The Dominican economist Víctor Canto has been characterized for being a standard bearer of the dollarization of the economy and his most recent article has generated controversies which the professional defends on the basis that it is convenient for the Dominican Republic, since in his opinion it prevents the governments from spending freely and also the capital flight is controlled.
Canto told Listín Diario that he defends his approach, which was refuted in an article by Virgilio Malagón. He explains that his position is very different from a dollarization as it was applied in El Salvador.
The economist said that Malagón lists a series of points that he believes are a disadvantage and the first point is that the country would cease to control its monetary policy and then the decisions would depend on another nation, and on this subject he says that “he who is a good tree, has good shade”.
The first thing will also be to see which is the best monetary policy, whether the local or the US one, because in his opinion the dollar has been maintained here at a high cost, in terms of financial repression.
One only has to see, he said, the differential paid between deposits and the collection of loans in banking and it is very high, which in part reflects a financial repression of the policy that wants to issue money and simultaneously maintain the currency, so he believes that his approach for that reason is an advantage. He also refutes that capital flight is provoked because he believes that this is controlled with a good economic policy in which the country grows, there is more opportunity for investment and economic freedom and there will also be a guarantee. Interest rates would go down, he said.
“It means that dollarization would force Dominican governments to opt for a higher growth economic policy that is attractive and would lead to a new fiscal policy in the country,” Canto said.
Víctor Canto said that nobody talks about Panama, when he was given the example of El Salvador’s dollarization. He said that in that country the official currency is the Colon and it is not printed and people use the dollar and have done well.