Money from Your Overseas Families – In Trouble

Oct 03, 2008 Features / Columnists

Peter R. Ramsaroop, MBA

INTRODUCTION
The financial crisis that hit the United States has spread to many other countries across Europe and Latin America. In Guyana, our economy is already on a life support system and is in danger of a tailspin unless we take this crisis seriously.

Tighter credit and falling commodity prices, both products of the U.S. slowdown, are showing signs of hurting our region. Remittances going from the US to Mexico dropped 12% last month. The slowdown has also started for Guyana when it comes to your relatives sending money.

Many in the US are forced to re-adjust their personal budget and take care of must-pay bills. This week the Bank of Guyana announced that it was watching the crisis closely and that its investments in the U.S are safe.

That statement is cause for worry in the context of the financial crisis since the Bank has invested hundreds of millions in the US. We have not heard from the other banks serving us.

There have been no public statements from the Ministry of Finance on the measures it is taking to protect our financial institutions and what the impact on our economy will be, given the slowdown in many sectors of the export markets.

Surveys this week show most people around the world feel that their governments are doing a poor job at economic policies and that poor performance has resulted in this meltdown. In addition, corporate greed on Wall Street has affected not only the US but most countries around the world.

REMITTANCES
Our economy is being held up by sources such as remittances from our relatives outside of Guyana with a whopping 40% of our Gross Domestic Product (GDP). Many have depended on these sources to manage their finances, both from a personal and business perspective.

Many of our families in the USA are starting to feel the pinch. They will find it more difficult to obtain credit; the job market will get smaller as businesses downsize, and many will have to closely manage their disposable money.

They will need to pay cash for more items such as cars and transportation, instead of using credit, and will have to reduce expenditures in areas such as remittances as we have already seen in countries such as Mexico and Ecuador.

IMPACT ON KEY INDUSTRIES
As economies slow down, the purchasing power for 11import goods will also be reduced. This is one area where our country may be affected given our limited export markets.

Money transfer companies will also be hit hard and we need to be prepared for fees to rise and some companies may even go out of business.

We must be ready to experience currency depreciation, an economic downturn, problems in securing and allocating commercial credit, and unusual difficulties with corporate debt.

As a result, agricultural trade can be affected, mostly through higher import prices and reduced import volume.

This is where we need active involvement from our Finance Ministry in preparing to counteract these known problems. There are other key areas that we must also focus on, especially as it relates to gold prices.

PRESSURE ON OUR LOCAL SYSTEM
The pressure on our nation becomes more important given the global financial crisis and we need to rapidly move ahead in areas such as alternative energy, the Brazil connection and finding oil.

MacLean’s Magazine of Canada has said that Guyana may be able to eventually match Kuwait’s annual oil production of 500 million barrels.

We need to be more aggressive in becoming self sufficient. We need reduction in taxes now in order to stimulate our economy before we really feel more of the impact of the global financial crisis.

CONCLUSION
As you manage your personal finances, you must be aware of your dependence on money from overseas to supplement your income.

You need to take into consideration how your families will be affected by the crisis. Some will lose homes, jobs and income. This will reduce what they can send to you in Guyana.

We all have to look at ways to improve our own standings; that is where you must become involved in ensuring you are part of the Grow More campaign, at least in your own backyards.

You must lobby our government to reduce the VAT and put more money back into our pockets, and to take what they have collected and create the infrastructure necessary that will attract investments and create jobs in order for all of us to have the chance to prosper.

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