As part of the deal in 2008 to dissolve the Netherlands Antilles (Curaçao, Sint Maarten, Bonaire, Saba and Sint Eustatius) on 10 October 2010, it was decided that the common currency, the Netherlands Antillian guilder (ANG), would be maintained for Curaçao and Sint Maarten. “For a very short period,” we were told. This because the ANG would be replaced by a brand new currency of the brand new monetary union Curaçao and Sint Maarten (MUCS).
Today, 7 years after the dissolution of the Netherlands Antilles and the birth of the MUCS there is no new currency. Instead, the ANG of the defunct country is still in use which as far as I’ve been able to fact-check, is a world record. Curiously this topic came up during a conversation last year with an official of the United Nations banking institution (the United Nations Federal Credit Union (UNFCU)) who told me that the ANG did not appear anymore in its system meaning that someone who gets paid in ANG cannot get a loan or credit card from the UNFCU. How widespread this is, I do not know. Neither do I know if the authorities in Willemstad are even aware of this matter. Unnecessary confusion.
When Czechoslovakia was dissolved both the Czech Republic and Slovakia used the Czechoslovak koruna currency. In less than a year the two states adopted two national currencies. Shortly after the fall of the Soviet Union in 1991 local currencies were introduced in the newly independent states. The same thing happened with the dissolution of Yugoslavia, the breakup of the State Union of Serbia & Montenegro, the separation of South Sudan from Sudan and Timor Leste when it gained its independence from Indonesia. But why go halfway around the world? When Aruba left the Netherlands Antilles in 1986 it almost immediately introduced its own currency.
Sadly, this confusing situation, maintaining a currency of a country that does not exist anymore, is not the most important problem we are currently facing. The common definition of a monetary union is two or more countries with a single currency, one central bank, one monetary policy and convergence of macroeconomic policies. After 7 years there is no mechanism -not even on paper- to coordinate macroeconomic policies relevant for the monetary union. According to the Minister of Finance of Curaçao (2012-2016), when I questioned him in Parliament, the monetary union was “not a priority”.
Meanwhile under the watch of the two governments, the board of supervision of the Central Bank of Curaçao and Sint Maarten, we continue to think that somehow this monetary union will spontaneously function and be a success by pretending it doesn’t even exist. From time to time voices can be heard in Sint Maarten to step out of the MUCS and start using the U.S. Greenback which is de facto already taking place. In Curaçao the decision makers remain suspiciously silent.
The question is how the MUCS is going to function with a weakened Sint Maarten after the devastations left behind by Irma. How is a potential “free rider” problem, very common in dysfunctional monetary unions, going to be handled in the aftermath of Irma? What is the cost to preserve the MUCS – which was never based on one single economic feasibility study? Since Curaçao’s share of the MUCS is about 75%, is Curaçao going to pay for the lion’s share? Is Sint Maarten going to be pushed out or will Curaçao opt out?
I’ve always objected to the decision to have a monetary union between the two countries. My reasoning was that when political unions dissolve in separate countries/entities, this is done so that each party can pursue its own policies. If that were not the case, there should not have been any need for a separation in the first place I argued. So why did Sint Maarten and Curaçao form a monetary union? The Netherlands simply did not trust Sint Maarten to have it’s own central bank. So no monetary or macroeconomic arguments were used to arrive at the decision to come up with a MUCS.
As an avid sports fan, I am fond of records. As a former State Secretary of Finance, nothing makes me more nervous than this record-setting entanglement we are in. Question is how much longer are we going to dally without taking a decision? In any case if we want to be considered a serious international financial center this is definitely not the kind of situation we’d want to persist. Especially not when we throw in the mix the court hearings in the criminal case against the Curaçao and Sint Maarten Central Bank’s President that will take place at the end of this month.