IF I WERE SPEAKING on behalf of the Bankers’ Association, which I helped to revive in 1981 in St Lucia, I would not speak in vague generalisations. If I were speaking frankly, then I would first start with my own lack of contribution to the lacklustre performance of the economy leading to the recent downgrades.
I would say that my record uptick in profitability would generate dividends that would further impact negatively on the foreign exchange. I would say that the drastic reduction on two occasions in my staff complement would further exacerbate the current unemployment situation, and I would be highly critical of any of my colleagues regretting the “hurt” of taxes to their profitability.
Indeed, I would regret that the latest offer of the Central Bank for bonds is not 7.5 per cent, as was seen before, but a mere four per cent as possibly the Central Bank cannot afford to pay more in its endemic situation.
Be that as it may, we in the Caribbean, besides having to do something dramatic about reducing our local and foreign debts, have a significant challenge facing us. In fact, we are really in deep “doo doo”. So far, over 16 correspondent banking relations (in the Caribbean) have been severed. If I were a banker of a correspondent bank, I would look seriously at my relationship with a Caribbean bank. What do I get out of it? (A) A small credit balance in my books that is mostly there to service drawings. (B) Perhaps a commission for clearing to other American entities. (C) A risky arrangement if I want to send or receive money from the Caribbean – here I get a small commission; maybe some commission from credit cards. That does not compensate for the risk of facing fines of millions of dollars.
While I have always been happy for President Obama to occupy the White House, I am convinced that he has shown little understanding of the relationship of the countries of the Caribbean to the United States. What he has done in agreeing to FATCA [Foreign Account Tax Compliance Act] laws is to throw us under the bus. He has not succeeded in getting the big organisations or the rich people in the United States to pay their fair share of taxes. President-elect Donald Trump exemplifies this because for the last 20 years he has made millions, but paid no taxes. How can that be fair when you are going after the small business that turns over US$50 000 a year in the Caribbean or elsewhere?
But wait! Our leaders are appealing to the United Nations in the vain hope that it can do something about the correspondent bank debacle. Does the UN have a say with the new president and his proposed set of economic reforms? Indeed, is there not an urgent need for a decision to unravel the correspondent bank crisis?
That is why the Wild Coot says that we are in deep “doo doo”. It seems that only one of our leaders (Fred Mitchell) dealt with the real issue. However, I do not believe that anyone is listening. We need to join the debate of the 21st century and think of an alternate way of moving money, which essentially is what correspondent banking is about. We must understand what is happening in the world of “bitcoin” and “blockchain management”, and what it has to offer in moving money to and fro.
We need to explore the possibility of central banks becoming an exchange point among themselves in collecting transactions and being clearing houses. In this electronic age where money can be moved at the switch of a button, this should be highly possible, always remembering the experiences of the early 70s with Guyana – the CARICOM Multilateral Clearing Facility.
Right now people are keeping foreign currency overseas as a contingency against payment abroad. People are engaged in swapping debts in a foreign country for debts in a local country. We are unaware of the currency movement in the underground economy.
If Barbados were to decide to sell its natural gas corporation, its Grantley Adams International Airport and its seaport, it would not only rid itself of the foreign (or local) debt that is a burden, but would come closer to balancing its annual budget. An outright sale of 50 per cent or over would be unwise. The purchasing party could never pack up the ports and leave. However, and this may be the inhibiting factor, the Government would be depriving itself of an outlet for pork barrelling and hiring.
Harry Russell is a banker. Email: quijote70@gmail.com