[b]Dominican Republic Banking and Exchange Rates:
Due to the previous devaluation of the Peso vs. the US Dollar (which has now gone the other way) many Dominicans have converted their currency holdings to US Dollars. As such, the local banking system is flush with US Dollars and the result has been a decline in US Dollar interest rates as a result. Most banks are currently offering anywhere from 2 to 4 percent on US Dollar savings accounts and up to 5 or 6 percent on time deposits. However, time deposits at local banks in Pesos will offer up to 20 percent. In addition, the current exchange rate is about 28 Pesos to one US Dollar, down from the previous high of 52 Pesos to the Dollar. What is going on? The current government is attempting to contract the money supply with three main goals in mind. One is to curb and possibly reverse the inflation that existed under the previous administration, the second is to encourage more investment and third, to silence the outcry for adopting the US Dollar instead of the local currency as a medium of principle exchange. On the last point, indeed, many businesses have stopped indicating prices in Dollars and have gone back to Pesos as a result. All positive moves to stop the erosion of the national currency and to maintain control over the Central Bank and ability to influence economic policy. Once a country accepts the US Dollar as its legal tender, or allows for a scenario whereby the Central Bank becomes nothing more than a puppet instrument for another foreign government, then such a country has just lost is sovereignty. It would seem to me that this is something the current administration seemingly does not want to accept or see happen, and a admirable point to be sure.
Originally Posted by BrooklynBeas
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