Update Country Report Curaçao 08 Oct 2018

Event

Curaçao and Sint Maarten have launched a study into the feasibility of establishing a common currency by 2021, aiming to bolster economic and trade ties between the two countries.

Analysis

Curaçao and Sint Maarten effectively share a currency at present through the Netherlands Antilles guilder, but the aim to create a new currency is linked to ongoing efforts to demonstrate growing autonomy from the Netherlands. Both countries have been using the Netherlands Antilles guilder as their currency since the dissolution of the Netherlands Antilles in 2010 and the move to a more autonomous status for the former overseas territories within the Netherlands Kingdom. Saba, Bonaire and St Eustatius, three other former members of the Netherlands Antilles, have adopted the US dollar as their formal currency but Curaçao and Sint Maarten announced plans to adopt a joint currency, tentatively named the Caribbean guilder.

According to Leila Matroos-Lasten, the interim director of the central bank of Curaçao and Sint Maarten (CBCS), the goal is to adopt the new currency by 2021. The central bank is currently making preparations for an evaluation of the plans for the new currency by the IMF, which will take place at an unspecified date. Ms Matroos-Lasten added that the new currency could be linked to a digital currency, which would increase its international liquidity and potentially boost trade opportunities. The CBCS has signed a memorandum of understanding with Bitt Inc (a Barbados-based financial technology company) regarding the possibility of launching a digital currency.

The cost of transitioning to a new currency could make the project less feasible in the short term, especially as both countries are suffering an economic slowdown at present, with Sint Maarten in particular struggling to cope with the fiscal cost of post-hurricane reconstruction. In the longer term, a shared currency could be a harbinger of greater economic co-operation and bilateral trade, although is unlikely to encourage a major boost in non-Caribbean trade.

Impact on the forecast

We do not expect the two countries to establish a common currency by 2021, but such a development is possible on a longer-term timeframe.