Good ideas come to the Caribbean to dieSunday, March 07, 2021
The acting chief executive officer (CEO) of the Trinidad and Tobago Stock Exchange Limited, Ms Eva Mitchell, has revived a long-running debate about promoting Caribbean integration by strengthening the region's financial services sector.
She supports her argument by pointing to an estimated US$57 billion in investable funds across the Caribbean which could go towards the financial sector and thereby enhance the region's global competitiveness.
This is not a new idea, but it shows that good ideas often come to die in the Caribbean. One of the studies done through The University of the West Indies (UWI) at the time of the West Indies Federation was on a common currency, which would have allowed payments between countries to be settled in that currency.
Admittedly, a common currency among countries is not easily attained but it has been done in the form of the Euro in the European Union. It is reasonable to have expected some progress over the last 70 years as it remains one of those seemingly unattainable goals of the Caricom Single Market and Economy.
However, there are preliminary forms of financial integration that can yield substantial benefits, namely the creation of a single regional capital market, the benefits and requirements for which were set out as far back as 1977 in a paper entitled: “The Integration of Capital Markets in the Caribbean: Problems and Policy Proposals”.
Thirty years later the lack of progress on a single capital market was bemoaned at the first Jamaica Stock Exchange Investments and Capital Market Conference in 2008, which noted hurdles such as the several currencies with widely different exchange rates, the absence of a single investment code, and different taxation rates and interest rates which bear no relationship to each other.
A common stock exchange idea was mooted by then Prime Minister Michael Manley in 1980, but the countries with stock exchanges could not agree among themselves because their institutional establishments and operating platforms were very different and no one was prepared to change.
A study published in 2012 reported that the stock exchanges in Barbados, Jamaica, and Trinidad were “seriously considering combining”. The Organization of the Eastern Caribbean States established the Eastern Caribbean Securities Exchange as a regional exchange in St Kitts.
In 1999, The Bahamas International Securities Exchange was established and in 2002 Guyana established a stock exchange which operates on Monday mornings.
If we lower the bar a bit, at least one thing can be achieved without upsetting the apple cart: Cross-listing of companies on more than one exchange is already allowed on the three major stock exchanges and there are numerous Caribbean-owned companies that operate in more than one country. This should be encouraged and intensified.
The lesson is that the economic integration process can be started by governments but it can only succeed if it is driven by private investment through institutions such as stock exchanges and arrangements like a region-wide capital market.
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