There needs to be greater disclosure

Feb 27, 2009 Features / Columnists, Peeping Tom

The thing is beginning to hit the fan. The effects of the global financial crisis are reaching close to our doorsteps.
The Peeper understands that some big ones in Guyana have lost or are about to discover that they have lost a great deal of money which was invested outside of Guyana. These big ones are in deep distress and have joined some West Indian cricketers who have lost money invested in companies which are involved in the troubled capital markets of the world.

Unfortunately these things are happening before the proposed firewall which we were promised months ago could have been erected. This is now just a missed opportunity but may now cost this nation dearly if the rumours circulating that a major financial player in Guyana may have some problems.
One of the important elements which were expected of the firewall would have been detailed regulatory scrutiny of financial companies. It would be inexcusable if it is now discovered that the local financial sector is threatened because of the failure to move earlier on building such an oversight body after the financial crisis broke.

The buck will have to stop somewhere and if the reports we are now being told about are confirmed, there is only one place where the buck should stop over Guyana’s failure to build a firewall to contain the fallout from the global financial crisis.
As I said in a previous column, the government is in the deep end when it comes to analyzing and predicting the possible contagion effects of the financial crisis. The government did not seem to know what was likely to happen. It can only respond after a crisis hit.

It has never had the real capacity to predict likely outcomes, not just in terms of the effects of the crisis, but also in relation to global commodity prices.
To be honest, I am worried more about the Guyana government coming to the rescue of the local financial sector. The last time the government involved itself in the banking business it ran the state-owned Guyana National Cooperative Bank (GNCB) into the ground. After siphoning off the bad debts of the former Guyana Cooperative Agricultural and Industrial Development Bank (GAIBANK) and GNCB to a debt collection agency, the government got a clean start with the GNCB, but within a few years had raked in almost the same amount in bad debts.

This is why despite what many Guyanese may feel, there can be no consolation if the government decides to take over any troubled institution. No sooner does this happen, than the institution will become more troubled.
In the meantime, Guyanese are becoming worried and what is now required is not a panic reaction but rather full disclosure so that the extent of Guyana’s exposure can be identified.
They are worried because of the lack of assurance of what is taking place in Guyana at this time.
This column calls on the government to move swiftly to ascertain just what risks investors and the public face in Guyana.

I am particularly worried about three issues. The first of these concerns is the investment by the National Insurance Scheme in CLICO. We were told that it was about six billion dollars. When did this investment take place; was it sanctioned by the Board of Directors of the Scheme and how secure was this investment given what we are now learning. Is it true that this investment of the NIS funds was made three years ago and what is the guaranteed rate of returns and associated risks involved in this investment?
Could the Commissioner of Insurance indicate just what percentage of the total assets of CLICO (Guyana) was invested outside of Guyana and whether any such investment was allowable under our insurance and financial laws?

The public, given the meltdown that is taking place within the Caribbean, have a duty to be told just what is going on. What we were previously being told may be quite true and I have no reason to question the accuracy of certain statements which were made, but I was quite taken aback yesterday when I read that some 51% of the assets of a certain company may have been invested overseas.
This is disturbing and requires clarification.

Also worrying are the suggestions that are being made in sections of the press that a local building society may have purchased CLICO’s share in the Berbice River Bridge.
If this is true – and I hope it is not – then it would raise serious red flags because why would a company which has a guaranteed rate of return that is higher than could be obtained from alternative local investments, sell their shares in such long-term investment?

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