Category: Letters to the editor

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Business Page statement derived from Bank of Guyana report

Mr Rajendra Rampersaud’s letter in Stabroek News, of October 27, 2010, ‘Ram’s analysis in relation to the exchange rate was flawed’ refers.

Citing data from the 2009 and 2010 half-year reports of the Bank of Guyana where Mr Rampersaud works, I wrote in last Sunday’s Business Page that the “exchange rate of the Guyana Dollar to its US counterpart depreciated by 0.25 per cent compared with an appreciation of 0.37 per cent at end-June 2009.” That came from their reports; it was not spun by me. And a single sentence that states that it is incorrect to measure a floating Guyana Dollar against only one other currency is hardly a harp – musical or otherwise – or self-serving – to whom or what I haven’t a clue.

I find it interesting that a country whose exchange rate management was practically dictated by the IMF for nearly twenty years is significant and unique enough to develop the concept of a “home grown, official” exchange rate. Mr Rampersaud should identify the experts in the Bank of Guyana and their reasons for deciding that the decades-old methodologies established by international financial institutions, central bankers and academics are inappropriate to Guyana. To use Mr Rampersaud’s word properly, both the IMF’s assessment and his reliance on it are a classic case of “self-serving.”

The statement in Business Page to which Mr Rampersaud refers, derives its support and basis from the June 2010 Bank of Guyana report, Table 9.2 (b) which shows that over the period December 2000 to June 2010 the Guyana Dollar depreciated against the US Dollar from $184.75 to $203.75 or 10.3%. In turn, over the period December 2001 to April 2010, the dates for which the Bank of Guyana provided figures, the US Dollar depreciated against the Canadian Dollar by 36.5%; the Euro by 33.8% and the Pound Sterling by 5.4% (Table 9.5). I can understand why Mr Rampersaud would wish to avoid such realities. What I cannot understand is why he would consider such statistics and analyses necessary in a newspaper column dealing with national accounts.

Let me put it another way. Based on the selling rates by Guyana’s leading commercial banks, at December 31, 2000, it took G$120.63 to buy one Canadian Dollar. Today it requires $191.27. That is a 58.6% change. At December 31, 2000, it took G$267.28 to buy one pound Sterling. Today, that will cost $298.57, a downswing of 11.7%. At December 31, 2000, it took G$185.65 to buy one US Dollar. Today, that requires $203.70, some 9.75% more, proving the point that the US Dollar has lost against those three major currencies. For the average Guyanese buying Canadian Dollars, official exchange rate stability is a mirage.

Finally, it may seem a small point, but as an economist with the central bank, Mr Rampersaud should know that the Bank of Guyana Act abolished cents since 1998. He should know as well that professionals and technocrats do the public a great disservice by being careless, incorrect or recklessly disregarding accuracy.

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The liquidator not the President should be meeting with policyholders

Today at the National Cultural Centre President Jagdeo will tell policyholders of Clico Guyana about his administration’s arrangements for them to recover the billions of dollars squandered by the failed insurance giant. This follows swiftly on the ruling last week by Ian Chang CJ (ag) that the company be liquidated.

The Chief Justice ruled that the Bank of Guyana be the liquidator. But President Jagdeo had promised that no policyholder would lose out on their investment, and he may be meeting them to say how the government will back his guarantee. That is the extent to which the government can go without frustrating the ruling of the court. In fact the President should be meeting with the Bank of Guyana in its capacity of liquidator and it is the liquidator that should be meeting with the policyholders.

The migration from judicial management to liquidation – two distinct insolvency regimes – involves a number of technical issues including the basis on which principles and statutory provisions of the former could be transplanted into the latter. But the President finds it irresistible to interfere and to try to benefit from the mess to which his administration made no small contribution. It would be the classic case of deus ex machina.

While the collapse of the company cannot be divorced from the demise of its Trinidadian parent, the directors of which are probably equally culpable, the taxpayers of this country will bear a huge cost as a result of the illegal transmission of US$34 million the local company shipped out to its sister company, Clico (Bahamas). It is one of the most costly corporate crimes ever to have been committed against the people of this country and in keeping with the principles of relevant law, it is the directors of the company including Ms Gita Singh-Knight and Mr Ramalho, who should be held culpable. And on top of this, all this took place while we boasted about the quality of the Insurance Act and the supervision by the Office of the Commissioner of Insurance.

We understand that Director Ramalho and his wife surrendered their policies to the tune of $45 million even as the Clico ship was fast sinking. He has denied receiving any money but the question remains whether he acted based on inside information.

As at February 28, 2009, the Guyana company had some $600 million in cash and other liquid assets – much lower than the $1.5 billion it received from the sale to the NBS of investments in the Berbice River Bridge Company Inc. Unfortunately the court did not comment on any person or persons who might have benefited from insider information by cashing in on their policies or those who might have colluded with them. My understanding is that several powerful persons with political connections would have been on the list of beneficiaries and that high political functionaries may have had a hand in the prioritization of the payments. In effect they were paid improperly in advance while the policyholders who will turn up at the National Cultural Centre this afternoon may be told they have to wait years for full, nominal recovery.

The court must have been aware that there had been a concerted cover-up of vital information. With the greatest of respect, I believe it missed a great opportunity to assert the rule of law, by not offering some comment on the selection of persons by CEO Ms Gita Singh-Knight for preferential payment when she must have known that collapse was imminent.

CLICO represents one of the worst acts of corporate misfeasance ever committed in this country. Yet, some of the people whose hands drip with culpability will probably be there this afternoon.

The question is whether today will simply be the end of this sordid affair or should we not follow the call by Government Senator Patrick Watson to the authorities in Trinidad and Tobago that those persons in CLICO in Trinidad responsible for milking thousands of unsuspecting investors of their money should be ‘jailed.’

Hopefully, policyholders will be allowed and will have the courage to ask President Jagdeo some challenging questions. Let us not forget that billions of dollars belonging to the NIS is involved, putting at risk the pensions of workers. It would be a sad day for Guyana and corporate governance would be rendered meaningless if today’s meeting closes the book on this affair.

The advertisement for the meeting mentions that only policyholders will be admitted and that persons would have to provide proof of identification. It is therefore likely that the press will be barred from the meeting.

The court has dealt with one aspect of this matter. A full and thorough investigation is now required to identify all who contributed to this expensive mess. The money to pay the policyholders belongs to the taxpayers. They should join the call.

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The EIU report derived its questions from comparative data published by the Bank of Guyana

The Bank of Guyana and the Ministry of Finance would have had immediate access to the Economic Intelligence Unit (EIU) April 2010 Guyana Country Report. Since these reports are considered mandatory reading for policymakers across the world, it is a reasonable assumption that the Minister of Finance, Dr Ashni Singh and Rajendra Rampersaud of the Bank of Guyana would have read the report some time ago.

If they had concerns with its methodology or contents they kept these quiet. But suddenly, within days of the Stabroek News reporting on the report, the doors of hell are opened wide. Mr Rampersaud pronounces authoritatively on statistics in a letter in Stabroek News of June 28 (‘Empirical data do not support the growth contention by Economist Intelligence Unit’) and Dr Singh on June 26 through GINA abuses everyone about house, mouth and integrity.

For the sake of convenience and brevity, I will respond separately to Mr Rampersaud and Dr Singh.

First Mr Rampersaud:

1. In his haste to respond, he fails to distinguish between Stabroek Business and Business Page or the meaning of “one of only few.”

2. He completely ignores the fact that the EIU’s principal concern is the inexplicable growth in the fourth quarter after negative growth in the first three quarters, and that the report derived its questions from comparative data published by the Bank of Guyana where he works.

3. His claim that production data are difficult to manipulate shows a lack of understanding of assumptions made about the local consumption of rice, the massive under-declaration of gold, and transfer pricing in forestry and bauxite. By implication, however, he is admitting to ease of manipulation in the other sectors that account for an overwhelming share of GDP.

4. Mr Rampersaud fails to mention that the major elements and contributors to GDP derive from sectors that are easy to manipulate – wholesale and retail (13.5%), transportation and storage (7.5%), construction (9.7%) and other services (4.4%) which together account for 35.1% of 2009 GDP. Or that the public sector categories – Public Administration, Education, and Health and Social Services account for 15.2% of GDP.

5. He asserts that agriculture is a key component in real GDP growth. In fact Agriculture is a sub-sector in Agriculture, Forestry and Fishing which as a group contributed 20.9% of GDP at Constant Prices in 2009. If the numbers are disaggregated, he will see that Agriculture contributed 15.0% to GDP, made up by sugar 4.7%, rice 2.7%, Livestock 2.7% and “Other crops” 4.9%. As a policy adviser, he may wish to consider whether the state gets an adequate return from the substantial sums it expends every year on these industries and tell us whether he believes that the Other Crops contribute almost twice as much to Agriculture as rice does.

6. If as he claims the Statistical Bureau is the “official agency charged with dissemination on authentic real sector data in Guyana,” Mr Rampersaud may offer his views on the propriety of the President advertising growth and inflation figures in his end-of-year broadcast, or the inaccessibility of the Stats Bureau to the press, or about the bureau publishing critical data, including those on inflation, only after it has received political clearance.

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Ms Teixeira was incorrect on how commissions of enquiry are set up

I can only speculate whether it was a momentary lapse that caused Ms. Gail Teixeira to mis-speak about the basis and mechanism of commissions of enquiry (Stabroek News, May 22, 2010: No info, no phantom probe – Teixeira). Faced with persistent questions on the phantom squad for which her government is again under scrutiny, Ms. Teixeira told the media that “the constitution clearly states how a commission is set up to inquire.” That is not correct.

How a commission of enquiry is set up and functions are provided for not in the Constitution but under the Commission of Enquiry Act Cap. 19:03 under which only the President may appoint a commission of enquiry. If Ms. Teixeira truly believes what she said, then she must be confusing commissions of enquiry with the constitutional commissions such as the Judicial Service Commission and the Rights of the Child Commission.

As a former Minister of Home Affairs and now one of the country’s hugely expensive political contract employees paid to advise on governance, Ms. Teixeira is expected to know the contents of the Constitution. It forms the basis of the country’s governance system. Her statement suggests that despite her long association with the PPP/C which in opposition criticised the Guyana Constitution as creating a dictatorship, Ms. Teixeira never understood the Constitution, and as Minister and now advisor on governance, still does not.

If Ms. Teixeira has any interest in good governance, she would be advocating the removal of those dictatorial elements in the Constitution, and supporting those calling for the abolition of the dictator-creating executive presidency. More practically, she should be ensuring that all the constitutional commissions – including the Public Procurement Commission – are appointed, provided with adequate resources and functional, and the post of Ombudsman filled.

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Wall Street Journal not Economist

In early January this year, Stabroek News reported on a Wall Street Journal/Heritage Foundation 2009 Index of Economic Freedom. That sparked the usual outrage from the government led by President Jagdeo, and supported by the usual letter writers including Ms Marissa Lowden, whose contributions have dried up since her departure from Dr Prem Misir’s office. For some reason, the Kaieteur News only recently carried a report on the same index.

The government reacted as it knows best – instinct over common sense and power over brain, again led by the champion driver, this time supported by the three doctors Ashni Singh, Prem Misir and Randy Persaud, and Marissa’s ghost. The fact that none of them recognised that the later report had no originality was bad enough. If they had, they would have had the upper hand and precious state resources could have been better used elsewhere. But lead letter writer Dr Randy Persaud in the Stabroek News of May 8 (‘Organizations like the Heritage Foundation and the Economist are attempting to usurp the authority of the multilateral institutions’) combined a pedantic and political approach, concluding with a professorial pronouncement on the report’s perceived authors as well as its imagined “basic mistakes” which he claimed even a sixth grader would have recognised, even though he himself seemed unable to identify any. This cleverness backfired with several serious errors in his letter.

Here are some of those errors with elaborations inserted for Dr Persaud’s enlightenment.

1. The report was an international index, not a country report as suggested by Dr Persaud.

2. For this particular index, Heritage partners with the Wall Street Journal of the USA, not the Economist of the UK.

3. The index is available free online, with methodology and all. Therefore, it is inaccurate to state that there is no transparency in the index’s publication and that the index is a commercial venture.

4. The Economist might be an institution but it is not an organisation, nor does it publish a country report. The Economist is a weekly news magazine. Also, the Economist Intelligence Unit, a leading research and advisory firm, in addition to consulting, publishes quarterly Country Reports for subscribers.

5. The IMF and the World Bank, among other multilaterals, are endowed with authority to provide reliable economic data and analyses. In fact these institutions rely almost entirely on the “official” statistics published by governments, including Guyana’s. Perhaps Dr Persaud could be encouraged to tell Guyanese who endowed them with proprietary authority that others can usurp. Or why his President rejected the World Bank’s “authoritative” index and analysis in their 2009 ‘Doing Business’ series, which was less than complimentary about Guyana’s business climate.

6. The rankings, Dr Persaud claims, are not based on actual performances, but biased towards narrow ideological criteria. Again, if Dr Persaud would break ranks and tell the nation about the government’s actual performance on corruption, it then could be able to test how ideological or biased is the index’s Guyana’s percentage rating of 26.5 in ‘Freedom from Corruption.’ The cynic might argue that that score reflects a pro-government bias!

7. The organisations he identified (Heritage and Economist) have their roots in the Cold War era. The reality is that the Economist first appeared one hundred and three years before the Cold War began in 1946 and that it is the IMF and the World Bank which are rooted in the Cold War, formed in the US by the West, as their tools of economic colonization and control. (See Cheddi Jagan’s West on Trial.)

I once wrote in a response to another letter that I had never seen so many errors in a single letter. I now need to review that assessment. Other than the above, I share with Dr Persaud an ideological dislike for the conservative, pro-capitalist Heritage Foundation.