WILLEMSTAD – Curaçao’s system of foreign-exchange permits is often criticized as outdated or restrictive. The Central Bank, however, describes it as a necessary consequence of a fundamental economic principle known as the “impossible trinity”.
A country cannot simultaneously maintain a fixed exchange rate, free capital flows, and full monetary independence. One of these must give way. Curaçao has chosen to preserve its exchange rate and retain limited monetary control, which means capital movements cannot be entirely unrestricted.
Under normal conditions, foreign exchange permits are granted routinely. But in times of stress — such as during the COVID-19 crisis — controls can be tightened to prevent sudden reserve losses. According to the Bank, this mechanism acts as an emergency brake rather than a permanent barrier.
Without such controls, speculative capital movements could overwhelm a small economy, forcing abrupt policy adjustments or currency realignments.
