Guyanese Online

Anti-Money Laundering Bill…Local businesses brace for hike in foreign currency rates

US Dollar Notes

MAY 11, 2014 | BY KNEWS |

The non-passage of the Anti-Money Laundering and Countering the Financing of Terrorism (Amendment) Bill by this month-end would see financial hardships threatening Guyana’s economy.
This view was expressed by Nazar Mohamed, General Manager of Mohamed’s Enterprise, recently.

According to Mohamed, there is currently no shortage of foreign currency on the local market. He assured that there is no problem in customers getting money transfers or cash from commercial banks to conduct business. There may be instances where a customer would be asked to wait a day or two but there is no lengthy delay. However, a matter of concern is the hike in exchange rate for US dollar as against the Guyana dollar.

“If the politicians in the National Assembly don’t pass the Anti-Money Laundering and Countering the Financing of Terrorism (Amendment) Bill this month…I predict three months later the country would shutdown.
“We would probably have to pay $300 for US$1. Essentially people would have to pay whatever rate is being demanded,” he added.

Since the beginning of the year, foreign currency rates have been varying with one commercial bank, as recent as last week, selling the US$1 for $219.
Guyana cannot escape its high dependency on foreign currency since not much goods is manufactured locally. The country is dependent on exports including gold, sugar, and rice; foreign investment; and remittances.

These economic activities allow foreign currency to enter the country. But, with the absence of the relevant legislation in place and Guyana continues to be a blacklisted country by the Caribbean Financial Action Task Force, local banking institutions, businesses, and individuals would have difficulty in accessing foreign currency.

Mohamed said that even his enterprise would be affected since the overseas company that does business with him would more likely stop. In fact, all businesses are facing similar threats.
Another city businessman, who prefers to remain anonymous, expressed similar sentiments like Mohamed.

The businessman said, “If the Bill isn’t passed there would be massive smuggling, hike in foreign currency rates, prices for commodities would go up… Parliament has to pass this thing.”
He emphasized that the international financial system is designed in such a way that any wire transaction to any part of the world must pass through a US corresponding bank. As such, there is no telling how difficult it would be for Guyana to conduct business in the near future.

Commenting on the hike in foreign currency rates, the businessman explained how commercial banks arrive at the rates. Nonetheless, he was stern that Guyana has a free market environment and so every organization would buy and sell foreign currency to make a profit.

According to the businessman, daily the Central Bank calls cambios to get an idea as to what foreign currencies are being bought and sold for on the market. The Central Bank arrives at an average that would help to determine what rates commercial banks could sell.

The man noted that currently commercial banks are selling US$1 for $210. He said that the Guyana Gold Board also uses a similar pattern to base the price for gold. The prices paid by licensed gold dealers are fed to the commercial banks that would utilize the same payment pattern.

The businessman said that in January when the economy experienced a slump, gold dealers played an important role in keeping foreign currency in circulation. Gold dealers sold their foreign currency to commercial banks at an affordable rate so that customers would not be affected.

He said in short, cambios regulate the sale of foreign currency based on local demand and supply. And, gold dealers sell foreign currency to commercial banks, which allows customers to conduct overseas transactions.