Forex Trading - A Solution For Jamaica's Balance of Payment?

David Smith of Olint Corporation is said to be willing to trade Forex on behalf of the Jamaican government if asked to do so.
For a country where 60 cents out of every dollar earned goes into debt
servicing, the immediate question that comes to mind is, "why won't the
government ask Mr. Smith?"

Jamaica's debt to GDP ratio stood at an estimated 130 per cent in June 2007. With a fiscal deficit of 5.4 per cent, the country continues to miss its revenue projections, and the year's budget allocation of J$380 billion for expenditures has recently been shown to under-report to the tune of J$15 billion. A bleak situation for Dr. Omar Davis as minister of Finance, had his PNP administration been returned to a 5th term in the recent general elections - an even bleaker truth to swallow by the new JLP administration that has to 'correct it'.

David Smith took off from Jamaica to make Turks & Caicos Islands his home in the wake of how his Olint Corporation was treated by the Financial Services Commission (FSC), the regulatory body for financial institutions in Jamaica.

Olint Corporation claims to be an investment club, but that does not exclude this organization or any other like it from being under the regulations of the FSC. Having said that, one must quickly qualify the statement by saying that there is nothing illegal about David Smith's business or what the business does.

David Smith was quoted by Caribbean Business Report as saying: "If asked (i.e. by Jamaican government), I would utilise my skills on behalf of my country, and it is a responsibility I would take on. However, trading foreign currencies for a members' club is a totally different proposition from trading for a country. I would insist on having a solid team of hand-picked traders around me in order to get the very best returns for Jamaica."

Supporting this patriotic gesture with valid precedent from more advanced economies than Jamaica, Mr. Smith sited the case where Australia had used Forex trading to virtually eliminate its national debt. What is stopping Jamaica from following suite? If Legislation is not already in place to facilitate this, a proactive government with an equally reactive opposition could for once

have consensus on the matter in the national interest.

The past few fiscal quarters, have seen several Jamaica Stock Exchange listed financial institutions posting less than desirable results at best, and worse results than those of same period in preceding years. All sorts of reasons are provided for the unpalatable results, but one is yet to see an investment banker who would call a spade, 'a spade' - clearly David Smith and Cash Plus operations that give their clients what they want and consistently so, are beginning to make visible dents in the operations of the regulated institutions. The former, now shadow minister of National Security, Hon. Peter Phillips was once quoted as saying that in Jamaica, only those who play by the rule get 'shafted'. Right now, it is looking more like the regulated financial institutions and their clients are the ones being shafted big time.

There can be a win-win situation for all players viz. Government of Jamaica, Financial Services Commission, David Smith and his Olint Corporation, Cash Plus, regulated financial institutions and the investing public in particular.

'Finsac' is a bad word to many past Jamaican entrepreneurs because it not only left a bitter taste in the mouth for some, but also emasculate a number of stalwarts in business, turning them totally against enterprise and normal production. But Finsac came about as a result of the financial meltdown of the nineties. The unsustainably high interest rates regime preceding the meltdown sweetened the hearts and pockets of bankers and investors alike.

If Jamaica thought that Finsac was wicked, try for a few minutes to picture a scenario where heaven forbids, the bottom drops out of the Forex trading business through Legislation from elsewhere (look what happened with online Casino gambling in US territories). Imagine how many Jamaicans at home and abroad, dignitaries and otherwise, politicians, even bankers risking their clients’ investments would then need to be bailed out.

Now imagine another scenario where David Smith's business is allowed to operate in Jamaica - with more investors able to take advantage of his offerings, unemployment level drops drastically and by extension, criminal activities. Other financial institutions get to offer similar products to their clients thereby levelling the playing field for all; and the government gets to collect humongous amount of tax (even at reduced rates) from the investing public. And since it is all legal, GOJ and BOJ also trade Forex regularly, blasting off Jamaica's deficit and the country is celebrated as an economic model to watch once more.