WILLEMSTAD – A renewed public debate has emerged over the gold reserves of the monetary union of Curaçao and Sint Maarten, following a detailed analysis circulated by economist and former Auditor of the Court of Audit, Luigi A. Faneyte. In his article titled “On the Gold Reserves, CBCS Assets and the Future of Our Guilder,” Faneyte calls for a sober, fact-based discussion about the Central Bank’s 2024 decision to sell approximately 30 percent of its gold holdings.
According to the article, the Central Bank of Curaçao and Sint Maarten (CBCS) sold roughly 30 percent of its gold reserves last year and reinvested the proceeds into liquid, interest-bearing assets, primarily U.S. Treasury bonds. The move, Faneyte notes, did not reduce total reserves but altered their composition.
Liquidity Versus Diversification
The gold sale coincided with a sharp rise in global gold prices, which increased the book value of the remaining gold on the Central Bank’s balance sheet. Faneyte emphasizes the distinction between realized gains — gold that is sold and converted into liquid assets — and revaluation gains, where rising market prices increase balance-sheet value without an actual sale.
The rationale behind the Central Bank’s move appears clear: gold does not generate interest income, while U.S. government bonds do. In addition, highly liquid dollar assets can be deployed quickly if intervention is required to defend the fixed peg of the Caribbean guilder to the U.S. dollar.
For a small open economy, liquidity is not a minor consideration. Strengthening operational flexibility in the event of exchange-rate pressure can be seen as a prudent step.
However, Faneyte argues that risk has not disappeared — it has shifted.
While U.S. Treasuries are considered low credit risk, they are not immune to market risk. Rising U.S. interest rates can reduce the market value of existing bonds, potentially leading to accounting losses. The reserve portfolio is now more concentrated in dollar-denominated assets and exposed to interest-rate fluctuations.
Gold, although volatile in price, traditionally serves as a non-correlated safe haven during periods of monetary uncertainty. By reducing gold exposure and increasing fixed-income dollar assets, the Central Bank has changed the risk profile of the reserves: less exposure to gold price swings, but greater exposure to interest-rate and dollar risk, and potentially less diversification overall.
What It Means for the Guilder
The Caribbean guilder remains pegged to the U.S. dollar. The credibility of that peg depends on sufficient, liquid, and trustworthy foreign reserves. According to Faneyte, the recent restructuring does not directly weaken the guilder, provided that total reserve levels remain solid.
Still, the international environment is volatile. Rising or fluctuating U.S. interest rates, periods of dollar weakness, geopolitical tensions, global capital flow shocks, and pressure on the balance of payments are all potential stress factors. For an import-dependent economy such as Curaçao’s, reserve robustness is crucial.
The key question, Faneyte writes, is not whether the gold sale was “good” or “bad,” but whether the current reserve composition is resilient enough to withstand multiple stress scenarios. These could include a decline in gold prices, a rise in U.S. rates, a significant drop in the market value of U.S. bonds, a structural weakening of the dollar, or external shocks affecting trade flows.
Call for Transparency and Scenario Analysis
In his article, Faneyte calls for greater transparency from the CBCS. He suggests that the public would benefit from periodic scenario analyses outlining how many months of imports are covered by reserves, what the impact would be of a 10 percent bond market correction, and what minimum gold position is considered strategically necessary.
He also proposes examining duration risk in the bond portfolio, exploring further diversification — possibly including moderate euro exposure given Curaçao’s import structure — and using realized gains primarily to strengthen buffers.
Ultimately, Faneyte argues that the debate is not about gold versus bonds, but about prudent risk management, transparency, and safeguarding the value of the guilder in an increasingly unpredictable world.
For a small open economy, he concludes, trust is the most important capital. That trust depends not only on the size of the reserves, but also on the quality of their management and the willingness to communicate clearly about risks.
The discussion, he writes, must continue — calmly, factually, and with long-term monetary stability in mind.