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Faced with astubborn drop in the economy and doubts that local prices aredriving away visitors, people are asking, should we make the ...
CI$ Devaluation An Option?
With verylittle encouragement in sight for improvement in the local economy,it appears that several economic pundits are predicting that theonly way in which the Cayman Islands can escape the present economicsituation is by agreeing to place the Cayman dollar on par withthe US dollar.
"As ugly as it may seem, it's the onlyway we can have any chance of recovery in the tourism industry",said one hospitality industry manager, who requested that hisname not be published because he says "this may go againstsome of the membership's of Cayman Island Tourism Association's(CITA) feelings."
A majority of the visitors to the Islands,are still having a difficult time coping with the fact that theirUS dollar is exchanged for 80 cents Cayman, often leading up toarguments between the customers of hotels and restaurants. Itis for this reason that many establishments catering to dinersand duty free shopping are providing their bills in both US andCI currencies.
It was back in 1972 that the Cayman IslandsGovernment of the day was faced with the reality that the thenlegal tender Jamaican dollar, which was used as the local currencywas being returned back to the Jamaica Central Bank at an alarmingrate by local banks who were inundated with a significant amountof bearers, who deposited same in Cayman's banks in exchange forUS dollars.
Threatened with the possibility of beingleft without a currency of its own, the Cayman lawmakers of theday decided -- following a caution from the UK Government thatthe territory was too small to have is own dollar that itwould create its own monetary system, backed by its reserves whichwere in British pounds, amounted to two Cayman dollars to theBritish pound, which at that time was worth US$2.40.
Armed with this confidence, the Cayman Islandscontinued to build up a healthy reserve in US dollars over thefollowing years up to this date, because of its prominence asa financial planning centre and tax haven, supplemented with aheavy influx of American greenbacks being spent by visitors andinvestors.
Meanwhile, other tourism destinations likethe Bahamas, British Virgin Islands, Turks and Caicos and evenBelize used the US dollar either on parity or as their own officialcurrency. Even Cuba, has speciality stores which offer betterrates for the US dollar.
Here in Cayman, which is no longer gettingthe frequently returning visitor, new tourists coming here forthe first time are swearing off coming back to Cayman owing towhat they claim to be a "rip off" of their US dollarwhich only gets 80 cents in exchange.
In recent months there has been a considerableamount of speculation that the Cayman dollar will be devaluedto be on par with its US counterpart. This has been denied vigorouslyby the Financial Secretary's office. Yet, it is known that a numberof Caymanian and non-Caymanian professionals and businessmen,are converting their Cayman Islands dollar accounts to US currency.
A retired lawmaker of the early 1970s eraconfirmed to Cayman Net News this week that part of the reasonthat the Government did not put the local dollar on parity withthe US is because many of the merchants felt that because theCI dollar was stronger, there will be better purchasing powerfor the over 90 percent of goods which were imported to Cayman.
It is known that the British Governmentwants to join the euro currency, but has been unable to do sobecause certain conditions have not been met. With the euro makingstrides to remain stable and gaining in strength against the USdollar for the near billion population which makes up the EuropeanUnion, Cayman will no doubt experience its own inertia while thecountry's economic picture continues to be bleak
And what will happen if Cayman decides toplace its dollars on par with the US? It is expected that therewill be a shock reaction to the upward changes in prices. It isfor this reason that it has been suggested a very powerful MonetaryAuthority directive, with legal teeth for prosecution, will helpcontrol any attempts at price gouging.
Perhaps if the Cayman Islands dollar atits introduction was called a 'turtle' or 'conch' there mighthave been less resistence to the strength it has enjoyed goingup dollar for dollar in previous years until now.