Executive Summary – Friday (12/05/08) the leaders of the Central American nations met for the 33rd Summit of the Central American Integration System. They issued statements in response to the world financial crisis. One of the measures they intend to implement is the start of a new currency. We assume this is to be called the Central American Dollar and will be tied to a basket of other currencies to avoid fluctuations that a single currency is subject to.
The Central American nations are also going to standardize their passport. It is expected that the new passport will have the name of the country and above or below it say “Central America Passport” similar to the way the Mercosur nations do it now. The nations participating were: Belize, El Salvador, Nicaragua, Guatemala, Honduras, Costa Rica, Panama and Dominican Republic participating as an associate member.
Discussion – With a new currency you can expect to see a new money wiring system similar to the SWIFT system. The big difference is that the USA and EU will not be able to view any and all confidential banking transactions going through this new system. Bank secrecy is still a way of life in these nations and if anything the new system will allow for more secrecy and confidentiality. This will also lessen the demand for US dollars.
It appears to this writer that these are not the only countries to be moving in this direction. Russia has dropped some subtle but clear comments about relying on the US dollar. China is also not happy. Venezuela is in the process of starting a new central bank and has the support of several South American nations. So while the USA can go and push Lichtenstein around other nations are moving to get away from the USD and go back to sensible international banking. In the USA one just goes into a bank and shows a drivers license and leaves in 30 minutes with a bank account. In the offshore world this process can take days or weeks.
I expect the process to soon go back to being a 30-minute process as soon as there is no longer a monopolistic grip on the nations to use the wire systems passing wires through the USA or EU. Without having to rely on the USA and EU wire systems there is no penalty to be imposed on nations practicing banking the way they like to. Will the good old numbered bank accounts with no ID return? We will have to wait and see but this author is optimistic.
So while everyone is saying doom and gloom regarding Lichtenstein and Obama shouting anti-tax haven slogans you now know what is in store shortly down the road. And yes you did read correctly Panama was at the conference. Did anyone notice the Russian battleship being allowed to cross the Panama Canal a few days ago? First time a Russian warship crossed the Panama Canal since WWII. The world financial crisis brought on by the USA changed things. Be patient and watch for these changes to emerge. www.panamalaw.org