According to the 3 December report of Bear Stearns, the investment banking and securities trading and brokerage firm, while their contacts in the economic team deny that capital controls would be implemented to stop the slide on the peso, they have reason to believe that “President Mejia seems to be relying on very strong moral suasion to try to force the peso stronger.” The report prepared by Carl Ross and Franco Uccelli for the firm states: “Our view is that this strategy is doomed to fail. In our opinion, by any valuation measure the peso is undervalued. The reason for the weakness is lack of confidence and too much peso supply. Trying to apply moral suasion to this set of circumstances will make the situation worse because it reduces confidence instead of increasing it.” The report explains that the peso should appreciate of its own volition because December is a month in which foreign exchange inflows are high due to remittances, the free-trade zones’ financial repatriation and the end of the Christmas inventory-building season. The peso broke the RD$45-US$1 barrier last week, to drop several points by itself at the end of the week.