LatinFinance / March 2006
By Larry Luxner
SANTO DOMINGO — Rafael Camilo Abréu has been the Dominican Republic's superintendent of banking since August 2004, when President Leonel Fernández appointed him to the job in the aftermath of the country's devastating financial crisis.
An economist and longtime activist in the left-center Dominican Liberation Party (PLD), Camilo had been director of planning in the previous 1996-2000 Fernández administration.
Camilo, 57, talked to Latin Finance at his office in Santo Domingo last month. Here are excerpts from that interview:
Q: What have you been able to accomplish since becoming superintendent of banking?
A: "When I arrived, there was lots of work to be done. Our first priority was to initiate a capitalization of the banks; secondly, demand that the banks establsih provisions for their bad loan portfolio; thirdly, to strengthen the banking norms and finally, to strengthen the supervision of the institution itself and its human resources and technology. All this was with the objective of not repeating the crisis of 2003."
"We have achieved a capital adequacy ratio of 12.7%, and the law requires a minimum 10%. So the banks are well-capitalized now. In view of this situation, we think that from now on, it would be difficult for new crises in the banking sector to arise. If they do, it would be related to other external factors, not supervision."
Q: How did the banking crisis affect the Dominican economy?
A: "The crisis of 2003 caused great damage, costing more than 15% of GDP. At the time of the crisis, our per-capita GDP was $2,600. This was reduced to $1,600, and 1.3 million more people came under the poverty level. This was all because of the huge devaluation of the peso, which caused inflation of over 50%.
"It will take at least 10 years to eliminating the debt that was caused by saving the depositors. The population is paying through higher taxes that were imposed after the crisis."
Q: What can be done to lure more foreign investment to the country?
A: "Now that the economy is being handled responsibly, with the criteria that it is fundamental to maintain a sound economic policy without deficits or political influence, foreign investment is returning to the Dominican Republic. CAFTA also helps. If we hadn't joined CAFTA, many investors would have gone to Central America in order to take advantage of the U.S. market."
Q: What has your office done to restore confidence in the system?
A: "Before, the people didn't have much confidence in the banks, but neither did they have confidence in the government authorities that were supposed to regulate the sector. Our actions have returned this confidence to the public. I am an economist and I know the financial sector, but the most important thing I bring to this institution is responsibility and transparency.
"The most difficult thing for us to achieve was to create new norms for the sector on an international level, in accordance with our agreements with the IMF, and to give this institution, the Superintendency of Banking, the capacity to prevent another financial crisis like this one.
"Another thing that will help us avoid another crisis is that both the Central Bank and the Superintendency of Banking now have complete independence to do their jobs. We no longer take orders from the executive branch. Before, there existed a total dependence, and many times, when they were going to inspect a bank's records, high officials right up to the president of the republic would impede these inspections. This happened a lot with the previous government."
Q: Any progress on the Banco del Progreso investigation?
A: "We're on a path to solving this problem. What happened with Banco del Progreso is proof that supervision has improved substantially. The most important thing is that the shareholders are once again capitalizing Banco de Progreso. The manner in which we've dealt with this situation has prevented it from having an effect on the entire sector. And despite the rumors about Banco del Progreso, the bank continues to operate normally."
Q: If found guilty, what sort of punishment should be imposed on those involved in the banking scandal?
A: "We are convinced that in the previous bankruptcies of the [three] banks there was fraud, and that those responsible will be punished. I hope that this punishment will correspond with the enormous damage they caused to the economy and to the Dominican people."