Weekly Report - 13 January 2004

DOMINICAN REPUBLIC | Dollar-rate repression collapses. Just over a month after the government launched a military-led drive to bring down the dollar rate to RD$30 (on the grounds that the IMF wanted it below RD$40 before it would approve the standby agreement being negotiated), the central bank admitted the futility of the exercise. Bank governor José Lois Malkun said on 7 January, `Let the market decide the rate. That is the policy of the Central Bank, to not intervene in the market under any circumstance.' On the street, though established exchange operators were posting a rate of RD$35, they had no dollars with which to conduct transactions. In the meantime, a black market developed in which the dollar was changing hands at more than RD$40. By 10 January the dollar was trading openly at RD$44 — close to the peak that had prompted to government to intervene.

GUATEMALA | `Modest growth' subject to stability. The incoming government of Oscar Berger has been warned that it will have to preserve stability if it wants to see the economy grow by 2.6% this year. This, said central bank president Lizardo Sosa, means keeping the fiscal deficit below 2% of GDP and inflation contained between 4% and 6%. Last year, when the bank set the same inflation target, the economy grew by 2.1%, slightly short of the 2.4% the bank had initially predicted.

The structure of Guatemala's economy is undergoing considerable change. Last year the export of cheap labour provided, in the form of remittances, the second-largest inflow of hard currency (US$2.07bn, up 30% on 2002). The leading source of hard currency is non-traditional exports, which brought in US$2.37bn.

HONDURAS | Real per-capita growth this year? The Honduran government is predicting that the economy — unless hindered by natural disasters — will grow this year by 3.2% to 3.5%, which means that it would slightly overtake the country's population growth rate of 2.7%. Last year the economy grew by an estimated 2.5%, which translated into a per-capita decline.

CENTRAL AMERICA | Reviving the customs union drive. In February, Panama will host a meeting of Central American tax and customs authorities who will try to come up with the long-delayed blueprint for a harmonised import-revenue collection and administration system. This is the key piece of the projected Central American customs-union scheme, which should have come into effect on 1 January.