Nov 05, 2017 adam harris kaieteur news
The coalition government has been accused of many things, some of which were orchestrated by the opposition. For one, it has been accused of a slowdown in the economy. Just the other day, businesses were complaining about a downturn. They all claimed that consumer spending was down and that not much was happening.
A few of them reported that their imports were down as evident, they said, by the number of containers they imported.
This was followed by the debacle in foreign currency. Suddenly the exchange rate shot up to unprecedented levels. Businessmen and the casual holiday maker soon found that they had to dive deep into their pockets. Many claimed that they could not get the required foreign currency from the commercial banks. And this was true.
But while the local businessmen were complaining, the Chinese businesses were booming to the extent that they opened their doors on Sundays. The local businessmen then complained that the Chinese were undermining them.
When I asked, I heard that the Chinese embassy was importing goods on behalf of the Chinese community, thus providing goods that were cheaper as a result of the absence of duties. I did investigate and even attracted the ire of the Chinese embassy. The ambassador invited me to inspect the embassy compound to verify the claim that the Chinese embassy was the largest importer of containers.
I have noticed that the foreign currency situation has normalized and this happened when Central Bank intervened. For one, the Central Bank set about limiting the spread between which the banks and the cambios could buy and sell currency.
The Central Bank also promised to investigate, but that investigation never got going because suddenly, the volume of foreign currency increased on the local market. However, the exchange rate crept up slightly. Someone was still making money in this area.
This past week I happened to be chatting with a businessman and he revealed something that never crossed my mind. Indeed the conversation crept to the economy and I, not being an economist, could only listen.
I was made to understand that Bharrat Jagdeo enjoyed 48 per cent of the votes. By that, it meant that the People’s Progressive Party secured 48 per cent of the votes. However, the 48 per cent of the votes controlled close to ninety per cent of the economy. The message didn’t take long to get through to me. The PPP was using its power to control the economy to the detriment of the government.
I had heard that the Opposition Leader was going around telling his supporters who held political power in the regions not to sign off on projects. That would slow down any development in the region. Some Regional Executive Officers spoke of this trend but there was precious little they could do.
They tried to get things going, but they had to contend with the Central Tender Board. Contractors won bids and sat on projects during the mobilization period. A few then started the project and asked for extensions.
The highpoint of the conversation centered on taxes. I was told that most businesses try their best to avoid paying their fair share of taxes. They would hide money. But such things always have a down side. I now hear that many of them want to bring out the money but they are now scared of the anti-money laundering laws. So they have money that is all but meaningless.
I can understand the quandary. They cannot deposit such large amounts into the commercial banks without having to explain the origin of the money. India’s Prime Minister Modi caused something like that to happen in his country. He removed the large currencies from circulation and caught many businessmen who were hoarding currency.
Guyana cannot attempt this because the economy is far too small, but it would be interesting to see those businessmen who have tons of money in some quarter. I would suspect that this money is finding its way into the commercial banks in small quantities, hence the seeming ease in the local economic situation.
But the Finance Minister is being pilloried for causing the situation in the first place. Some are saying that he attempted to clean up things much too quickly. My impression is that governments are expected to turn a blind eye to some corrupt practices. But with the anti-money laundering legislation one can see what is happening.
Indeed the businessmen got the money legally, but because of their actions, it’s their own jumbie coming to haunt them. This happened to many large drug dealers in Mexico and Colombia. I saw photographs of warehouses full of money which for practical purposes have no value. That is how some drug cartels win the support of the peasantry; they simply share out some of that money.
The businessmen may have to do the same thing to stimulate their very businesses.
The political opposition is aware of the situation. Many are going round talking to these moneyed people asking them to ‘Hold strain’ but there is a limit to how much strain a man can hold. Perhaps now is the time for the businessmen to pay their staff so much better in an effort to reduce the stockpile of money.
Indeed, they would also have to confront the tax man, but that would be the least of their problems. No longer can people really enjoy the money they have in their mattresses, because it has no real value.
Situations like this led to the removal of large stocks of paper money for transactions in the developed world. The result is that people pay their taxes, even though they may not want to. Guyana is heading in this direction. Increasingly people are using debit and credit cards. Pretty soon we will see more and more terminals in business places.
But for now, development is crawling, but lessons are being learned. Christmas is around the corner and I am waiting to see the increased spending on the part of the importer.