Months ago the global financial crisis hit. The response of the Government of Guyana at the time was that we had limited exposure, since we had a parochial financial system with not many companies investing in the stock exchange.
What was overlooked was that, while most of our companies may not have been trading in the troubled capital markets, they had investments with companies that were doing so and thus, once these companies experienced problems, it would eventually filter back into our system.
We were promised then that consultations would take place to build a firewall to protect Guyana. But these consultations never materialised, and the government must now be held responsible for this failure to build a defence shield.
Over one month ago, CL Financial in Trinidad ran into problems necessitating the government of that country having to intervene. Again this should have nudged us into building a firewall. Instead, CLICO (Guyana) indicated there was no need for undue alarm. The Government said it was monitoring the situation.
Just what the Government was monitoring, I do not know, but it would surely be helpful, when the present crisis in Guyana is debated in the National Assembly, if we are told just what was being done.
It would be interesting to know whether, within the more than one month since CL Financial experienced cash-flow problems, attention was being paid to the investments that CLICO (Guyana) had with other CLICO banks throughout the region.
Based on what is being made public, the Government was aware two weeks ago that serious problems were developing with CLICO (Guyana). This was two weeks ago and therefore, while the Budget was being debated, there were signals that problems were arising.
It should be mentioned here that what Uncle Freddie wrote has been confirmed: that CLICO did sell its shares in the Berbice River Bridge to NBS, one of the sure signs that the company was experiencing problems.
In this context, two amazing things happened. The first was that the Budget debate proceeded as if everything was normal. Surely, if the signals were that CLICO was experiencing problems and the possibility was high that these could cause disruptions, the Budget should have either reflected this situation, or should have been put on pause so as to make accommodation for any possible intervention and disruption to the economy.
How could the Government have been aware of the problems of a major player in Guyana’s financial sector, yet proceeded to debate the Budget without any serious reference to the possibility that the Budget would have to make provision for interventions that would become necessary?
And why was it proposed that after the Budget debate was completed that there would be consultations on building a firewall? Why after? Why, if the Government was aware of the problems with CLICO, was the Budget debate not paused and consultations held which would have arrived at a plan on the type of intervention that would be necessary to salvage the situation?
Where is the government going to find the funds to salvage the situation? By the time this article gets to the press, the Estimates of Revenue and Expenditure proposed in the 2009 Budget would have been passed. So where are the funds going to be found to provide the short-term financing to help CLICO?
I for one do not believe that the Government has the resources to salvage the situation, but the fact that it is involved would help restore confidence, since the public and CLICO’s investors would feel that they will have a better chance with the government guaranteeing the security of at least some or part of the total investments made into the local company.
As it turns out, there are both short-term and long-term investments, and the question therefore needs to be asked as to just which investors the government is intervening to help.
Is it the small workers whose pensions can be affected, or is it the large fish that made short-term investments in annuities? I do not think for one moment that all the investments can be saved.
It is believed that quite a few big-wigs have huge funds invested in CLICO. And we know when the bourgeoisie class has problems they will lobby and lobby hard for the government to bail them out.
But they took a risk and invested in short-term annuities, seeking the attractive rates of return offered. These big-wigs should bear a greater portion of the pain of the fallout.
The government should insist that the pensions of workers are not jeopardised, and should have the first call on the resources of the institution. The small man, the workers who have their pension funds, should be the first to be protected.
Not that there should be any problems in protecting them. After all, is there not supposed to be a statutory fund which we are told had quite a large sum as at 2007, a fund which is set aside to cater for the payment of these long-term investments?
The first question that should be asked by our parliamentarians when they begin to debate the financial crisis should be: What is the status of this statutory fund, and just how much of it has been invested outside of Guyana?
After all, there is a provision in the Insurance Act of Guyana which stipulates that a company engaged in providing long-term insurance shall have assets invested in Guyana to the extent of no less than 85 per cent of its statutory funds.
The second question to be answered therefore is whether any of the provisions concerning the investments were in breach of the Insurance Act.
It is disturbing to note that CLICO (Guyana) has such a high concentration of assets in CLICO (Bahamas). This requires some explanation. And this is also why what should emerge from the debate in the National Assembly should not be a war of words since there are practical matters to be addressed.
Foremost of these should be the establishment of a bi-partisan committee, comprising three members of the Government and three members of the Opposition along with a Chairman from civil society, to investigate this entire situation regarding CLICO, and to make recommendations for the future insulation of Guyana from similar crises.
The Government, which was just days ago calling for a stakeholder consultation of this crisis, now has the opportunity to show its goodwill and establish a parliamentary team to investigate and make recommendations on the way forward.
If the PPP is unwilling to support such a move it should be allowed to sink in its own ship because, despite what the President of Guyana claims that there is no significant systemic effect because of the problems with CLICO (Guyana), there is that lingering question that if there is no significant systemic impact why is the government intervening.
Sep 25, 2018Three days of fun filled activities at the 2018 Amerindian Heritage Games, coordinated successfully by the Ministry of Indigenous Peoples’ Affairs concluded on Sunday night at Everest Cricket Club...
Sep 25, 2018
Sep 25, 2018
Sep 25, 2018
Sep 25, 2018
Sep 25, 2018
Editor’s Note, If your sent letter was not published and you felt its contents were valid and devoid of libel or personal attacks, please contact us by phone or email.
Feel free to send us your comments and/or criticisms.
Contact: 624-6456; 225-8452; 225-8458; 225-8463; 225-8465; 225-8473 or 225-8491.
Or by Email: [email protected] / [email protected]