A decline in remittances may be a sign of capital flight

Oct 12, 2018 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 galvanized sheets 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.
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.
This is one of the reasons why the government should pay attention to the increase or decrease in remittances. Right now, reports suggest that there is instability in remittances, except for workers’ remittances.
Rather than speculating that the rise and fall may have to do with the underground economy, the government should examine remittance levels to see if they are related to capital flight, as they were in the past.
How can a remittance be converted into capital flight? A step back in time is needed. A foreign exchange shortage hit Guyana after the oil shocks of 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 and 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 exchanged their local currency for foreign exchange with Guyanese living overseas who sent remittances back home. 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.
There is deep fear right now that the election in 2020 is going to be rigged. Many people cannot see how the APNU+AFC is going to win a free and fair election, given their performance in government.
And some people are talking about getting their money out. But they do not wish to have to answer all those questions which the banks like to ask. As such, persons may once again resort to using remittances to engage in extensive capital flight.

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A decline in remittances may be a sign of capital flight

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