The Bahamas would become more attractive to foreign investors if it adopted an international currency like the U.S. dollar, American Ambassador to the Bahamas Richard Blankenship said Thursday.
Calling it "an undeniable attraction," Mr. Blankenship said, "Currency fluctuation is one less thing they have to worry about in making their business decisions, and the need to convert national currencies to international ones, sometimes at considerable cost, is obviated."
Investors are drawn to stability, said the American Ambassador, who addressed the weekly Buena Vista meeting of the Rotary Club of West Nassau on "The Role of National Currency,"
He said this was a "practical advantage" of smaller and or more vulnerable economies adopting an international currency.
Ambassador Blankenship said he is not suggesting what the Bahamas should do with its currency, but he pointed out that his government would not encourage nor discourage other nations from adopting the US dollar as their official currency.
He said he said he hopes his contribution is not misunderstood, because he merely wanted to give his audience "food for thought."
The use of a widely accepted international currency can lead investors to believe that, economically at least, a country is more likely to be stable, Mr. Blankenship said.
Due to size, proximity to the United States and a large dependence on American visitors to bolster the tourism industry and the Bahamas is pegged to the US economy. The adverse effects of the September 11 attacks in the United States most recently, evidenced the country's vulnerability, he said.
"Considerable efficiencies" also come with the use of international currencies. Central banks do not have to maintain large reserves of foreign currency to defend the value of their own currency, as the Bahamas does so it can maintain its 1:1 par with the U.S. dollar.
Countries are relieved of the increasing expense of printing, stamping and engraving bills and coins, and government will not have to continuously introduce new anti-counterfeiting features.
Mr. Blankenship said the consensus of nations adopting individual currencies as their own as symbols of sovereignty, government control over its citizens and as a means of controlling the money supply is changing in the 21st century.
He said, in the western hemisphere, there has been a discernable trend away from national currencies. "Here, the trend has been toward adoption of the U.S. dollar, rather than towards creation of new international currencies."
For example, Panama and Ecuador are regional examples that the ambassador gave of countries that have adopted the U.S. dollar. And like the Bahamas, Argentina's dollar is pegged to the U.S. dollar and "full conversion to the U.S. dollar is still under serious consideration."
Globally, several of the world's leading economic powers in the European Community "voluntary" gave up their national currencies in favour of an international currency, the Euro.
Ambassador Blankenship added, "The European decision was a recognition that the world economy is becoming ever more integrated, and that the proliferation of national currencies is neither efficient nor necessary."
Unlike Europe, which consist countries with "advanced economies of similar size and development, the western hemisphere has only one economic superpower with really only one international currency – that is the U.S. dollar, according to Mr. Blankenship.
Nevertheless, the U.S. ambassador said a major down side of giving up national currencies is relinquishing "some" economic sovereignty.
"Governments do give up the ability to manipulate the money supply to attempt to stimulate a sluggish economy or cool off one in danger of overheating into inflation," he added. The Bahamas would become more attractive to foreign investors if it adopted an international currency like the U.S. dollar, American Ambassador to the Bahamas Richard Blankenship said Thursday.
