Identifier | Created | Classification | Origin |
---|---|---|---|
03SANTODOMINGO7570 | 2003-12-29 11:03:00 | CONFIDENTIAL | Embassy Santo Domingo |
This record is a partial extract of the original cable. The full text of the original cable is not available. |
C O N F I D E N T I A L SANTO DOMINGO 007570 |
1. (C) Summary: Technical Secretary Carlos Despradel said
he had "no response, but would inform the President" when emboff conveyed Ambassador's concerns about an emerging currency black market. In a recent meeting, the GODR reportedly appealed to traders' sense of patriotism and the urgent need for an IMF program to elicit agreement from currency traders to sell dollars at a lower price. Embassy contacts confirm local press reports that dollars are scarce at the "official" exchange rate, and at least one paper has begun to quote the "mercado negro" rate alongside the official rate. End Summary. 2. (SBU) Since Mejia's December 2 appointment of a commission headed by police and military officers to enforce exchange trading regulations and close down illegal operators, the "official" exchange rate has stabilized at around RD$35 per USD. Prior to the appointment of the commission, the peso had been trading above RD$43 (reftel). However, there are now widespread reports of a shortage of dollars at the official rate. Exchange houses frequently remain closed, and banks are limiting the sale of dollars. A vice president of the country's largest private commercial bank, Banco Popular, told emboff December 23 that his bank is even limiting its sale of dollars for payment on dollar-denominated credit cards (issued by Popular) to the minimum payment amount. Other contacts, as well as the press, have confirmed that few if any dollars are available at the official rate. However, they note that dollars are readily available "on the street" for about RD$40/1. They also report incidences of (presumably preferred) customers purchasing dollars from exchange houses at the official rate, and then selling them outside at a premium. 3. (C) The owner of a medium-size chain of exchange houses told emboffs December 19 that Central Bank officials had met with bankers and foreign exchange traders earlier that week and told them that an IMF agreement hinged upon maintaining the currency below RD$40 per dollar. He said that the group informally agreed to keep the rate below 40, and that the Association of Foreign Exchange Traders now recommends to its members the price for dollars. The contact said that the GODR threatened further audits if the rate slipped and that the Superintendent of Banks has stationed people inside some of the exchange houses. 4. (C) Emboff called Technical Secretary Despradel December 22 to inquire about developments in the currency market and to convey concerns about apparent GODR interference. Despradel said that he had "no response." He said that as an economist he agreed that exchange controls would not work, but added that "no one could govern the country if the rate went to RD$70 to one." He said that he would raise Embassy's concerns with the President. 5. (C) In a separate meeting, officials from the Secretariat of Industry and Commerce reiterated the GODR position that the government is only trying to prevent illegal speculation against the peso. They said they would ask the Secretary of Commerce, who is a member of the Monetary Board, also to raise concerns about interference in he exchange rate with the President. 6. (C) Comment: The GODR finds itself in a difficult position and appears to be trying to "thread the needle." It wants to maintain fuel import prices and avoid social unrest that could result from rising costs of basic goods. At the same time, there probably are people speculating against the peso, and they likely have more resources to intervene in the foreign exchange market than the Central Bank does. However, most observers believe that the weakness of the peso is due primarily to lack of confidence. End comment. HERTELL |