Update Country Report Curaçao 28 Oct 2016

Event

An anti-corruption investigation continues against Emsley Tromp, the president of the Centrale Bank van Curaçao en Sint Maarten (CBCS, the Central Bank). The case has prompted Dutch authorities to consider greater supervision.

Analysis

On October 7th a Dutch-led anti-corruption unit raided the offices of the CBCS, located in Curaçao's capital, Willemstad. Earlier, in August, Mr Tromp's home was raided, along with the offices of a trust company that is considered to be connected with the case. The raids are part of an ongoing investigation against Mr Tromp over possible tax fraud and money-laundering; he has taken leave of absence from his position as a result.

Accusations against Mr Tromp were lodged as early as 2011 by the prime minister at the time, Gerrit Schotte (2010-12), who is also the current leader of Movementu Futuro Kòrsou, one of Curaçao's largest political parties. It is not clear whether these initial accusations were politically motivated, but they were seen as damaging to the relationship between the Curaçao government and the legally independent CBCS.

The investigation has raised concerns among Dutch authorities about whether the De Nederlandsche Bank (DNB, the central bank) should be granted greater supervisory authority over the CBCS. The CBCS was created in 2010 following the dissolution of the Netherlands Antilles; it oversees monetary policy for both Curaçao and Sint Maarten. However, the DNB does have authority over some other smaller Dutch territories, such as Bonaire, Saba and Sint Eustatius. Some degree of Dutch supervision has already been granted during the past year, owing to concerns about the "working and integrity" of the CBCS.

The investigation should not have a material impact on monetary policy for the two islands, although much will depend on whether Mr Tromp remains in his post or is ultimately replaced (or charged). However, it could lead to greater involvement by Dutch authorities in the islands' economic management. The situation could trigger greater efforts by Sint Maarten to leave the currency union with Curaçao and set up its own central bank, a latent proposal that would likely garner considerable support.

Impact on the forecast

We expect Dutch authorities to pursue the investigation against Mr Tromp and the CBCS with greater rigour. This will raise the risk of a secession of Sint Maarten from the currency union in the near future (although this is not currently our baseline forecast).