Mr Latibeaudiere: a costly governorship

Saturday, November 21, 2009 6:35 AM

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Editorials

Wednesday, November 04, 2009

The 13-year tenure of Mr Derick Latibeaudiere as governor of the Bank of Jamaica was, without a doubt, a costly one for the country. His exit is not a personal feud between himself and Mr Audley Shaw, the finance minister. As they are reputed to say in the Mafia: it is not personal, it is just business.

According to Observer sources in the high corridors of information, the Government has been looking locally and overseas for a willing and able replacement for over a year. The decision was not hasty, but very cautious.

During the time as the most powerful technocrat, indeed virtually a law unto himself - under the guise of central bank independence - the governor presided over one of the worst performing economies in the world. Inflation was never consistently in the single digit target range; the exchange crashed to US$1 to J$90; interest rates skyrocketed to dizzying heights; economic growth was non-existent; the International Monetary Fund (IMF) negotiations remain incomplete; debt/GDP became one of the highest in the world and a massive banking sector crisis was allowed to happen.

In all of this, he was aided and abetted by his then boss, Dr Omar Davies. We were never sure who was calling the shots. Indeed, at times Dr Davies seemed not to be governing Mr Latibeaudiere, whose fundamentalist economic theology appeared to remain immune to other policy perspectives from any source, local or international.

The policy of persistent devaluation of the Jamaican dollar and the consistent high interest rates at his behest burdened many viable businesses, discouraged investment, eliminated the possibility of international competitiveness and escalated the debt servicing of the Government of Jamaica.

Under duress, the governor brought down interest rates in recent months, proving what many had said for years, that interest rates could be lower and still be real and provide a differential which would induce investors to hold Jamaican financial instruments. Interest rates have been far higher than necessary to maintain adequate international reserves.

Poor stewardship allowed the difficulties of three small banks to become a crisis of gigantic proportions while the other banks were making super profits from the high interest rates and foreign exchange. This was a reflection of the quality of bank inspection by the BOJ. Why the problems were not detected earlier and addressed more expeditiously will no doubt be revealed by the ex-governor to the pending FINSAC inquiry.

Mr Latibeaudiere was also too costly because his emoluments were outrageous, ie salary, mortgage, rental, household staff and allowances of every imaginable kind. These are alleged to exceed those provided by the Bank of England and the US Federal Reserve.

The lack of transparency on a loan of $50 million connected to the construction of a palace in the salubrious hills of upper St Andrew and his refusal to move into the official residence purchased at $21 million and refurbished at over $10 million were some of the issues that led a director to resign from the board of the BOJ. Perhaps, for us to get some answers, Mr Greg Christie, the contractor general, should turn his microscope on these matters.

For now, Mr Shaw is no longer encumbered from pursuing the economic policies from which he was discouraged by the former governor, now that he has changed the financial secretary and the BOJ governor.

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