Independent Financial Centre of the Americas
Encyclopedia
Dominican Republic
The Dominican Republic is a nation on the island of La Hispaniola, part of the Greater Antilles archipelago in the Caribbean region. The western third of the island is occupied by the nation of Haiti, making Hispaniola one of two Caribbean islands that are shared by two countries...
. If all goes well the centre could be up and running by 2009 and would serve as the capital markets hub for the Americas, similar to The Dubai International Financial Center
Dubai International Financial Center
The Dubai International Financial Centre is a near-shore financial hub for the or Middle East and North Africa containing a capital market designated as a financial free zone in Dubai. The centre was designed by Eric Kuhne...
in the Middle East. It is considered one of the most ambitious projects undertaken in the regions recent history and could potentially transform the financial condition of Latin America and its position in the Global economy
International finance
International finance is the branch of economics that studies the dynamics of exchange rates, foreign investment, global financial system, and how these affect international trade. It also studies international projects, international investments and capital flows, and trade deficits. It includes...
.
Background
The Centre is the result of three years research by a group of Dominican and Latin American investors into other financial centres and extracts the best practices from around the world. It benefits from beginning with a clean slate - a new legal framework and an independent regulatory structure will be served by state-of-the-art information architecture. It will operate from a USD S850 million purpose-built business facility on a 17 square kilometer greenfield site, bordering the Caribbean coast. The site is midway between Santo DomingoSanto Domingo
Santo Domingo, known officially as Santo Domingo de Guzmán, is the capital and largest city in the Dominican Republic. Its metropolitan population was 2,084,852 in 2003, and estimated at 3,294,385 in 2010. The city is located on the Caribbean Sea, at the mouth of the Ozama River...
and the Casa de Campo
Casa de Campo, Dominican Republic
In 1975 Gulf+Western developed of its Central Romana sugar mill's land into the Casa de Campo resort. Situated in La Romana on the southeast coast of the Dominican Republic, Casa de Campo is a Ponderosa-style, tropical seaside resort.The first to enjoy the luxuries of this enclave were friends of...
resort and will include office space, a conference centre, independent power generators and a private landing strip. The IFCA will house private and commercial bank
Commercial bank
After the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...
s and an electronic exchange, called LAIFEX, to clear and settle emerging market debt
Emerging Market Debt
Emerging market debt is a term used to encompass bonds issued by less developed countries. It does not include borrowing from government, supranational organizations such as the IMF or private sources, though loans that are securitized and issued to the markets would be included...
and other tradable products.
Swiss-Dominican entrepreneur
Entrepreneur
An entrepreneur is an owner or manager of a business enterprise who makes money through risk and initiative.The term was originally a loanword from French and was first defined by the Irish-French economist Richard Cantillon. Entrepreneur in English is a term applied to a person who is willing to...
Gaetan Bucher, the current President of the IFCA commented:"The Independent Financial Centre of the Americas is being purpose built from the ground up: the legislation, regulation, operating systems and physical infrastructure have been meticulously planned and researched. We are applying the best practice of other financial centres, to create a new model for the 21st century, which responds positively to greater regulatory scrutiny and appeals to market participants operating in an increasingly innovative marketplace. The Government of the Dominican Republic appreciates the benefits our model will generate for the country. It also understands that success is dependent on the dynamism and adaptability of a private enterprise".
Banking
The Centre plans to support a wide range of banking services. The Regulatory Authority will grant licenses for other regulated financial services business including investmentInvestment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
, commercial and private banking as well as asset management. The Information technology
Information technology
Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...
(IT) platform has been designed to underpin all banking transactions to increase the speed and cost efficiency for institutions and their clients.
LAIFEX
The Centre will house a settlement and clearing centre, called LAIFEX: the Latin American International Financial ExchangeLatin American International Financial Exchange
The Latin American International Financial Exchange is a proposed electronic central trading and exchange facility, which will be housed in the Independent Financial Centre of the Americas in the Dominican Republic...
. LAIFEX will facilitate primary and secondary debt trading both regionally and globally. It is a private exchange where members can apply for seats. The custom-built IT platform for the Centre could also support a regional stock exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...
. The rationale behind the Clearing (finance)
Clearing (finance)
In banking and finance, clearing denotes all activities from the time a commitment is made for a transaction until it is settled. Clearing is necessary because the speed of trades is much faster than the cycle time for completing the underlying transaction....
and settlement
Settlement (finance)
Settlement of securities is a business process whereby securities or interests in securities are delivered, usually against payment of money, to fulfill contractual obligations, such as those arising under securities trades....
centre is the USD 2.94 trillion of Latin American and Caribbean debt
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
traded globally in 2004, accounting for 63.2 % of total emerging markets debt traded worldwide that year. Currently, there is no central platform to clear and settle locally denominated trades in Latin American debt. While competition for clearing and settlement comes from the over-the-counter
Over-the-counter (finance)
Within the derivatives markets, many products are traded through exchanges. An exchange has the benefit of facilitating liquidity and also mitigates all credit risk concerning the default of a member of the exchange. Products traded on the exchange must be well standardised to transparent trading....
market between banks, a private banking centre would compete with neighbouring Caribbean centres such as the Bahamas and the Cayman Islands
Cayman Islands
The Cayman Islands is a British Overseas Territory and overseas territory of the European Union located in the western Caribbean Sea. The territory comprises the three islands of Grand Cayman, Cayman Brac, and Little Cayman, located south of Cuba and northwest of Jamaica...
that have built up strength in this area over the past 25 years. However, Mr. Bucher aims to steal a march on rivals by capitalising on recent international concern about regulation of offshore financial centre
Offshore financial centre
An offshore financial centre , though not precisely defined, is usually a small, low-tax jurisdiction specializing in providing corporate and commercial services to non-resident offshore companies, and for the investment of offshore funds....
s. (See also; Latin American debt crisis
Latin American debt crisis
The Latin American debt crisis was a financial crisis that occurred in the early 1980s , often known as the "lost decade", when Latin American countries reached a point where their foreign debt exceeded their earning power and they were not able to repay it.-Origins:In the 1960s and 1970s many...
)
Regulation
The Centre will embrace positive regulation through independence, responsiveness, efficiency and transparencyTransparency (market)
In economics, a market is transparent if much is known by many about:* What products, services or capital assets are available.* What price.* Where....
. An internationally
recognised regulatory authority is presently being established to regulate the Centre with complete independence from political and commercial influences, and the Centre itself. A new legal framework is currently being proposed to the Congress of the Dominican Republic
Congress of the Dominican Republic
The Congress of the Dominican Republic is the bicameral legislature of the government of the Dominican Republic, consisting of two houses, the Senate and the Chamber of Deputies. Both senators and deputies are chosen through direct election...
to grant an enabling law which will permit the formation of a new jurisdiction
Jurisdiction
Jurisdiction is the practical authority granted to a formally constituted legal body or to a political leader to deal with and make pronouncements on legal matters and, by implication, to administer justice within a defined area of responsibility...
in 2006. The centre's regulatory framework is being tailored directly to guidelines laid down recently by the Financial Action Task Force, an intergovernmental body formed to combat money laundering
Money laundering
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount...
. The centre's regulatory arrangements – outline proposals for which are being drawn up by Patton Boggs, a Washington
Washington, D.C.
Washington, D.C., formally the District of Columbia and commonly referred to as Washington, "the District", or simply D.C., is the capital of the United States. On July 16, 1790, the United States Congress approved the creation of a permanent national capital as permitted by the U.S. Constitution....
law firm
Law firm
A law firm is a business entity formed by one or more lawyers to engage in the practice of law. The primary service rendered by a law firm is to advise clients about their legal rights and responsibilities, and to represent clients in civil or criminal cases, business transactions, and other...
, and Deloitte Consulting in London – would be separate from those that already apply to the Dominican Republic's domestic financial system. According to Mr. Bucher, "Instead of an auditor coming in once a year you’ll have constant live and real-time monitoring of transactions."
The
| Country | GDP (PPP) per capita | GDP (PPP) |
|---|---|---|
| international dollars | millions of international dollars | |
| 7,055 | 63,594 | |
| Latin America | 8,105 | 4,421,569 |
Sources: Data from an April 2005 report by the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
and graphics data are from data by the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
from 2003 http://www.worldbank.org/data/quickreference/quickref.html. GDP (PPP) per capita for Latin America was calculated using population data from List of countries by population
For a country that has just survived the biggest banking crisis in recent Latin American history, it might seem a bit ambitious to launch an offshore financial centre. But that is exactly what is planned for the Dominican Republic. The country was selected for the IFCA due to its strong economic and cultural links with Latin America, the United States and Europe, and its political stability, economic resurgence and well-developed infrastructure. Following the 2003 banking crisis (Banco Intercontinental
Banco Intercontinental
Banco Intercontinental was the second largest privately held commercial bank in the Dominican Republic before collapsing in 2003 in a spectacular fraud tied to political corruption...
) and change of government, President Leonel Fernández
Leonel Fernández
Leonel Antonio Fernández Reyna is a Dominican lawyer, academic, and the current President of the Dominican Republic since 2004. He held the same office from 1996 to 2000...
is credited by his peers with rebuilding the economy and fostering strong international relations
International relations
International relations is the study of relationships between countries, including the roles of states, inter-governmental organizations , international nongovernmental organizations , non-governmental organizations and multinational corporations...
, providing a solid backdrop for the Independent Financial Centre of the Americas. Former Dominican president Hipólito Mejía
Hipólito Mejía
Rafael Hipólito Mejía Domínguez is a Dominican politician and former President of the Dominican Republic...
of the Dominican Revolutionary Party
Dominican Revolutionary Party
The Dominican Revolutionary Party is one of the main political parties of the Dominican Republic. It has a moderate centrist position, social democratic in name. The party's distinctive color is white....
, who still has big influence among opposition deputies, is also a firm supporter of the project.
Gaetan Bucher
The founder and head of IFCA is Gaetan Bucher, a banker from the Dominican RepublicDominican Republic
The Dominican Republic is a nation on the island of La Hispaniola, part of the Greater Antilles archipelago in the Caribbean region. The western third of the island is occupied by the nation of Haiti, making Hispaniola one of two Caribbean islands that are shared by two countries...
, Gaetan Bucher studied at the Schiller University in Lausanne, Switzerland, before starting a career in private banking.
External links
- Independent Financial Centre of the Americas
- Superintendencia de Valores de la Rep. Dom.
- http://iatwm.com/200609/ArchitectureBiennaleVenice/index.html