Listin Diario reports that the prime rate fell to 14.36% last week, the lowest in the past 10 years. Interest rates have been sliding since May, after reaching highs of more than 32% in December of 2000. The average lending rate is now 19%. Jose Lopez Valdez, president of the Association of Commercial Banks, expressed his concern that interest rates could go below the 12% historic low set in 1919 when the US intervened in Dominican financial markets. He expressed his concern that Dominicans might switch their savings to US dollar accounts. Economist Porfirio Garcia said the drop in interest rates will have a positive effect on productive sectors in the DR. He said the rates are declining because of the economic stability of the country and the elimination of restrictions on credit by the Central Bank. He says the decline in Dominican banking rates comes at a favorable time, especially since the US Federal Reserve has reduced rates in that country to new lows thus reducing the incentives to move capital from the DR to the US. He feels interest rates could continue to drop locally. (See http://www.bloomberg.com/markets/rates.html for info on interest rates in the US.) Economist Pedro Silverio of the Madre y Maestra University economic studies center told Listin that the rate decline is a consequence of the government having access to US$497.5 million in sovereign bond money and US$80 million from an Interamerican Development Bank loan disbursement.
