domingo, 25 de octubre de 2009


Written by: Felipe Argote
Photos: Felipe Argote

Very regularly I receive consultation on whether or not it is beneficial that Panama is a dollarized country. With the increasing weakness of the dollar, this question is becoming more topical.

Part of the responsibility of the price increase is because some products come from Europe surcharge payable because the change has come today to 1.5 dollars per euro. For American exporters this weakness is ok as it suits them place their goods by 33 percent cheaper.

Let's see this with an example. If a European buyer intends to purchase an automobile he will take his options from North American and European alternatives. Let's say he's torn between a Volvo and a Chrysler. The Volvo is at 50,000 euros and Chrysler at 50,000 dolars. The buyer evaluates its options and see that when buying the volvo or the Chrysler he can change their euros for dollars. By being the change in 1.50 you can get 75,000 dolars with the 50,000 euros that he had intended to buy a car. In that case if you buy  the Volvo will invest 50,000 euros but if price is your priority you will decide by the American Chrysler since the vehicle will be paid by $ 50,000 and he still will have another $ 25,000 in his pocket, which is switching to euros to 16.667 dolars. The U.S. exporter will receive their $ 50,000 in selling the car so it is not affected and instead is happy to make the sale because of its weak currency.

But our reality down to Panama is not an exporter, we are not even a producer. Our economy, we know is bound by 80% for the tertiary sector, trade, finance, transport.

To make the story more interesting, lets put this into perspective. Some countries are currently dollarized: Ecuador, El Salvador and Panama. Other neighbors who wanted to be dollarized but are disabled. To dollarize the first thing needed is to hold dollars. I remember some politician now enjoyed at the goverment emphasized the need for U.S. bases to remain in our country because otherwise, they argued vehemently, the Americans were to take out the dollar. As presented very well dressed in suit and tie some thought they knew what they were saying. The reality shows that had no clue about what they were talking. Did the  thought Americans sent out a container with dollars each month to ensure that we had enough cash? These politicians were convinced that if the U.S. bases where closed the soldiers would pass through town the night before asking the locals, passersby and handed them their dollars. Who graciously force citizens to be honest they would put their pockets upside down and bring them to their rightful owners, with the exception of course of those like Bosco Vallarino who were made U.S. citizens. Absurd.

In order to have a dollarized the country must have enough dollars. If you ever need cash to a Friday night you stop at an ATM and this expels him, instead of the actual request, a paper in which he excuses and regrets not being able to provide and where guarantees that on Monday meet you at the bank without fail, you probably next time holding U.S. dollars bury it under your pillow or better yet packages it and keep it in the fridge. This attitude will create scarcity and deepen an economic crisis in the country, carried out by a plural number of angry depositors. So the first thing that requires a dollarized country is to have enough source of dollar inflows. How do Ecuador El Salvador and Panama? Why not Costa Rica, with its 2 million foreigners who enter the year? Ecuador,  is unlike Panama an exporter. It is the largest world producer and  exporter of banana, is the largest exporter of shrimp in controlled environment, petroleum exports, which represented 42 percent of its exports and natural gas among other items. Not for nothing is one of the biggest users of the canal. When you export demands to be paid in dollars. This is enough to cover their dollar requirements. El Salvador, another country dollarized its currency gets remittances their citizens who migrate to Los Angeles, Chicago and North Carolina eminently. These immigrants send money to relatives who are waiting anxiously in their home country. But this system differs from Ecuador does not seem sustainable. The people who migrate feel responsible for helping their family at first, but after five years or have moved all the other family members or have acquired a new family in his adopted country. Therefore it is constrained from sending dollars, as they have new commitments. The only way to keep dollars flowing river is to continue migrating Salvadorans. But while El Salvador is a country with high population density, since it is the most densely populated in Latin America will follow the trend of the time no one left who send remittances. The last one to leave turn out the light. Panama is another story however. She has driven the dollar since it became a semi-colony in 1903. Today the coins are guaranteed not only by the trust, but at the time of the begining of the last century the dollar was backed by gold. It was necessary then an agreement to authorize the use of the dollar in Panama. So-called agreement was signed on Taft in 1904 that allowed the use of the dollar in Panama and the back of fractional currency Balboa prior deposit $ 500,000.00 by Panama on a U.S. bank, as collateral. Currently, this agreement has no practical meaning since 1973 because the U.S. does not guarantee its paper currency with gold and Panama ceased to be a semi-colony at the end of the century.

But the neoliberal model that governs the entire world is a fundamentally monetarist model. We see that the U.S. maintains a weak dollar pear benefit from export and gives more money to get out of the recession that suffers. Also takes advantage of its central bank called the Federal Reserve reduced interest by promoting economic recovery. We also see that the underdeveloped countries now better placed financially and Brazil which was also the first out of recession, or as Chile did not have among its plans anywhere near the possibility of abandoning its currency through dollarization. Not even Mexico in its higher dreams of being part of an integration project with the United States thought of dollarization. Ecuador is in the process of de-dollarization. If there is not the term I coined.

When dollarization, the country virtually resigned itself to an economic policy as it does not have a central bank or with money. So why insist on the goodness of having a dollarized country. The reason is not economic or financial ... is political. I think almost everyone that there is consensus in confidence in politicians that the Panamanians have a little machine to make money from using it responsibly. We scared the possibility that our politicians in the nocturnal night surreptitiously moving towards making machine money and emit the quantity of paper that they fit in their pockets, while rubing his hands with a mischievous laugh.

Then it is convenient, economically speaking, as a country have the ability to have its own currency for internal transactions. That would not prevent for instance require users to the channel, which could be paid in hard currency. Having its own currency to avoid the current inflation reached almost 10%, but like most Panamanians, just scares me to think of leaving the responsibility of giving the mouse caren of the cheese. We have therefore taken the attitude of the alcoholic aware of his weakness who ask his boss to deduct all the liabilities in advance to avoid having cash in his hands because he knows he will not meet its obligation of being a good father and she used it instead of vice that controls it. This is a good example for alcoholics as a responsible citizen, If you are not, you know how to manage your money without giving up his administration. There is nothing to be proud then, having no currency.

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