Referring to the recent two-percent increase in the Central Bank benchmark interest rate, business owners interviewed by journalists of acento.com.do and El Caribe say they accept that the Central Bank had no alternative. The Central Bank approved the rate at which monetary policy is set from 4.25% to 6.25% yesterday, Thursday 29 August. The peso had depreciated past the RD$43 mark this week for the first time in many years.
They were interviewed after attending the Analysis of the Economic, Social and Institutional Situation for the Period 2012-2013 held to mark the 50th anniversary of the National Business Council (Conep) at the Hotel Embajador yesterday.
Julio Brache, former president of the American Chamber of Commerce said that the devaluation of the peso was reaching peak levels in recent years. Brache said that the measure would restore stability to the exchange market. He said many manufacturers were about to increase local prices.
Pedro Perez of the Santo Domingo Chamber of Commerce (CCPSD) said that other factors affecting the market were the nervousness of economic agents. He said, nevertheless, that the measure was being taken in a year that is marked by reduced economic activity. He said the government capital investments are down, and despite a reactivation when the Central Bank authorized a reduction in bank reserve money in May, a new contraction of the economy is to be expected.
“The fact that the interest rate was increased by as much as two percentage points is very significant as it will undoubtedly contribute to a contraction of the economy. But we know it is aimed at encouraging investment and saving in Dominican currency and preventing the pressures on the exchange rate,” said Perez. He said the effects would be painful.
Circe Almanzar, vice president of the Dominican Republic Industries Association said that it was the only measure the government could take to restrict the money in circulation. “Unfortunately this is going to bring a greater slowdown of the economy that already had very low growth rate,” she said. She said that the country has to take anti-inflation measures because it depends greatly on imports, especially fuel and raw materials, and the increase in the exchange rate would have led to inflation.
Kai Schoenhals of the Dominican Exporters Association says that the Dominican government had set the target for the Dominican peso at 43 pesos to the dollar by the year’s end. “But this has happened prematurely and the Central Bank is using the mechanisms it has to achieve stability,” he said, adding that there has to be a balance that does not affect exporters or the general public. He commented nevertheless that inflation has always been greater than depreciation, which results in reduced competitiveness for foreign currency generating sectors.
Frank Elias Rainieri of the Young Entrepreneurs Association (ANJE) recalled that just a few months ago the government announced measures to stimulate the economy that had slowed down mainly due to the chilling effects of the November 2012 taxation increase has had on consumers and business.
www.acento.com.do/index.php/news/116019/56/Empresarios-califican-de-dolorosa-pero-necesaria-alza-en-la-tasa-de-interes.html
www.elcaribe.com.do/2013/08/30/temen-medida-afecte-creacion-empleos-credito