The case against dollarizationPOSTED: 04/10/15 12:20 PM
The fact that there is still a discussion on the dollarization issue is somewhat strange to me and not because I think it would the worst thing that can happen to us in St. Maarten but because of the total lack of actual benefits proposed by those supporting dollarization.
The symposium on dollarization organized by the Council on Advice at the University of St. Maarten only confirms what I have believed all along, that dollarization is not a valid option for St. Maarten. Although I am basing my article on what was published in the media since I was unable to attend the actual meeting.
In the media, supporter of dollarization, Mr. Richard Gibson, used two arguments. One was we should dollarize because the French Side of the island doesn’t take guilders. His other argument was that the Central Bank of Curacao and St. Maarten keeps most of the profit from the seigniorage of the Antillean Guilder and St. Maarten does not benefit from this. The first argument does not even warrant a response as it makes no sense to even mention that as a reason to dollarize. The second statement is actually an argument against dollarization, instead of the seigniorage ‘disappearing in the pockets of the Central Bank’ this money would now be a profit for the Central Bank of St. Maarten and be used for the benefit of St. Maarten economy.
What worries me about this issue is that to date I have yet to hear a convincing argument for dollarization other than for convenience of the tourist and the business community. Even reputable consultancies are giving presentations with incomplete information and the advice from the SER cannot be considered scientific and was only presented in order to push their agenda.
I am bold enough to say this because both items mentioned above only mention the negatives of a St. Maarten dollar and do not mention the positives. Additionally, every benefit mentioned in the SER document is one for the business sector. I am sorry but as it is now the business sector does not contribute to the development of St. Maarten and in most cases are only exploiting the island. Do I need to remind the SER that tax compliance is only 30%? After giving these businessmen all these benefits, how is government going to pay its bills?
The SER does mention seigniorage as a benefit but fails to mention the foreign exchange tax. For all dollar transactions, the government makes money. The strange thing is that no one seems to know how much is collected in foreign exchange tax or they are refusing to tell us. Why? It is my opinion that everyone who is supporting dollarization is either grossly uniformed or has a stack of dollars in a US account and does not want to pay to withdraw the money. They care not about us. If the people now holding their money in US accounts don’t want to pay foreign exchange tax then simply convert your money to guilders.
Even more of an indication is the situation in Saba, Statia and Bonaire. Even with all the proof of a failed system, we still have some people supporting this dollarization idea. I was discussing with an Independista the other day and they are fully supporting dollarization but could not clearly indicate to me why. I guess they are proud to carry a St. Maarten Passport but ashamed of a St. Maarten Guilder/Dollar. Does anyone else see the hypocrisy in this? I guess they are not Independista but American-ista.
If you reading this right now and you don’t have thousands of dollars in a US account, you had better get involved in this discussion and quick. The reason being, is if we make the grave mistake of dollarizing and we lose the seigniorage and the foreign exchange tax, where you think government will plug that hole? You guessed it, they will do what they always do when they need money, raise taxes. Don’t believe me, remember the TOT was only supposed to be implemented for three years.