From: mcbean@vax.oxford.ac.uk
Newsgroups: soc.culture.caribbean
Subject: Foreign Exchange purchasing in Jamaica
Date: 13 Apr 92 15:08:10 GMT
Organization: Oxford University VAXcluster

The following is an article from the Sunday Gleaner, dated April 5th, and was 
written by Margaret Morris.  It is being reproduced without permission.

"Foreign Exchange .... Who buys for the Bank of Jamaica?"

The Bank of Jamaica (BOJ) is using a network of freelance money traders whose 
operations appear to be questionable.  At least one of the known traders has 
been to gaol for drug trafficking.
     
Prior to the recent robbery of a BOJ outlet in Negril, a hotelier had warned a
 top executive of BOJ about what is perceived as an extremely unorthodox and 
insecure system oof purchasing foreign exchange in that resort.

The Negril hotelier obtained documentary proof that a "freelance" agent was 
purchasing purportedly for the bank.  This person had distributed letters 
bearing a BOJ stamp to hotels and business places.  When the hotelier attended 
for an interview with the BOJ executive, the banker pretended to be out of 
office.  The information was left with his secretary, but no action was taken.

"The BOJ know, but they don't want to hear about these operations, they cannot 
admit that they exist," the hotelier told the Sunday Gleaner.  The robbery 
occurred about two weeks later.  Three persons were stabbed and the four armed 
robbers escaped with an undetermined amount of money.  They are still at large.

The BOJ denied that the money stolen was theirs or has any connection with 
them.  But the Negril police describe the complainant as "an agent of a BOJ 
agent" and clients of this person have confirmed that he operates on behalf of 
the BOJ and has bought foreign exchange from them and given them BOJ cheques 
in return.

One source confirmed that this agent of an agent contacts his employer at the 
BOJ in Kingston to agree the rate.  He also maintains a stock of blank BOJ 
cheques signed by the BOJ agent for trading.  He checks the amount due on his 
calculator, hands the cheque to the customer to be filled in for the agreed 
amount and takes the foreign exchange, frequently without checking it. (This I
find difficult to believe!)

The agent of an agent is still operating from his bureau de change at 
"De Buss" restaurant on Norman Manley Boulevard.  "Security", i.e. grill work 
on the office, has recently been increased.  This reporter, posing as a 
prospective customer, got a telephone quote from him of J$27 to US$1 for a 
hypothetical amount of US$85,000.  The Spot Market Weighted Average Rate on 
the same day was J$26.94

The agent of the BOJ agent said that it would be difficult to negotiate a 
better rate, "because of this IMF thing the BOJ doesn't want to push the rate 
too high."  He said that the reports that $J2 million had been stolen in the 
robbery were not accurate.  About $J1 million of cheques, cash and US$ was 
taken, but it was his - "a personal loss." He is partially insured.

The BOJ Public Relations Department told the Sunday Gleaner that they have 
five agents in the field and all of them are ex-employees.  They are not 
assigned to any one area.  They declined to name the agents.  The BOJ 
spokesperson denied any knowledge of the agent of an agent operating from De 
Buss in Negril who gives his mane to customers as Morrel.  They insisted that 
the money stolen had nothing to do with them.

The agent who employs Morrel is stationed at the BOJ.  He is reported to have 
pulled in some US$6 million so far.  An incognito telephone interview with 
this agent revealed that they are allowed to fix their own exchange rates 
"using our discretion" within a band of rates.  They are paid a commisson on 
the money they buy.  This is reported to be 1%.  The Sumday Gleaner could not 
ascertain the commissions paid to the agents of the BOJ agents.  A banker told
 the Sunday Gleaner that there are at least four well-known businessmen or 
quasi-businessmen who are buying US dollars for resale to the BOJ.  They buy 
as low as possible and sell as high as possible and are reported to be making 
millions on the margin.  It is logical to assume that they also suppply other 
parties, including the banks themselves.

***** End of article *****


In the same newspaper, the editorial had this to say;

"It has been established that the Bank of Jamaica has been using agents in the
 field to buy foreign exchange.  The Central Bank needs to get foreign 
exchange to pay legitimaate debts.  It has an arrangement with the commercial 
banks but is not getting all it wants". (The BOJ gets 28% of the FE from 
commercial banks)

" It employs agents to buy foreign exchange on its behalf.  More and more 
there is the sense that the central bank is behaving like a hustler in the 
marketplace rather than a cornerstone financial institution in the country.  
Some even question its association, no matter how roundabout, with 
questionable characters.  That will not do."

"We are beginning to wonder if the central bank iis not being more a part of 
the problem than it is a solver of problems, and this despite the disclaimers 
by the governor of the BOJ in Montego Bay on Thursday, which we publish today.
 (Unfortunately the article is too long for me to type it in today, about five 
times the Margaret Morris article.  If sufficient people are interested I could
 publish my own summary of the salient points of athe governor's comments).

"The time has come, we think, for the Government to review its economic 
policies and make variations where necessary.  And cardinal to any variation 
must be the role of the central bank and the level of independence it needs to 
get to function effectively and without the central bank breathing down it's 
neck.

*********************************************************************



IMO the Gleaner editorial is being quite hypocritical.  Shouldn't the 
commercial banks be subject to the same criticisms as the BOJ.  Maybe they 
would be happier if the BOJ simply increased the % take from the banks and 
left them to do all the dirty work.

In the same edition of the Gleaner, there is an interesting article on the 
Manley years which I hope to post later this week, thesis permitting.

On a personal note,  Graham Brand, I've recieved your e-mails but I can't seem 
to reply to your Internet address.  Hopefully I'll have it sussed soon.


McBean.