Economist Victor Canto suggested that the authorities allow banks to open current accounts in dollars, which would be a simple way to achieve the dollarization of the Dominican economy.
Canto, a Dominican resident in the United States, believes that once current accounts are opened in dollars, bank clients will gradually stop opening peso accounts and will prefer to open them in U.S. currency.
He said that this will not require the Central Bank to have large reserves in dollars, since the banks’ private clients will look for their foreign currency to feed their accounts.
He considered that these clients will ask those with whom they do business to pay them in U.S. currency.
Canto is of the opinion that the US Government would not oppose the dollarization of the economy, since it is convenient for it because it charges the seigniorage established by the Federal Reserve for the right to print dollars.
He stated that dollarization would stimulate investments, since these are more expensive due to the financial repression applied by the monetary authorities to counteract the pressure exerted on the exchange rate by the printing of national currency.
Canto has explained the disincentive that a controlled economy, where prices are not free, represents for investments.
He explains that in a market economy interest rates would be as low as in Greece, Spain and Italy.
“We have to give certainty to the general population by adopting the dollar as their currency,” Canto argues.
He said that this will give transparency to the economy, eliminate price ‘interventionism” and make GDP growth more real.
He argues that distortions in the local economy can be corrected with a “dollarization of the poor”.
Distortions in the local economy can be corrected with dollarization.
“It is necessary to give certainty to the general population by adopting the dollar as their currency. This will provide transparency to the economy”.