President of Central Bank of Curacao and St. Maarten Shares Views on Monetary Union and Future Outlook
The Central Bank of Curacao and St. Maarten recently released its 2020 annual report which detailed the economic decline caused by the covid-19 pandemic and the prospective recovery which will not be seen until 2024; given that there is no other disaster. President of the Central Bank of Curaçao and St. Maarten (CBCS) Richard Doornbosch presented the report before an audience of economic, political and financial stakeholders as he laid out the economic developments of the last year, recommendations for recovery and engaging the audience’s questions.
In a brief dialogue with me, Doornbosch shared his thoughts on the topics of whether St. Maarten benefits from sharing its monetary union, the release of the Caribbean Guilder and the CBCS’s position on cryptocurrencies.
It is often mentioned and a matter of public discourse that St. Maarten contributes significantly to the foreign reserves of the central bank due to its dominant tourism economy. According to Doornbosch, in general, Curacao’s economy contributes 80% of the share and SXM 20% of foreign reserves. The difference in the size of the two islands is 4:1 ratio and he expects the foreign exchange ratio would be similar. “It might be that SXM does more than 20% in other years it would be less” but the larger financial center in Curacao Doornbosch stated.
Where sharing the union is concerned Doornbosch said, St. Maarten’s population is too small thus "the economy is not big enough to support it's own central bank." He added that the responsibilities such as supervisory tasks like supervision of the integrity of financial institutions and ensuring payment systems work, "those are things that require expertise, that requires specific expertise that is not readily available in every country." Therefore sharing the union and skillsets allow for the responsibilities to be taken up for both countries at once. “There's not a lot of trade integration but the financial integration is quite sufficient in a sense that many of the banks in Curacao are also in St. Maarten.”
When questioned about the use of the stock exchange to bolster economic recovery Doornbosch said “it's not an easy thing because if a company wants capital from the market, or float a bond on the exchange’. There are rules to be complied with, preparations of prospectus and it has to be a sizeable loan to make it profitable. “The guys from the exchange are actually pushing this they are very much in favour of using this exchange but it's up to the companies to use.”
Despite being dismantled in October of 2010, both St. Maarten and Curacao still use the Netherlands Antillean (NA) Guilder as their national currency; a currency of a non-existent nation. Aruba has its own guilder which was achieved when they separated from the NA in 1986.
There are plans to introduce the new Caribbean Guilder which was stipulated in legislation in 10-10-10. The holdup was caused due to differences in dollarization. He said it would first make sense to have these debates, which are scheduled to be held in September/October of this year, with pros and cons of dollarization. Depending on decisions made by the governments of Curacao and St. Maarten, they (CBCS) are planning to introduce the Caribbean Guilder as the currency. Although it was already made, it was never implemented. The CBCS will rollout the currency after the debates if the decision hasn't changed and the markets can expect it in 2023 or 2024. CBCS will provide an update on the rollout when the time comes.
He ended the dialogue with comments on cryptocurrency and stated, "we are in an analytical mode so it's really something we are following from 2 sides. One side is from a consumer perspective, that there's no fraudulent behaviour of the supply of cryptocurrency. They're not regulated in many instances, so it's really something that is a risk for consumers that are not well informed because the price of these cryptocurrencies go up and down." He warned that people should be careful before making investments. The second side of their analysis point of view is whether the CB should distribute its own digital currency where consumers can have a token or a direct account with CBCS and not through the banking system. "It's a very intense debate at the moment and there we have said we're going to follow this debate." For now, CBCS is focused on instant payments and efficiency. He said crypto is something of interest because it can help the financial inclusion of those that are unbanked, and help those businessess however there are pros and cons. "We have to study this as a central bank" but because it's a small central bank and he doesn't think CBCS needs to be the frontrunner on crypto.
