Devaluation and Privatization

Submitted by Looking Glass

???

That the IMF would dare suggest devaluation of the dollar as reported is to put it mildly unwise, misleading and embarrassing. Economics assume rationality. Countries are not rational entities; they differ in terms of resources etc. Dollar devaluation might have been something to consider if we were a large scale producer and exporter with large guaranteed markets to supply but that is definitely not the case. Sugar is about the only significant thing we export. Devaluation will make it easier to sell the exported products but more costly to produce. If we can’t get people to work on the land today it is unlikely they would do so for lower wages.

Devaluation will increase to cost of imports and with it the cost to consumers. Salaries and wages will be devalued in the sense that everything will cost more. Businesses and government will be expected to increase salaries. Hotels too will be expected to increase wages and will likely increase the price to visitors. In short the cost of everything will rise and so too job loss and unemployment. It is unlikely that salaries and wages will rise sufficiently to compensate the increase cost of living. Government will have to increase taxes etc. in order to have money to pay its bills and the national debt which will increase. Given our reluctance to revise our lifestyle the dollar devaluation will likely lead to social unrest.

Exactly what does privatization and private sector participation mean and how will it improve the economy? Privatization is generally understood to mean the sale of commercial assets. Why would government sell/privatize its profitable assets? If government sells its commercial assets to foreigners or the local private sector profitability and efficiency could lead to staff reduction and higher costs to consumers, more so with devaluation.

It is unlikely that people will readily invest in non-productive entities in the name of public participation. The state of personal and household indebtedness suggest that, some politicians apart, the people have not the where-with-all to buy shares especially in non-productive enterprises. That workers would buy shares especially in non-productive state entities does not make sense, nor does it make them efficient. Are people and or the private sector going to buy shares in business in which there is no return on investment? Even if they do it does not make them efficient and or profitable. It seems that government businesses have been inefficiently managed for a long time.

In Privatization Debate Devoid of a Philosophy a BLP spokesman cites the need to examine the ownership structure of the CBC, GrantleyAdamsAirport, Port Authority and a few others. When you do be sure to tell the public who owns the Port and Airport.

The last administration sold some of our most important commercial assets to Trinidad and the UK. It left a massive national debt of about $62bn, no value-added industry for employment generation (construction, services and tourism are not value-added industries), no powerful additions to fuel the economy beyond tourism (Fallacy In Shoddy Robes) and used borrowed money to finance reserves.

Fourteen years of ‘astute’ management left us in bankruptcy, indebtedness to sink the Titanic and the loss of profitable public assets. The motley autocrats are so inured in their iniquities they see them as natural they make sophists look like angels. On offer is another term of progressive retrogression. Like peacocks on audition they continue to fillip painful irrelevancies in the name of probity, financial management, progress, development and above all wisdom. The wise men, their integrity fragile, lack the ability to hide their nakedness behind tattered rags. As Lowdown once put it, the BLP doesn’t let customary convention stand in the way. The Reverend dare not importune the Redeemer on their behalf. In a country without natural resources and devoid of industry, given its past performance and current utterances, it is unlikely the opposition can/will change the tide and lift the country out of permanent recession and decline. It would require a generation or so to effectively lift the country from the bottom of a bottomless pit and for people to adjust their lifestyle.

0 responses to “Devaluation and Privatization

  1. All the while the GOVERNMENT getting ready to SELL oil blocks to BHP BILLITON. We Bajans sure are awashed with the wrong kind of pride.

  2. I heard with my own two ears on down to brass tacks on Monday, Minister of Finance Chris Sinkler called in and said that there is “no philisophical or fundamental difference between the blp and the dlp when in comes to privatisation” and also said to the Barbados chamber of commerce earlier this year that the statutory corporations are becoming too bloated and their structure must be examined…….so why is this a one-sided attack article which DOES NOT blast both parties for even daring to suggest such a thing as privatisation??? If you disagree with privatisation well disagree fully but don’t ignore what was said by Mr Sinkler as the minister of FINANCE (who if dlp was to get back in would formulate these policies which seem, from what he said, would include privatisation)

    And just so you know and don’t assume i’m a blp supporter because i disagree with this article, this is coming from an independent teenager not a die-hard, ingrained party faithful of either party. I despise attack articles such as these which are extremely subjective. I would like as a potential first-time voter to have OBJECTIVE AND UNBIASED information (actual facts) from which i can make my decision on who to vote for and if anything, this article is a deterrent from voting dlp.

  3. We were bankrupt before the recession after 14 yrs of blp?? If we really and truly were bankrupt then the blp shielded the people from that reality rather well indeed. All I know that for all of my life before 2008 that i was not suffering as i am now and my family certainly was not suffering the way it is now because i was born under a blp administration. However, the last 3 years were very challenging financially and i know there is a recession. But I follow politics and as far as i know the blp restored the 8% pay cut and inherited foreign reserves that could only pay for month more of food imports. So i know the blp inherited a bad economy just as the dlp inherited a bad economy and i see very little hope with this govt but perhaps they deserve a chance to correct things but they have not shown me as yet that they can do it.

  4. millertheanunnaki

    @ Looking Glass:
    “Sugar is about the only significant thing we export.”
    “Devaluation will make it easier to sell the exported products but more costly to produce”

    From those two statements alone one can conclude that you know nothing about which you write.

    The export of sugar is no longer a viable option. How can something that does not exist- even if more costly to produce through a devaluation- can ever be easier to sell abroad?
    This convoluted logic makes Alice really smart spying through the looking glass and shouting:
    “If I had a world of my own, everything would be nonsense. Nothing would be what it is, because everything would be what it isn’t. And contrary wise, what is, it wouldn’t be. And what it wouldn’t be, it would. You see?”

    For the sake of some balance and some clarity to your article can you tell us how we should go about staving off a devaluation i.e. keep the IMF Red Riding Hood wolf from our financial doorstep?

    Hint: we must earn foreign exchange since we can’t borrow it any more. How do we earn it is the question you need to address in the absence of the sale or privatization to foreigners of our national assets.

  5. @ Looking Glass
    This is a very simplistic analysis…..reminds one of the Central Bank’s position :) ….The world does NOT revolve around Barbados.

    LOOK!
    the basic problem with Barbados is that we are spending more than we are earning AND we have been doing this for so long, that the total amount that we ALREADY owe is about a full YEAR’s salary.
    basically our bankers are saying that any more loans to us will have to be at high interest rates, and so the government has been spending monies accumulated in the children’s piggy bank (NIS) for routine expenses instead.

    Obviously you have decided that our lifestyles are sacrosanct and CANNOT be compromised. Bushie hopes that you are correct, but we can’t expect the IMF to have that same perspective…. :)

    On BU we have already explored the challenges to improved productivity (square pegs in round (wrong) holes…..so
    How can there be ANY kind of sensible solution that avoids a CUTBACK in our annual expenses to WITHIN our means?
    Obviously there CANNOT…..and apart from a currency devaluation, the only other option will be a cross the board cut in emoluments…(dod we make THAT illegal?) ..and THAT would never fly.

    So if there is to be no devaluation
    There is to be no salary cuts
    …that only leaves massive layoffs. Would THAT be better that everyone taking an equal percentage cut?

    What would YOU suggest to be the best solution?…when the NIS and other reserves are gone….?

  6. Come on, miller. You are slipping badly. Surely you are not going to let Looking Glass get away with the astonishing statement:

    “Fourteen years of ‘astute’ management left us in bankruptcy, indebtedness to sink the Titanic and the loss of profitable public assets.”

    Man, that is a batsman’s wicket if ever there was one. The Government making more now from its minority shareholding in Republic Bank than when it had 100% of the BNB.

    Take it from there, miller

  7. national debt at $62bn in 2008?? utter rubbish!
    the national debt at the end of 2007 was around 88% of gpd
    if barbados real gdp in 2007 was averaging $8.5bn what type of mathematical formula can get barbados national debt at $62bn?

  8. a wasted fourteen years is what got us in this quadmire putting money in the peoples money was the mantra of the blp instead of one of restructing an economy and putting it on a path of sustainable growth and productivity now the chickens have come home to roost

  9. Whether u devalue or not the cost of living and high import bill will continue to increase as long as significant changes are not made to lifestyles. When one has a lifestyle diseasean do u not make changes to increase ur chances of survival? So too with the econony. The alternative is to continue with the inactive and destructive lifestyle and totally destroy the economy. Imagine with the continually rising cost of living wat it will be like in 5-10 years.

  10. And to think that cause and effect would be without devaluation,

  11. Would like to see a breakdown of how Looking Glass arrived at 62 bn, it is matter of credibility!

  12. BLP wants to send home workers. What nonsense, I don’t think this is the case at all. After privatization the private sector will send home any excess.

  13. David, your comment that 14 years of BLP government left Barbados in ” bankruptcy” is idiocy on stilts.

  14. If the national debt was 62bn in 2008 and it’s in accordance with the GDP ratio stated at that time, wouldn’t that mean that Barbados economy is two third the size of Trinidad economy? Is Barbados economy really that large?

  15. Looking Glass has manage to do it again. Note he maintains that the airport and seaport were sold, yet Sinckler said he intends to sell them as part of his government’s divestment plan. I am confused!!

  16. @Marlo Ray

    You obviously missed it but the credit for the submission goes to Looking Glass.

  17. millertheanunnaki

    @ Inkwell | November 15, 2012 at 10:49 PM |

    What’s the sense of further debate with an idiot that claims the national debt stood at $62 billion in 2007? Only morons like ac and CCC would digest such crap.

    I will not waste the ink of truth by dipping my pen of wisdom in your intellectual well to respond to a barb of darkness and lies hiding behind an opaque looking glass of emptiness and spite.

    Let the facts speak for themselves:
    In 2007 the national debt was around $4 billion
    In 2011 the national debt was close to $6 billion.
    This represents an increase of approx. $2 billion or approx. 50%.
    Anthony the resident statistician and man of facts and figures can clarify or confirm.

    According to Looking glass’s calculations the national debt at the end of 2011 would have been $62 billion plus $31 billion = $93 billion.
    Looking Glass, here is a basic lesson in “How to Lie with Statistics”.

    Not even “ac” would believe your lies, damned lies and statistics. Your credibility has been totally destroyed and your looking glass shattered to smithereens.

  18. old onion bags

    @ Miller
    This is not the first time Lookin Glass has imputed conveniently WRONG FIGURES…..I seriously believe Looking Glass is seriously mathematically impaired….OR SIMPLY A STRANGER TO TRUTHS…. But there again DLP politicos not the ” MOST” forward…..( town hall meets)

  19. old onion bags

    corr .I believe Looking Glass is seriously mathematically impaired.

    (when will the S stop ?)

  20. For those interested in factual information rather than fluff, I refer you to the Central Bank of Barbados’s June 2012 Press release here:

    http://www.centralbank.org.bb/WEBCBB.nsf/%28hpPublications%29/97A976AF0D7C4D1A04257A360064B2C9/$FILE/June%20Press%20Release%202012%20Finalv.2.pdf

    in particular:
    Table 5: Public Debt Outstanding (BDS $Million
    on page 13, the salient feature in relation to this article being:

    Gross Government debt:
    2007 – 4,773.9 ( million dollars)
    2011 – 6,891.9 ( million dollars) as at June

  21. old onion bags

    Inkwell
    Excellent point ole chap…

    It took the BLP 14 years to incur a DEBT of $4 Billion ..AND HAVE MANY ASSETS to show….Kensington, Dodds, 7 schools, ABC Highway,and plenty more infrastructure….while IT ONLY TOOK DLP…. 5 years to increase it by $2 Billion in 1 TERM WITH A SCHOOL and only 1 School and Four seasons..TO SHOW…..TELL ME…WHO WOULD WANT TO GO BACK ?

    2007…….$4.7 Billion
    after
    2011…….$6.8 Billion

    MADNESS…..sheer MADNESS..

  22. millertheanunnaki

    @ Inkwell | November 16, 2012 at 9:32 AM |

    I am aware of these statistics or facts on the national debt. My figures were just for illustrative purposes to show in a simplistic way the stupidity of the $62 billion figure quoted by the simpleton savant Looking Glass.

    What the DLP idiots (including ac) have to justify is that increase in the national debt by $2.118 billion or 44.37% compared by 2007. Where did the money come from and where did it go? What assets or capital formation are there to show for this massive increase in just 4 years?
    Can we expect this debt to rise by an additional $1 billion by the end of 2012?

  23. old onion bags

    corr : TERM WITH A SCHOOL and only 1 unfinished polyclinic

  24. Observing(...)

    62bn.

    Well well well

    And I thought silly season couldn’t get any worse.

    @ac
    care to offer an analysis on the link you provided?? It contains some educational information.

    Just Observing

  25. millertheanunnaki

    @ old onion bags | November 16, 2012 at 9:43 AM |

    You forgot the Boardwalk named after Snow White the back-raiser and architect of the the 1991/92 IMF difficulties.

  26. old onion bags

    No wonder the Transport Board in the dire state…(.$ 40 million loss each year)….DLP goes VIRAL when the public purse cheque book in their care….they HAVE NO MONEY MANAGEMENT SKILLS…ask the NIS…or Brass tacks ‘ the truth must be told’ Marshall…

  27. @ observing in one word TRICKLE DOWN”

  28. We don,t have to justify nothing the justification is in the fact that the little money the BLP keep talking about that they left was not enough to fix a pot hole the truth of the matter is that the debt borrow was so high including interest that the now govt had no other choice than to borrow outside of closing shop

  29. @Charles
    nice and balanced reasoning.

    THe Blp administraton need to tell the barbadian public that when it signed the loan for the expansion of the airport , among the agreement for the 28m euros was the corporatisation of the airport and subsequent privatization. But it could not proceed, I will not say much on it, except that govt inputted more into the project, so who should have been calling the shots.

    The blp think that Barbadians are stupid.

    On another note, when VAT was introudced, it raked in considerable sums, but what has happened to that money,?

    We alll know that the current govt. The govt has adjusted the income tax band, and this put more disposable income in people’s hand, that’s the way to go. I konw people who got an increase in take home pay of a little over two hundred dollars. so the BLP should weel and deal and come again, as the govt did what it can do, no pie in the skyy promises will fly with the middle class. The Republicans did not listen and they paid the price. Barabadains are quite aware that it kas to adjust its artificial lisestyle that was created over the last eighteen years

    The Blp is aware that it is illegal to restore the non-taxable allowances of over 97m in hosuing and entertainment etc. To do that will mean a short fall of about 27m in income taxes.. And we have been told that to do so would be contrary to the income tax act, is the Blp saying that it does not respect laws.

  30. @onions

    the amortization of the blp debt, logic 101

  31. @ TTP

    Come come come so what about the pre-1994 DLP debt amortisation? hmmm

  32. @enuff

    what was the dlp debt at 1994 and when amortized what was it when the blp took over? How much vat was collected and what was the money used for?

  33. Harry callihan

    like i said before. after you monkeys have messed it up.sell it to some one to fix what you have destroyed.
    i say privatize barbados government and sell the whole funking island now you money monger and greedy disguising waste of space have ruined it.!!!!!!!
    stick that where the sun don’t shine.bloody jackasses.

  34. With all the lovely name calling girls, am wondering where all the 2.5 increase in VAT is going. Something has to give with regards to way the bajan polititians think, don’t like politics but this is spiralling out of control. I say let OWEN try to fix wat damage his party may have done, and definitely try to undo all the destruction DLP has visited on bajan taxpayers, clico policyholders.

  35. Gabriel Tackle

    Our concern should be that the government stop borrowing the 40-50 million dollars every month from NIS to meet current liabilities viz salaries of a bloated public sector.It is my understanding that the civil service number approx 17000 persons and stautory bodies number the remaining 10-13000.It’s the latter that’s contributing to the demise of the government’s ‘physical’ deficit(a la jepter) and therefore there is that need to cut the ‘unbiblical’cord(a la jepter) less buhbaydus like greece would have to cut its social programmes,devalue its currency and slash everybody’s salaries and benefits.If thats what bajans want I say good luck to you all,I gone from ’bout hay.Wunna and frendell and jepter can hold hands and continue to walk bout in yella and red shirts like clowns and buffoons.

  36. Something has to give

  37. old onion bags

    Ok everybody…..its officially unofficial……lil sparrow was right…..the ball will bounce tis week at long last and Rational Some will be in for real hot water(which every minister DLP he really is)….Imagine the audacity of some, come a begging affa posting a nothing thread…..attacking poor Caswie….den gettin vex when Caswie demand answers….poor winning strategy bredds…well well

  38. No government has bloated the numbers at Statutory corporations and wasted more taxpayer money in questionable and failed projects than the BLP under Owen Arthur.

    Arthur oversaw a great deal of inefficiency and encouraged it, far from cleaning it up, he brought on “consultant” after “consultant” who turned out to be his political buddies friends that he was propping up financially at the public and taxpayer expense.

    Why the hell would we want to go back to that. If you want efficency in our public sector ,you cannot in good conscience vote for the BLP especially under Owen Arthur.

  39. Bajans are not Fools

    0nion we notice you dont write the word PRIVATIZE. Does that word frighten you onion? It shouldnt your boss announce it as the cornerstone of government policy under a BLP administration if elected. As a hard working civil servant privatization means deprivation of employment as Barbados remaining assets fall into the hands of the greedy private sector and foreigners. We the voters wont allow that to happen.
    Say the word for me onion say PRIVATIZE.

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