Worries over who holds the CDs

[NewsWhore]

Two local economists, Arturo Martinez Moya and Guillermo Caram are expressing concern about just whom owns Central Bank certificates. They tended to question the bank's decision to increase the amount of certificates in the hands of foreign investors. They called the move "risky and possibly dangerous" since the certificate owners can, at any time, request their money and place significant pressure on the local currency. Currently about 20% of the Central Bank's CDs are in the hands of international investors. Martinez Moya pointed out to reporters that the recent problems in the sub-prime lending area in the United States could move investors to extract their funds from the Dominican certificates in order to cover their deficits. Economist Guillermo Caram called on the Central Bank to explain just why it has more than US$1.0 billion in foreign-held certificates. He recalled what happened in Mexico when foreign investors decided to withdraw their money. Both economists are identified with opposition parties, and when reporters pointed out that the certificates were for fixed periods of time, they said that foreign investors had used the secondary market to change their dollars into pesos to purchase the CDs, and could easily access the same market to retrieve their dollars. This would put a lot of pressure on the exchange rate and oblige the government to use some of its reserves in order to avoid any abrupt shifts in the exchange rates.

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