Today’s news from the Central Bank of Curaçao and St. Maarten (CBCS) about a looming hike in the foreign exchange licence fee may not come as a complete surprise, but it can hardly be called good news for the local private sector. After all, the US dollar remains the predominant currency on St. Maarten streets, so this is likely to raise the local cost of doing business and of living as well.
That is even the more the case because practically every consumer product must be imported from elsewhere with international financial transactions subject to the charge. Sure, it will only go from one to 1.5 per cent, but that is still an increase of 50 per cent. Then again government needs the additional 10 million Netherlands Antillean guilders, not in the last place because at some point soft loans provided by the Netherlands to survive the COVID-19 crisis need to be repaid.
While there are worse revenue-generating measures one might think of, to expect this will not have a negative socioeconomic impact would be naïve. At the same time, considering the amount of money sent abroad in remittances, perhaps an additional levy on those transfers as recently proposed in Parliament could have been explored instead.
It also seems any plans for dollarization should now be viewed long- rather than short-term. State Secretary of Home Affairs and Kingdom Relations Raymond Knops had earlier announced a study by the International Monetary Fund (IMF) on that option for the three Dutch Caribbean countries as part of their liquidity-support-related restructuring “packages.”
However, St. Maarten apparently needs the levy’s income, up to this point about NAf. 25 million per year under “normal” pre-COVID-19 pandemic circumstances.
Perhaps it is better to go ahead and move forward with plans for a Caribbean guilder to replace the present outdated – the Netherlands Antilles was dismantled per 10-10-10 – version. Radiating that kind of clarity and sense of purpose rather than indecisiveness can have a positive effect on the investment climate as well.