A study of the evolution of interest rates in El Salvador over 37 years concludes that dollarization confirms the theory of parity between domestic and international interest rates .
From the concluding remarks of the study entitled "El Salvador: Determinants of interest rates" by Alirio Alfonso Fernandez:
"An Interest rate represents the price of money and is an indicator which takes into consideration economic agents when making decisions on consumption, investment and savings, variables which influence economic growth and inflation.
There has been more than a century without salaries, offices and staff travel expenses, while politicians have been forced to control costs, having no one else to cover the deficit by printing money.
Economist Quijano Diego Duran celebrates the anniversary with an article in Prensa.com, outlining the advantages Panama has had over other countries in the area, from lacking of a central bank.
Panama minted coins of one and two Balboas for circulation at par with the Dollar.
José Ramón Fernández, director of the Ministry of Economy and Finance, noted that the measure does not imply any changes in the Dollarized economy of the country. The coins will be used without any restrictions and with the same nominal value of the U.S. Dollar.
Fernandez explained that the Panamanian government pays the United States a high cost for the return of damaged notes, and that these have a lifespan of nine months to a year approximately. He added that it costs to acquire Dollars from the United States. However, in order to circulate the U.S. Dollar in Panama, the country must purchase at face value through the Central Bank in denominations and must bear all freight and insurance costs implicit in importing the currency," published Horacero.com.pa.
Slow recovery tied to a lagging U.S. economy, 3% growth in 2010 due to increased domestic consumption and rising remittances and international trade.
The countries in Central America are recovering gradually, led by a rebound indomestic demand (following its sharpcontraction in 2009), which has partly spilled over into imports. Pickups in exports and morerecently remittances have been further positive developments.
Good news for importers and store owners, bad news for exporters. Governments cannot afford to ignore this problem.
The causes of the appreciation in the value of Latin American currencies relative to the United States dollar are varied. The main reason is the current weakness of the US economy and the low expectations of a quick recovery. In addition, Central and South American economies are doing well, boosted by high commodity prices and the way their financial systems withstood the last crisis.
The recent increase in the value of the Costa Rican colon versus the dollar is worrisome, not only because there are no clear reasons to explain it, but also because it would be hard to contain it without causing greater problems.
In the past weeks, and without apparent reason, the price of the U.S. dollar in Costa Rica dropped considerably.
Last week we surveyed some financial operators as to why these movements where occurring, the general answer being: “we don’t know”.
As in Orwell’s fable, Central Banks assume the task of deciding who, among equals, “is more equal than others”.
Paul Laurent Solís analyzed the anathema that has become the label “tax haven”, and remarked the role Central Banks have assumed in Central American economies, especially when they become tools for whichever government that happens to be in power.
Fitch Ratings warned that although Central American sovereigns have resisted the global crisis pretty well so far, they now require fiscal consolidation in order to maintain their credit ratings.
Summary
Fitch‐rated Central American sovereigns have thus far withstood the destabilizing effects of the global economic and financial crisis, despite monetary and exchange rate policy challenges.
"Almost all independent countries choose to assert their nationality by having, to their own inconvenience and that of their neighbours, a peculiar currency of their own".
This phrase by John Stuart Mill is the header of an analysis on the subject published by the Central American Monetary Council.
In it, they attempt to answer the following questions: It there justification for Central American countries to have their own currencies? Which monetary options do these countries have? Wouldn't it be more convenient for them to use a unified currency, either a proprietary one or an existing like the U.S. dollar, Euro or Yen? What are the required steps towards a monetary union?
Although recent public opinion has focused on what went wrong with securitization, it is important to recognize the many benefits associated with sound securitization.
Global Financial Stability Report (GFSR), October 2009 - Chapter 2
Key points:
Sound securitization provides important benefits—to allocate credit more efficiently, transfer credit risk away from banking sector to more diversified investors, and more finely tailor risks and returns to potential end investors.
Panamanian banks will not use Financial Stimulus Program funds due to their terms and conditions.
The Banking Association of Panama, through its president, Mosi Cohen, told the new government’s transition team that banks have not and will not use Financial Stimulus Program (PEF) funds unless there is a change in the terms and conditions.
Journalist Edith Castillo Duarte wrote in a Prensa.com article: "ABP (Panamanian Banking Association) seeks conditions that are more flexible and consistent with our reality in order to maximize these resources and [Cohen] recommended for the new government’s team not to commit to using the funds from the Inter-American Development Bank (IDB) because they would have a very high cost for the country under the conditions that these funds have been presented to us.”
The $500 million contributed by the IDB for the financial incentives program will be available beginning on May 10.
The National Bank of Panama will manage the $500 million available to Panamanian banks through loans with two-year terms and an interest rate of 4.50%, with interests for LIBOR services at 6 months.
The Prensa.com website published: "The PEF funds are destined for short term loans and for promoting investment, employment and stimulus of the Panamanian economy, looking to minimize the crisis."
The National Bank has announced the terms and conditions under which PEF loans can be accessed.
Bank Manager Juan De Dianous reported that the loans will be in terms of up to seven years and under the individual parameters of the three entities that have contributed funds.
Edith Castillo wrote in Prensa.com: "The BNP issued a statement inviting all general license banks interested in using these funds to go to the offices of the entity on Via España for the corresponding procedures."
The terms and conditions of the Financial Stimulus Program for banks to access the $1.11 billion are ready.
The banking industry has repeatedly indicated that for the program to be attractive, it should allow the use of funds without the submission of collateral. However, according to an article in Prensa.com, a government source said: "It is going to be difficult to omit this requirement [the filing of collateral] because the Government is responsible for the use of this money."