between US$ and Euro the last months,
the Euro been this year on a top of around $1.60.- compared to the dollar, went down to $1.1587.- and is back up rising now.
in the stats of the link i could not find that lil disturbance, so would that mean it was only the euro who 'weakened' a lot and comes back or was it the dollar who had a 'strengthening' and weaks back down??
i don't know,
i am really not speculating on currencies, i always try to keep them in their currency and use them that way without exchanging them to others.
early this summer when the dollar started to strengthen/euro started to weaken compared to dollars, what ever of both been the reason, i had some dollars free at my hand and got offered a good deal to buy euros. i planned and still do to visit europe in summer 2009, so i thought it may be a good moment to get some pocket money in euros aside. i bought euros and paid them in US dollars. i did not think about a breakdown of the euro compared to the us dollar and more important, i did not plan to change that money back into some other currency. just a lil bit up or down would not been important, because once i purchased the euros i anyways had no plans to trade them, i just wanted to keep them for the 2009 summer trip there. this fall i had the situation where i needed some cash, i did not have enough dollars or pesos to cover the leak, so i had to pull some euros out from under the mattress and exchange them in pesos, heck, compared to what i paid for them few months prior i had a deficit i really don't wanna talk about. my lil cash leak been resolved, yes, but if i would not have changed those dollars in euros, just let them in dollars and changed them in pesos when needed would have saved me the money for many x-mas employee parties like i had one for the boys this afternoon.
never compare just 2 currencies to each others.
that the dollar shows moving up to the peso MAY mean the peso is weakening, but it also may mean that just the dollar is strong against all others at that moment and the peso may be stable compared to them except to the dollar.
it's a devil's game,
that's why i don't like to trade currencies,
but hey,
i wanted to purchase what i purchased at that time and the available currency been only the at that moment weak euros which i bought prior to that "shopping idea".

i really hope we will not come any close to the 40 pesos per dollar the next 2 months(without any gas-rates raises), it would raise the rates for the daily needed stuff a lot and bring a very bad taste to the many people who earn their money on a fix pesos number.
and an important point actually many people don't see in it's importance:
the gas rates are down, completely down, half than they've been when on top rates THIS 2008 year, but no rates of anything did significantly drop down.
i did not see not even one cabby driver who lowered his rates because the gas costs half than a short while ago, public transportation tickets are more expensive than ever. neither did i realize such when i purchase some bred or chicken or rice or such. we are actually in the high danger of a softly falling (softly because with a lot of gubmin money 'stabilized') Peso while the important rates factor of the country, which is the rate for the GASOLINE/COMBUSTIBLE PARA LAS PLANTAS, is in the cellar.
let that gas go up just a few lil percentos and we will have a disaster, the gubmin does not have the resources to balance such with an other 100 or 200 millions to stabilize.
if the pound of chicken costs early february 200 pesos while salaries are today's, that's when people are on the streets with the police force on their side.
Mike
 

Mu?ecote

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the real question is what happens when the us dollar depreciates over the next year vs the majors and what affect it will have on the peso. i think leonel finally gets it but is he too late to the game and will we have to suffer the same consequences as the US where our purchasing power is severely diminished because of too many dollars in circulation and too few goods.
 

MikeFisher

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the purchasing power is decreasing worldwide, that the effect of a worldwide economy crisis, and of course such will effect the lil Isle the same than other countries.
this x-mas season been booked and all is moving on a 100% occupancy, but in case of the turism here i await strong downslides this upcoming spring and summer compared to the prior year.
the touroperators will throw out a bunch of great deals to occupy their contingents on planes and at the resorts, many people may skip 2009 and not go on vaca overseas or to the caribbean.
Mike