#1925: Re: #1900: Gourde depreciation : Poincy comments

[Robert Corbett <bcorbett@netcom.com>]

From: Jean Poincy <caineve@idt.net>

"Haiti's Central Bank intends to strengthen the Gourde through the
purchase of dollars using its reserves.  Haitian economists doubt this
can be done given that reserves amount to US$ 250 million while Haiti
imports on average US$ 60 million worth of goods and services monthly."

	I don't understand how Ayitian economists can even talk about not
having enough money to buy US dollars to strengthen the Gourde while
referring to what's needed for monthly imports. Which means if the
reserves were high enough, they would fully agree with this ill economic
decision. 

	No currency can be strengthened by borrowing or by buying money if the
country in question does not produce. Plainly, let's try to understand
what's behind the whole thing. We have a lack of and a need for hard
currencies. Assuming that there was plenty or enough yesterday, today's
lack means great spending without replenishment. 

	If the need to replenish from an outside source rather from the
internal market is felt, the internal productive system is deficient and
can't produce neither to satisfy local demand nor to export. In other
words the country is not generating money, pure and simple. The
implication is that the reserves have been eroded by importations and
the need to import is growing stronger.

	If the situation remains the same, there will be constant need for
replenishment day after day. When looking at the state of the Ayitian
economy there is no sign that things will be different and the country
will be soundly productive tomorrow, then by what miracle would buying
hard currencies to replenish for the purpose of import strengthen the
Gourde? 

 	It does make economic sense when a country in severe economic
constraints borrows money while devaluing its currency. Often, the
former is to revamp the country's productive system through productive
investments and the latter to reduce the buying power of the locals and
reduce importations as a result. It is somewhat a form of forced saving
or consumption of local products, which will help revitalize the local
economy. 

	On the same token the devalued currency makes the country's products
cheaper for outside buyers; which in return would automatically help
replenish the reserves with hard currencies. However, the point remains
that some goods produced by the country would be needed. That is not the
case for Ayiti.

	The country just does not produce. Only through production along with
skillful juggling with the currency devaluation and borrowing money
tools can the local currency become strong in the future. Other than
that, when the production factor is absent and the decision to buy US
dollars becomes effective, we should await the economic death of Ayiti.

	Simply this economic policy would bring more inflationary pressure on
the economy and create an Ayitian style of the 1930s depression. Buying
US dollars not for productive investments, but for facilitating
importation is just an artifice that will fail to do the magic trick. 

	How can one envisage nurturing something so destructive? The excessive
importation makes the country poorer day after day. Now, rather than
making some structural adjustment in the economy, they see it fit to buy
hard currencies to facilitate importations, the number two killer of
Ayiti's economy (the number is absence of production). I found that very
self-destructive.


Ayiti has lived, lives and will live
Mozeb