The Central Bank of Curaçao and Sint Maarten (CBCS), previously the Central Bank of the Netherlands Antilles, has been under fire for years. Deficient oversight of, among others, Ennia (an insurance company), Giro Bank, FCIB Bank, and dealings with a convicted criminal has affected its reputation. Integrity and ethical failures have characterized this institution which will not bode well with the upcoming peer review by the Caribbean Financial Action Task Force. It has mastered how to apply the lowest possible ethical standards that it can get away with. Yet, I’m not going to talk about these today. Neither will I mention the personal vendettas, conspiracy theories, revenge, and constant leaks of confidential information. Seems better if a producer adapts all this into a Colombian novela.
As part of the deal in 2008 to dissolve the Netherlands Antilles (NA) in 2010, it was decided that the NA guilder (Ang), would be maintained in the monetary union of Curaçao and Sint Maarten. “For a very short period, until the Ang is replaced by a new currency,” we were told in 2008. After that, the CBCS went silent on this matter. No reasons were given. Recently it announced that a new currency will be introduced. Will it happen this time? What’s certain is that Curaçao and Sint Maarten will go down in history as jurisdictions that have maintained the currency of a non-existent country for the longest time.
So why did Sint Maarten and Curaçao form a monetary union? The Netherlands did not trust Sint Maarten to have its own central bank. Simply a political decision. No monetary or macroeconomic arguments were used to arrive at this decision. I was the only one in the Council of Ministers who vehemently objected to forming this monetary union.
When countries dissolve into separate entities, as was the case with the NA, this is done so that each party can pursue its own policies. Parties of a monetary union must after all coordinate and/or harmonize certain macroeconomic policies. Why would they want to do that after just being separated? We decided, however, to ignore common sense and join a union, thinking that somehow it will spontaneously function and be a success by pretending it doesn’t even exist. Under this misguided premise, the union came into being. We have not taken measures for the convergence of macroeconomic policies. I dare anyone to find a meaningful passage in the government programs of Curaçao or Sint Maarten that refers to concrete matters on the coordination of policies. How many times have the Ministers of Finance of Curaçao and Sint Maarten or government employees sat down to discuss policy coordination? The fact is that macroeconomically, the two members of the union have drifted further apart since 2010. Does it make sense to continue without a profound investigation? Are we not aware of how the Eastern Caribbean Central Bank has been handling its monetary union since 1983? To make matters worse, every so often, Sint Maarten threatens to adopt the U.S. dollar making the union unnecessary.
It’s important to take stock and determine what we strive for with this union. Waking up after almost 15 years and pretending nothing has changed is a blunder.
Alex Rosaria is a former State Secretary of Finance (2006-2009). He is currently a freelancer in Asia and the Pacific, a fellow with the Caribbean Policy Consortium, and a member of the Global Americans’ Workgroup on Climate Change in the Caribbean.
2 thoughts on “The Central Bank needs to get its act together”
I enjoyed this article.
Thank you. Much appreciated