When remittances were used for capital flight

Aug 19, 2016 Features / Columnists, Peeping Tom

Guyanese are the greatest. The things Guyanese did to survive during the Burnham regime make them the most ingenious people in the world.
Guyanese took old pieces of tin and turned them into much-needed products because they could not get those products to buy. Guyanese took old powdered milk tins and turned them into kerosene stoves because they could not afford to buy such stoves in the stores, even if they were available.
The ingenuity of Guyanese reached right into the area of financial services. Guyanese took remittances – which refers to inflows by Guyanese residents overseas – and turned that into the opposite, capital flight.
The same thing looks like it is happening today. Remittances have fallen, and it can indicate that the same things that happened in the past are repeating themselves.
How can a remittance be converted into capital flight? A step back time is needed.
A foreign exchange shortage hit Guyana after the oil shocks in the mid-1970s. By the end of that decade there was little left in the shops. Importers had to go through an agency called the External Trade Bureau in order to obtain import licences.
Foreign exchange restrictions were imposed. If you had to go overseas for a holiday, you had to go to the Bank of Guyana and they would place a stamp in your passport approving you to carry out US$40 per person.
Guyanese were turned into objects of ridicule over this US$40 that they were allowed to take out. That could not pay for their hotel bills or even food. How did Guyanese manage?
Well, there were persons in foreign countries who were supporting relatives in Guyana. Instead of sending the remittance, they gave the money to those vacationing and when those persons went back home they gave the relatives the Guyana dollar equivalent. In this way, they were able to go overseas and buy bread and cheese. This was one way in which remittance was turned in the opposite direction.
If you wanted to buy a car from overseas, you had to show that you had the foreign currency overseas to do so. Where did people get the money to bring in the cars?
The same system worked. Persons who sent remittances held those remittances back and an exchange took place with Guyanese who needed foreign currency, but who had enough local dollars at hand.
At the same time Burnham had begun to pressure the business and professional classes. Many of them decided that it was time to bail out of Guyana and to take their children with them.
They did not only take their family. They sold their properties and did the same exchange with persons living overseas. This is how most of those persons who had property and savings in Guyana were able to get their money out.
Importers did the same in order to finance their imports. They paid the dependents of overseas-based Guyanese and got the equivalent in foreign exchange overseas. This system of converting remittances into capital flight helped to feed and clothe Guyanese.
The reduction in remittances in the first half of this year is a disturbing development. It could mean that extensive capital flight is taking place, that Guyanese with money have no confidence in the new government and are doing the same thing as in the past: they are shipping their assets out by converting remittances into capital flight.

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