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While the various members of the European Union ponder their next steps to shore up their respective deficit and debt positions, there is a little known banking arrangement in the Caribbean that has managed quite nicely to deal with similar issues, although on a much smaller scale, since 1965.<\/p>\n
The Organisation of Eastern Caribbean States (\u201cOECS\u201d) is comprised of nine independent states in the region, but, with the exception of the British Virgin Islands, eight of these member states have joined to form the Eastern Caribbean Currency Union and operate with a common currency, the East Caribbean Dollar (sign: \u201cEC$\u201d; code: \u201cXCD\u201d).<\/p>\n
The \u201cXCD\u201d is not a free-floating currency.\u00a0 It is presently \u201cpegged\u201d to the U.S. Dollar, a process started in 1976 and administered by the arrangement\u2019s central bank, the Eastern Caribbean Central Bank (\u201cECCB\u201d).\u00a0 This monetary authority represents eight separate nations and two territories, namely, Antigua and Barbuda, Dominica, Grenada, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines, as separate nations, and the two territories of Anguilla and Montserrat.\u00a0 The bank was officially formed in 1983 with the primary task being to ensure the financial integrity of the regional banking system and maintain price stability with respect to the \u201cXCD\u201d.<\/p>\n
The official exchange rate today is 2.70 EC$ to the USD$.\u00a0 This exchange rate was reset in December of 2010 from below 2.60 to encourage a recovery after the recent recession.\u00a0 The currency is used by nearly 625,000 inhabitants in the region, about the size of Washington, D.C.\u00a0 The Commonwealth of Dominica, however, with a population of 67,000 is just under the regional average of 77,000, but many economists purport that its economy is the most challenging in the area for a number of reasons.<\/p>\n
The treaty that formed the current arrangement allows for the free movement of labor, capital, and goods across the region, but tourism, the primary driver of foreign exchange income for many of the member states, is unduly impacted in Dominica because the island is still volcanic and few beaches have been developed to attract the vacation community.\u00a0 As a result, the majority of workers tend to be in agriculture, which is often vulnerable to hurricanes and changing weather conditions.\u00a0 Agricultural exports and tourism are both sources of foreign exchange revenue.<\/p>\n
Dominica, nevertheless, is known as \u201cThe Nature Isle of the Caribbean\u201d for the pristine nature of its natural beauty.\u00a0 The tourist trade may have been slow to develop, but for the adventurer that prefers a natural setting, Dominica abounds in mountains, rainforests, freshwater lakes, hot springs, waterfalls, and diving spots.\u00a0 After building modern docking facilities, the island is now frequented by a host of cruise ships.\u00a0 The nation is also considered a tax haven and does not have exchange controls, two conditions that could attract more financial services and brokers of such things as binary options, favored by today\u2019s forex trader.<\/p>\n
The financing of necessary imports is carried out by the central bank as it manages the group\u2019s total foreign exchange reserves, which currently approximate three months of imports.\u00a0 The recent recession has hit the region especially hard, leading to reduced tourism, construction, and foreign investment.\u00a0 The World Bank, however, has stepped in to finance a number of projects designed to provide a base for economic recovery.<\/p>\n
New treaty modifications will also permit the OECS to have more unilateral control in the areas of the common market and customs union; monetary policy; trade policy; maritime jurisdiction and boundaries; and civil aviation.\u00a0 Recovery has been slow, but prospects for Dominica and the region are good for 2012.<\/p>\n