Any news about the devaluation?

Last week there were rumours indocating a possible devaluation to 20 RD Peso to the US$. Has anyone heard more about this? (Going to RD in October, and would sure like prices to drop a little.)

There was a World Bank recommendation that the peso should be allowed to float. This has the personal support of the president of the National Council of Business. At this point no one can accurately tell you whether it would happen in time for your visit.

Yes, it would be very nice if the peso was devalued - that way all tourists could save a little money on their t-shirts, fake cigars, and rum. Those hotels are WAY too expensive to begin with. Who cares about the effect devaluation will have on Dominicans with savings accounts, peso denominated notes, and businesses with receivables.

I agree, the peso should be devaluated. There are nearly no tourists here anymore, because the peso (and the US$) is waaaay too expensive. People would like to come back, and once here stay longer if they could afford it. This would in return generate additional business to all who caters to the tourist, and stimulate the economy in general. Imported items would cost more, but at least people with jobs would be able to afford them, and have an improved life.
Right now the unemployment is rising, employees take wage cuts to keep their jobs. In general cost of living wouldn't be higher at all.

"In general cost of living wouldn't be higher at all".

You must be joking, right? Any devaluation would create grave macroeconomic unstability.

Regards, Natasha

Natasha,

She has to be joking. Anyone living in the DR any amount of time realizes that so many things there are pegged to dollar prices these days. When the Dominican peso devalues, the prices of many consumer and durable goods in the DR automatically rise (unless the government (INESPRE) tries to freeze them) to match the dollar equivalent. If you're paid in dollars, okay, maybe you won't notice much difference in your day-to-day life. But Lord help you if you're paid in pesos...
Un abrazo,
Keith

Well, my intention was not to start a discussion on macroeconomics, but simply to know if anyone has any more facts about the possible devaluation. But having said that - no country can survive a long-time overpricing of their currency. As long as tourism generates 80% of the Dominican economy, (correct me if the figures have changed since I checked) one would believe that any measure aimed at stopping the rapid decline of foreign visitors would be more important for the Dominicans than the price of foreign goods. The reasons why I come back to the Dom. Rep. for the 3rd time are the beaches, the music, the people, the food and drink, and the culture in general, not low prices. Even with a price level more and more similar to Scandinavia, I will probably come back. But for a first time visitor, the current price level could easily lead to choosing another country in the region for the next trip. It is not very surprising that tourism in Cuba and Mexico currently increases, while the situation is the opposite in DR.

The dollar is overvalued against a lot of currencies right now. Since the Dominican economy is not driven by the same factors as the US economy, it is unrealistic to think that the peso should also appreciate (as the $US has over the past 2 years or so) at a similar rate (ie: against the Euro).

Besides, not all imports are priced in $US, nor do all potential tourists earn $US.

Not that the powers in control would make educated decisions anyway .....

How can you be so naiv and think prices would drop?
Don't you realize that you would certainly get more Pesos, yes, but all the prizes in Pesos would go up at the very same moment.

Or do you think that, for example a Hotel, that charges you US$30 or RD$500 would do so after that devaluation, that you anticipate so much?
Of course not!
The room would be US$50 or RD$600, a ten Dollar meal would cost RD$200 instead of RD$160 now, and a beer would cost you RD$35 on the beach.....
What are you saving?

I agree with Natasha. It would hurt bad. Besides, what's so expensive about the DR. Other than the plush hotels in the capital that charge US$250.00 per night BTW that is cheap in Europe and normal in the US, prices here are a give-away.