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Devaluation ole talk

Harry Russell

Devaluation ole talk

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“Boss man, you is a big brain in this country and I would like to know what’s going on. All this talk about devaluation! I is only a maid with six children to feed and am worried about what will happen.”
“Well, my dear, I am worried too. Devaluation is not an option for Barbados, so they should stop talking about it. It serves no purpose as we mainly produce sunshine and beaches. Even the few computer parts that we used to produce, gone! True, we also produce beer and milk and a few sweet drinks; and we produce services through our hotels, restaurants, taxis and some other knick-knacks such as encouraging businesses to set up here, a service for which we charge a tax.
The thing about devaluation is that most countries in the Caribbean that took the step found themselves back to square one in short order. It is a slippery slope.”
“How yuh mean ‘slippery’?”
“Look, let’s say that we devalue, not by ten per cent, but a meaningful devaluation that will encourage people to prefer Barbados as a destination for reasonable hotels, restaurants and general living – say a US dollar will fetch Barbados $2.68, as in St Lucia, about 33 per cent devaluation. All the things that we import will immediately cost 33 per cent  more, and in case of greedy people 50 per cent more or more – ‘yuh know we devalue’.
So I will have to pay you 33 per cent more or let you go, since I will not be able to afford it because I know that my business cannot generate 33 per cent more in profit, even if I try to charge 33 per cent more for goods that cost me 33 per cent more. A devaluation should mean that the pre-devaluation local prices should prevail. There is no way that would happen in the face of increased foreign prices. Let us forget about devaluation and start sucking salt or something else.     
“With devaluation you would be in trouble, now that you are struggling to stay above the poverty line; you would now be below the poverty line, you and your six children.”
“Lord Jesus, Mr Shallmar!”
“You see the minibuses that you take to get to work? They will have to pay 33 per cent  more for diesel, et cetera, so their fare must go up by 33 per cent. The house that your friend is building in which you hope to carry your six children will cost 33 per cent more for labour, cement, lumber, nails, blocks, steel, windows, doors, tiles, sand, gravel, water, power, t’iefing, et cetera.”
“Boss man, don’t go no further. What should we do?”
“Talk to the country. Tell them the true position. Tell them that you have no more money to repair the roads and putting marl fill in the potholes is stupid. There is little money to pay the employees or to pay for services. The foreign exchange that we have has to be used judiciously and not splurged on foreign jaunts, until we catch our hands. Ease up on the entities that bring in foreign exchange, such as hotels, restaurants and small businesses – electricity, water, taxes, so that they can be competitive.
“Get the banks to play their part or leave. They cannot take the buildings or the staff with them, as they would be too heavy to ship. Recall the Development Bank so as to control the assistance to hotels, etcetera. Agriculture should play its part. Cut the minister some slack because food that is imported must be substituted. COW’s cows are as good as the New Zealand ones. Pray, despite some people calling our gyrations Sodom and Gomorrah, that no hurricanes target 13 degrees to chase away the few tourists.”
“Lord, havest mercy!”
“Miss, you think devaluation sweet? Most of our islands that devalue have to devalue again and plunge their poorer class into abject poverty – Jamaica – and their middle class into migration or prostitution, drugs and crime, thus impoverishing the whole country.”
“But aren’t we now heading for devaluation?”
“Not in the foreseeable seven months, but thereafter . . . ?”
• Harry Russell is a banker. Email [email protected]