Hoy newspaper comments in an item in its economic section today that after the government agreed to reduce interest rates on certificates of investment, the representatives of the banking sector voiced their support for the measures announced by the government?s economic team. The newspaper writes that this new attitude is an about-face from the banking sector?s initial endorsement of the National Council of Business position that the recent government measures would have an overall negative effect on the economy.
As reported in Hoy, other business sectors contest that the government should have instead eliminated the subsidy it provides for its own payments. For example, the government has allotted itself a 17.76 exchange rate for payment of its debts in US dollars, which is much lower than the rate of RD$24 and up, which almost all private companies must pay for their imports. As a result of this practice, taxpayers ultimately pay for the subsidy to the government exchange rate.
Hoy newspaper explains that to eliminate the subsidy and remove RD$8 billion from circulation would have been a more healthy adjustment, with less detrimental effects on all businesses outside of the banking sector. The restrictive measures on money in circulation have resulted in record-high interest rates that penalize businesses and force companies to reduce their operations and fire personnel. The National Council of Business has recommended that the Central Bank rate comply with the elements of the recently passed Monetary and Financial Code ? something that is not happening at present.
After the government ceded to their requests, however, the banks have returned the favor by supporting the government and its unpopular measures, reports the Hoy newspaper item.
Interestingly, the Diario Libre, El Caribe and the Listin Diario, three press organizations owned by large banking groups, all carry stories that draw positive conclusions from the meeting between the banking sector, the presidential economic team and the media.
The front-page headlines of Thursday, 20 February generally reflect the financial institutions? support:
Listin Diario (Baninter): New measures push exchange rate down
El Caribe (Banco Popular): Peso-dollar rate expected to continue to drop
Diario Libre (Bancredito): President wants exchange rate of RD$20 to US$1
Following the meeting between the banks, economic team and the media, Luis Gonzalez Fabra, spokesman for the President, said that Mejia would be satisfied if the exchange rate to fluctuate from 20-22 pesos to the US dollar.