Four years after its launch, the local stock market was “handicapped” by low trading volume and regulatory problems, US Ambassador David Robinson told his bosses in Washington in 2007, saying that Guyanese preferred to lose their money in traditional investments, real estate or to leave altogether.
Robinson, in an April, 4, 2007 cable that has been made public on the WikiLeaks website, also said a row between the Guyanese Association of Securities Companies and Intermediaries (GASCI) and Banks DIH also made potential investors suspicious. He noted that after the Guyana Securities Council (GSC) won a court battle to review Banks DIH’s financial records, a “mysterious fire in the Banks DIH records office destroyed the requested files.”
As a result, according to Robinson, potential investors chose to lose their money in a slow trickle against inflation rather than risk it in a troubled fledging stock market.
He noted that the tiny number of listed companies, low trading volume, and regulatory problems all made the stock market “an unattractive alternative” to saving accounts, real estate, and migration. On the latter point, he said many Guyanese found it safer to abandon Guyana altogether, observing that more than two percent of the population—including ninety percent of all college graduates—leave the country every year for the US, Canada or other Caribbean countries.
“Against those odds, GASCI will grow glacially, if at all, as potential investors continue choosing to lose their money in a slow trickle against inflation rather than risking it in a troubled fledgling market,” he predicted.
Robinson noted that GASCI opened its trading floor in 2003, with one Trinidadian company listed and four firms certified to buy and sell stocks. At the same time, he said the GSC was created to function as the market’s regulatory body. Both GASCI and the GSC drew early budgetary and organisational support from the British government.
However, he said four years later little had changed, with the original Trinidadian company still the only primary offering, joined by thirteen secondary listings. Stocks, according to the then ambassador, were bought and sold—only on Mondays—from four laptop computers grouped in the centre of an otherwise barren room. Volume averages about two million shares a session. The British at that time no longer gave money to the project, he said.
Meanwhile, the former ambassador wrote, that efforts to attract potential investors “collided with culture and (apparent) corruption in 2005.”
He said that the GASCI launched a media blitz to make wage earning Guyanese aware that their traditional investments in savings accounts and pension plans earned lower returns than the rate of inflation and to draw them toward the market. “Its message should have been appealing to the middle class. Unfortunately, a longstanding conflict between the GSC and Guyana’s largest corporation (and secondary GASCI listing) undermined its efforts and steeled public skepticism about this new mechanism seeking their money,” Robinson noted, referring to the dispute with Banks.
He said that the conflict began when the GSC had a problem with beverage manufacturer Banks DIH and demanded to review its financial records. Banks DIH got an ex parte court injunction preventing the GSC from reviewing the books.
“Four years later when the injunction lifted, a mysterious fire in the Banks DIH records office destroyed the requested files. The matter was dropped, but potential investors learned again to mistrust Guyana’s institutions and legal processes: Their money may be dribbling away in traditional investments, but those are still safer than an essentially unregulated market,” Robinson said.