A campaign announced by the Central Bank of Curaçao and St. Maarten (CBCS) to encourage rounding off cash payments to zero or five Netherlands Antillean guilder cents caught the attention of Curaçao’s new Finance Minister Javier Silvanie (see Wednesday paper). He opposes taking the one cent coin out of circulation as it is legal tender, while the move threatens to increase consumer prices during an unprecedented coronavirus-related crisis.
CBCS in a letter to Parliament said it intends to amend the necessary legislation in due course. For now, the community will be called on to round off cash payments of 1 and 2 cents down to zero; 3, 4, 6 and 7 cents to 5; and 8 and 9 cents up to 10.
One of the arguments is that NAf. 0.01 coins cost more than twice their face value to produce. It should also lead to fewer coins in wallets and cash registers, along with a more efficient administration of companies. For St. Maarten there is the added factor that the US dollar rather than the guilder is the preferred currency in the street.
The initiative is supposedly supported by major entities promoting and representing economic activity in both countries of the monetary union. This would seem to indicate that particularly merchants see the benefit of not having to keep one cent coins.
However, inflation concerns raised by the MFK minister are not without merit. Some businesses might be tempted to round off all their prices upwards, so they do not have to deal with clients paying less or more.
Experience has shown that such changes usually spark rises rather than drops in the cost of living, because that is the natural preference of entrepreneurs trying to ensure they do not lose money.
As government stipulates maximum prices for only a handful of basic goods, some special form of controls may be needed to prevent such an undesirable development.
Nevertheless, just like in any other free-market society this will to a great extent depend on fair competition.