HAITI SHOULD ADOPT THE “US DOLLAR” AS ITS ONLY OFFICIAL CURRENCY:

HAITI SHOULD ADOPT THE “US DOLLAR” AS ITS ONLY OFFICIAL CURRENCY:

Haiti is known as one of the poorest countries in the western hemisphere. But that has not always been the case. There was a time when Haiti produced enough food not only to feed its inhabitants but to export products as well. But over the last four decades, Haiti has been in a downward economic spiral as it seeks to liberalize its economy, selling state assets, cutting tariffs on imported goods while allowing the merchant class to squeeze the lifeblood out of the masses. The cost of living in Haiti is unbearably high because local production of food is at its lowest ever. Some 80% of the foods consumed in Haiti is imported from the Dominican Republic, United States or Canada.

Like most countries around the world, these imported goods are paid in US dollars, which means the Haitian government must convert Haitian “Gourdes” its current official currency into US dollars to meet its obligations. That requires the government to maintain currency reserves in US dollars.  The use of the “Gourdes” as a currency only favors a small group of people – the producers of consumer goods/importers of foods. To radically change the Haitian economy and attract foreign investors, Haiti must get rid of the “Gourdes” and adopt the US dollar as its official currency. There are several advantages to this currency adoption and very few downsides.

Haiti will be among more than ten sovereign nations who have adopted the US Dollar as their official currency. The latest countries to have done so were Ecuador and El Salvador in 2000, and more recently Zimbabwe in 2009.  For several decades, Ecuador like Haiti has experienced political upheaval, corruption, and economic stagnation. In 1884, Ecuador adopted the “Sucre” as its official currency. By mid-1990’s the value of the “Sucre” like the Haitian gourde began to depreciate sending the country into an economic tailspin. By early 2000, the Ecuadorian government got smart and adopted the US dollar as its official currency. Since then, Ecuador has been able to stabilize its economy, attract more foreign investors, and did away with the exchange rate that caused the cost of living to increase. Similarly, Zimbabwe avoided economic collapse by adopting the US dollar as one of many official currencies.  Haiti has nothing to lose and much to gain by dumping the gourde.

What is Haiti to gain by adopting the US Dollar as its only official currency? A lot.

First, the US dollar is known for its strength and credibility in the International market. Second, adoption of a strong currency can help stabilize the Haitian economy; aid in economic recovery; attract foreign investors, change the dynamics of the market against speculators and money changers. Also, the exchange rate is so high (between the gourde and the US dollar) a single strong currency would obviate the need for such an exchange. Thereby equalize the purchasing power of the masses. Currently, everything in Haiti can be purchased using US dollars. However, what makes daily life unbearable for the poor is the huge money exchange market controlled by the merchant class.  Third, the Haitian government currently pays its foreign creditors with US dollars.  Forcing the government to retain funds at the present exchange rate of the gourde, while at the same time trying to fight inflation as the value of the gourde is perpetually going down. Directly affecting their buying power which often results in a rising cost of living for the poorest Haitians. The adoption of the US dollar will solve these and a myriad of other problems.

The major downside to adoption of the US dollar is that Haiti will cede monetary policy to the United States Federal Reserve Board in Washington, DC.  But, thinking broadly, this is not a bad situation, because it will force the Haitian government to observe fiscal policy. Ecuador, El Salvador, and Zimbabwe have experienced economic stability since the adoption of the US dollar.  They have attracted more international investors who have faith in the strength of the dollar. The biggest issue is Haiti’s banking system which is not up to international standards. Adoption of the dollar will force the government to review the country’s banking laws and bring Haiti to international standards.

The big loser will be the merchant class, the money changers, and currency speculators who make money betting on the devaluation of the gourde. A stable currency will level the playing field. It will be good for the Haitian government, the Haitian people in general; foreign and local investors, including the Haitian Diaspora, and of course the trade deficit between Haiti and the Dominican Republic. Also, adoption of the dollar will have a serious effect on the Dominican Republic. Haiti will use one currency while the Dominican Republic, one of our major trade partners will have to be concerned with inflation and the foreign-reserve to pay its debt. In other words, while Haiti will no longer have to speculate about the value and strength of the gourde versus the dollar, the Dominican Republic will continue to do so with the peso.

 

Emmanuel Roy

Editor

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