Our failed monetary union

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During a Kingdom Consultation in 2006 it was decided to create a monetary union between Curaçao and Sint Maarten (CSMU). Not due to any economic arguments, but because The Netherlands didn’t trust Sint Maarten to have its own central bank. I was the only member of government to object but, instead of looking at the merits of my comments, it was suggested I’d be kicked out of the cabinet (Nobo, 1 November, 2006, p. 8). The decision to institute the CSMU defies even political logic. We should remember that Curaçao and Sint Maarten belonged to the Netherlands Antilles which in 2010 was disolved because each island wanted to pursue its own development policies.

The CSMU operates since 10 October 2010. During all this time the same Netherlands Antillean Guilder of the defunct Netherlands Antilles is in circulation even though a new currency was promised since 2008. On many occasions politicians from both islands have threatened to leave the union and or start using the U.S. Dollar. The biggest problem however is that there’re no commitments in this union. For this union -any monetary union for that matter- to be successful, macroeconomic policy coordination is indispensable. Just ask the folks of the Eastern Caribbean Currency Union who have been at it since 1983. Despite the strong arguments for such coordination, policy makers take an island rather than a union perspective. Just read the Curaçao Growth Strategy. Yet, nobody seems to care.

The failure to take care of this matter further impedes us to realize our economic potential. I’m not saying that the messy CSMU is the sole culprit for our current malaise. We should however be aware that we cannot afford to postpone this issue and others such as our inability to increase export and modernize our policies. We cannot keep fooling ourselves into believing that our economic situation is due to Venezuela. We all had to see Venezuela coming.  What we should’ve done is to improve our domestic fundamentals to adjust smoothly to possible external shocks, including Venezuela. Let’s stop playing the victim and do what we need to do, no matter how hard it may be. The payoff may not be at the next election, but our grandchildren will thank us for doing the right thing.

Willemstad, Curaçao

Author: alexdavidrosaria

Alex Rosaria is from Curaçao. He has a MBA from University of Iowa. He was Member of Parliament, Minister of Economic Affairs, State Secretary of Finance and United Nations Development Programme Officer in Africa and Central America. He is an independent consultant active in Asia and the Pacific.

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