Lethem businesses hit hard by slide in Brazilian real

- influx of Chinese merchants worry local traders

The drop in the value of the Brazilian currency is hurting the Lethem economy, while increased competition, including an influx of mainly Chinese businesses, has forced a number of local businesspersons in the Region Nine border community to rent their properties rather than trade.

“Lethem economy survives on Brazilian customers. Without Brazilian customers, all what’s happening in Lethem can’t be successful. So, because of the recent devaluation of the Brazilian real, we find that the goods in Lethem now have become more expensive because the Guyanese businessmen are accepting the real at a lower rate than before,” President of the Rupununi Chamber of Commerce an d Industry (RCCI) Daniel Gajie told Stabroek News in an interview in Lethem last week.

The desolate Lethem Commercial Zone two Fridays ago.
The desolate Lethem Commercial Zone two Fridays ago.
The GuyBraz store
The GuyBraz store

He explained that when the value of the real was high, Brazilians found the goods sold in Lethem cheaper but with the drop in the value of the currency, the goods have become more expensive. In recent months, as the Brazilian economy slowed, the real, which previously traded in Lethem at $100 or $90 for one real, is now being exchanged for $65 or $70 for one real. According to Gajie, Brazilians account for 85% of consumers in the Lethem commercial zone.

While, businesses generally would not disclose what their earnings are, it is estimated that Brazilians spends millions of dollars in Lethem. “From estimations, we are certain that on a monthly basis, in terms of US dollars, over US$10 million would easily be spent at Lethem. Some days you might even find that might be one day, if it is a good day,” the RCCI president observed.

During a recent visit by Stabroek News to Lethem ahead of the Valentine’s weekend, traffic from Brazil, according to multiple businesspersons and residents, was down to a trickle. It picked up, however, on Valentine’s Day but was not as high as is normal on Brazilian holidays. Valentine’s Day also coincided with the start of Carnival in Brazil and usually stores did roaring business. Gajie noted that for the Brazilian Independence Day last year, there was about close to 2,000 vehicles coming over the border and there were traffic jams. “It was crazy, crazy, crazy,” he recalled.

However, with the downturn in the Brazilian economy, business has slowed. “Lethem is a unique place. We usually get business all year round. We may not get it every day but at least three to four days of the week, you would find the area [would] be filled with vehicles and customers from Brazil,” Gajie said. He said that there are good days and poor days and at that moment it was bad. “On a good day, we can have as much as 1,200 to 1,500 vehicles and on a poor day you can have just about 100 or less,” he said, while adding that the weekends are usually good.

 

Very few people

Nandalall at his store in Lethem.
Nandalall at his store in Lethem.
More activity at Lethem on Valentine’s Day
More activity at Lethem on Valentine’s Day

“The real has dropped, the Chinese [are] taking over. We’re not getting the business like before…we never had a Saturday like this in…the last three months, four months now…time like now Lethem is full with cars, very full,” a despondent sounding Nandalall (only name) said while sitting outside his GuyBraz Boutique in the Lethem commercial zone. He said since the value of the real dropped, the flow of Brazilians to Lethem slowed to a trickle. “Terrible, terrible,” he lamented.

Businesspersons told Stabroek News that the businesses most affected are those that sell clothing and footwear because the Brazilians buy these items in huge quantities as they are usually cheaper in Lethem than in Boa Vista. However, in recent times, the Brazilians have also expanded the range of items which they purchase as many of these items are found cheaper in Guyana.

Nandalall established his business in Lethem six years ago and has another store in Georgetown. Business is not what it used to be, he said. “If Brazil people decide to stop come Lethem, business is done,” he asserted. “We depend on a different people to support we here, not Guyanese.”

The businessman also noted that the real circulates a lot more in Lethem with most of the transactions being done using this currency. However, now there are difficulties in converting the real to Guyanese dollars and the local banks offering a low value for the real. Service providers are also hesitant to accept payment in this currency, he said.

Several other businesspersons, who spoke on the condition of anonymity, expressed similar sentiments. One Chinese businessman said that there are not enough customers. “We see less customers from Brazil right now,” he said. “Very few people coming to do the shopping.” He said it is difficult to make a profit with the drop in the value of the real. “It’s very hard for we,” he said, while adding that if he raises his prices, the customers will not feel nice. He disclosed that he has raised the price of a few items but is hesitant to do the same for others as it would see less customers coming. His customers are mainly Brazilian.

Another major businessman said his customers are 40% Brazilians and 60% Guyanese and so he is not really feeling the impact of the drop in value of the real. “Yes the real has affected us a lot but there is nothing I could do,” he said. He pointed out that his line of business is different from the clothing and footwear businesses that are being impacted more seriously.

He said that Region 9 does not have the population to move business and over the past year and a half, trade has dropped. Competition has also increased from about five major stores several years ago to over 30 major stores now, some of which are housed in cavernous warehouse-like buildings. “(Lethem) economy dependent on Brazil. If the people stop come, that’s it, the Region Nine population can’t sustain the business out here,” he said, while adding that there are about 15 large Chinese stores and more are coming.

Workers are also affected by the drop in the value of the real. “The Chinese, right now, normally they would pay the Guyanese in Guyanese dollars. Now, they want to pay them in Brazilian (currency),” one resident said. “They done feeling the impact of it already and the worker feeling the squeeze because the worker ain’ getting the kind of money they suppose to get when the week come,” he said. “Is better when the Brazilian money high, is better business here.”

 

Takeover

Meanwhile, Chinese are taking over sections of the Lethem economy. From a few businesses several years ago, there are now over a dozen large Chinese businesses in addition to restaurants. A number of buildings in the commercial zone, owned by locals, are now being rented and operated by Chinese. There is also a fair number of Brazilian investors.

“Chinese really wha knocking we,” Nandalall said while noting that according to the law no foreign investor should be located at the border line. However, this has not been addressed, he said. According to the man, there are now about 10 to 15 major Chinese businesses in the community. “Now, the business so bad that the Chinese come to rent your place, is best you rent them,” he said, while noting that businesses are not making the money.

In addition, he said local enforcement officials sometimes crackdown on the local businesspersons and forbid them from selling certain items but the Chinese are allowed to do so. “We Guyanese here now, it nah gat no business for Guyanese right now,” he said. He also pointed out that Guyanese do not shop all through the year.

Nandalall noted that he took a loan from the bank and is just operating to repay the loan. “It rough, real rough in Lethem,” he declared. He said he had plans to expand but due to the slowdown, he has not been able to do so. “Nuff Chinese come to rent my store and I tell them no but it look like I [have] to switch my mind because you are not doing the business,” he declared, while noting that his customers are 80% Brazilian.

While several businesses blame the influx of the Chinese for undercutting local enterprises and forcing them out, Gajie pointed out that there has been a tripling of stores from about five years ago from about 10 to over 30 major businesses now and thus competition has increased and could not solely be blamed on the Chinese. “Unfortunately we may have…too many stores doing the same kind of business,” he said while adding that he was not too worried about who are running these businesses.

“It is unfortunate that the Guyanese businessmen who own the stores did not see it fit to manage their operations themselves instead of renting out. The problem will come if there is a total takeover by foreign businesses, whether Chinese, Brazilian or whatever, Bangladeshis we have also, and they start to manipulate the economy then you will have a difficulty, then you will have maybe local residents suffering,” he said.

The RCCI president noted that at the moment, the foreigners are only dealing with dry goods and are renting their premises but if there is further expansion, issues can arise. He said local owners are renting out because they may believe it is an easier way to get money than sitting in a store. “It’s lucrative. The prices the Chinese are offering for the premises are good prices,” he said.

According to Gajie, at the moment he does not believe that there is an immediate cause to worry but if the drop in value of the real persists into next month, then it would be. He said the Carnival weekend would be a good way to judge as Brazilians usually flock into Lethem at the time.

Over the previous weekend, as Carnival began in Brazil, even though the number of Brazilian vehicles in Lethem increased, several businesspersons lamented that business was not the same as before and the one day bump would not compensate for the many days when the streets are virtually empty.

 

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