Dennis Jones is a Jamaican-born international economist, who has lived most of the time in the UK and USA, and latterly in Guinea, west Africa. He moved back to the Caribbean in 2007. This blog contains his observations on life on this small eastern Caribbean island, as well as views on life and issues on a broader landscape, especially the Caribbean and Africa.







**You may contact me by e-mail at livinginbarbados[at]gmail[dot]com**

Friday, February 06, 2009

What a week that was! But time to stop.

It's been quite a week...

It all started with a little financial contretemps a bit south of here, in Trinidad and Tobago. Now, the name of that set of islands with the people who know how to party and live for Soca, and have all that oil and gas flowing out of their gills, means 'three in one'. Good things happen in threes?

Barbados, never to be outdone by the Trinis, came along and tried to clear up any confusion about if CLICO-this was related to CLICO-that. How so? The Central Bank of Barbados opened a line of credit for CLICO and placed a B$10 million deposit with CLICO Mortgage and Finance Corporation (CMFC). The Governor said that it represented a "show of confidence in the institution and was not a negative development ... intended to show that the bank itself will place its money with CMFC as it had asked the company's clients to do." But within the nano-seconds that it took for that news to be made public, the public started to rumble. "You see. Dem is all in it togedda. CLICO go fall here jus' like in Trinidad." was the generic reaction. Governor (Mrs. Marion) Williams was heard to say: "I cannot understand why it should be queried that the institution is not as strong as we feel it is ... Something that has been intended to be positive is being construed to be other than positive."

My take on it as an old central banker, but a central banker nonetheless, is that discretion is the better part of valour. And remembering the rest of the phrase, "... in the which better part I have saved my life". Central banks normally do not like making headlines, so if what is done makes the headlines then waves will start to rise higher and the intent of an action--no matter how good--will quickly get distorted. I do not know why the central bank felt obliged to publicize this 'normal' operation. By making it public it became 'extraordinary', and in this climate, 'worrisome'.

PM Thompson tried to pour oil on troubled waters (Bajan oil, not imported from Trinidad) and said "the move was essentially to let the public know that should there be any challenges in our financial system that the Government would make lines of credit available to those institutions."

Hold on. My little economics brain tells me that deposits and lines of credit are different things, and it sounds as if B$10 has been deposited, and that CMFC also had a line of credit--size unspecified. That should be clarified.

So, within hours/days we had been told that CLICO in Barbados is 'safe', 'don't panic', and to 'stay calm'.Now, there are 'challenges in our financial system'. Maybe I overreact, and I am an economist not prone to that, so the general public has probably passed me by in their reaction. Sounds like the government and central bank feel that trouble is coming.

When I was asked what should be done, I said, "Nothing. If you do something then it suggests that there is a problem." If there is no problem then nothing need be done. I know, it's good to take precautions. In that case, keep them quiet. DON'T YELL ABOUT IT!

But commercial banks here began to feel some pressure on their deposits nevertheless. And guess what? People went along to their friendly bank branches at FirstCaribbean Bank, who just so happened to be making a 'routine' change of account pricing (so that people would have to pay for saving accounts and more). But this resulted in customers' accounts being closed. Oh dear. Panic? A little, as people tried to complete transactions and found that they had zero balances and that 'account closed' message staring them in the face. The bank's managing director called it a 'technical glitch' which "closed the accounts in error", and said it was being rectified (see Nation report, February 5). "Wo-yoi! CLICO's mess spredding fas' See! Fuss Caribeen gone don'!" was the generic public reaction. I hear from an associate at the bank that all is calm, all is white. Breathe in, breathe out.

But, where the three-in-one?

Government is supposed to govern, not run businesses. That view tells you that I am not really in favour of nationalisation and taking over of private companies by elected and often UNELECTED bureaucrats (look at the new board members for CL Financial). But, I know that in Barbados there is more than a whiff of stealthy socialism. So, PM Thompson was heard telling the top brass of Cable and Wireless International to 'rethink' its position to retrench over 115 workers in God's island. The execs. had flown in from the UK. LIME workers had been informed of the closure of the local call centre, but still about 50 employees showed up at C&W's Caribbean subsidiary, LIME's Windsor Lodge offices ... to find the doors locked.Now, we know that 'David' is ready to tackle any 'Mr. Goliath', and got another chance to press that 'Bajan's first' button--so said again that protecting the jobs of Barbadians is uppermost on his government's agenda at this time (and always?).

I'm not sure if the PM has a good 'borrowed' English accent, like mine but...

Was it a mere coincidence that the next day LIME services collapsed. No mobile-mobile connection, no mobile-fixed, no fixed-fixed, no connection with Digicel... "Wo-yoi! Yu see. De CLICO mess spread bad now. Even de phone service nah wuk. Is real Harmaggeddun." Stay calm. Breathe in, breathe out. Where is my Lamas partner?

So you have your three things. I am not superstitious. In fact the only super that I am is supercilious. But, I am going to calm my nerves and take a nice glass of rum and ice and look at the sunset. No blasted financial meltdown is going to spoil my sundown. Wait a minute. I just get a message on my BlackBerry: "Beware! What is going into your mouth may soon turn sour." I read the story that is attached.

CL Financial has to sell all assets. STOP.

Appleton and J Wray & Nephew, is a subsidiary of Lascelles de Mercado. STOP.

Angostura, a subsidiary of CL Financial, acquired the Jamaican conglomerate Lascelles de Mercado last year in a deal valued at around US$700 million. STOP.

STOP THAT RUM BUSINESS NOW (see Jamaica Observer report)!

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