Most of the weekend?s papers featured articles on the rising cost of a US
\ndollar, and the Central Bank?s publication of a communiqu? that states that the
\nelection campaign is affecting the exchange markets.
\nAccording to Diario Libre newspaper, the Central Bank chided the candidates for
\nwhat it called ?imprudent? handling of the economic themes of the campaign. This
\nsituation, according to the bank, has caused ?a profound state of uneasiness in
\nthe financial markets?, resulting in early withdrawals at the Central Bank, and
\na run on the dollar to around RD$50-US$1, after two months hovering around the
\n43 to 1 mark. ?Efforts of the government and Dominican society are threatened by
\nthe imprudent way in which the economic theme is covered in the political
\ncampaign and continuing warnings made by some spokesman for parties
\nparticipating in the race regarding future freezing of certificates or
\nunilateral reduction of the interest rates that is paid by the Central Bank,?
\nstates the communiqu?.
\nAt the center of debate is the converting into a campaign issue what Leonel
\nFernandez could do if elected President regarding the RD$75 billion in
\ncertificates of deposit at the Central Bank. The Mejia campaign ran a spot on TV
\nand radio alerting that deposits at the Central Bank were endangered by a vote
\nfor Leonel Fernandez, after the latter has stated that the high interest rates
\npaid on the deposits are unsustainable for the Dominican economy. The PRD
\nturning the matter into a campaign spot and weak point against the Fernandez
\ncandidacy seems to have boomeranged and diminished local confidence even further
\nand led to cashing in of the certificates before their expiration, and these
\npesos in turn pressuring the market as they are converted into US currency, just
\ndays before the election.
\nAs the Central Bank publication ran on Saturday in the local press, Hoy
\nnewspaper concurrently published statements by Jaime Aristy Escuder, of the
\nFundacion Economia y Desarrollo, who alerted speaking from the PRD campaign
\nheadquarters that if Leonel Fernandez is elected, he could lead the country to a
\n?corralito? situation similar to that in Argentina. Aristy blamed Fernandez for
\nthe new slide in the peso. The economist said the only way to confront the
\nsituation of the quasi-fiscal deficit is to reduce the high interest rates the
\nCentral Bank is paying on the deposits. Both Aristy and the president of the
\nFundacion Economia y Desarrollo, presidential economic advisor Andy Dauhajre,
\nhave taken a visible stance recently to defend the government of President
\nHip?lito Mej?a, asserting that he is the best option to manage the present
\neconomic crisis.
\nPresident Leonel Fernandez addressed the quasi-fiscal debt issue on Friday, on
\nthe Uno + Uno televised interview in reference to the depreciation of the peso.
\nHe said that the present government has issued RD$110 billion in money not
\nbacked by reserves, and has removed RD$75 billion in the form of certificates of
\ndeposit at the Central Bank. He explained that the 50% interest being paid on
\nseveral of the more recent deposits is ?too attractive,? and has resulted in
\ndepositors removing their money from commercial banks [that pay 16-30% interest
\nrates] to be deposited in the Central Bank. ?If everyone takes their money from
\ncommercial banks to the Central Bank, the banks will collapse, and if banking
\ncollapses, the Dominican economy will collapse,? he said. He said to confront
\nthis situation, his government would sell assets of the Central Bank, the
\ncentral government, and perform fiscal adjustments to reduce the quasi-fiscal
\ndeficit. ?Only this way would we be able to generate confidence to resolve the
\nproblem, and the US$3 billion that has fled will return to the country, as will
\nforeign investment and as a country we will again be able to attract savings,?
\nsaid Fernandez. He explained that if Dominican banks paid 4% on savings in
\ndollars, flown capital would return because it earns more here. According to
\nFernandez, this capital is not coming in because there is a lack of confidence.<\/p>\n","protected":false},"excerpt":{"rendered":"
Most of the weekend?s papers featured articles on the rising cost of a US dollar, and the Central Bank?s publication of a communiqu? that states that the election campaign is affecting the exchange markets. According to Diario Libre newspaper, the Central Bank chided the candidates for what it called ?imprudent? handling of the economic themes … <\/p>\n