The historic Save-the-Dollar initiative
ONE awful December morning, 17 years ago, the Bank of Jamaica (BoJ) delivered a fatal stab to the heart of one of the most patriotic acts of modern Jamaica. It was an act that Jamaicans popularly dubbed the “Butch Stewart Save-the- Dollar Initiative” — the BS Initiative, for short.
BoJ men in grey suits and operating out of spanking new briefcases, fanned out across the city and traded the Jamaican dollar above the rate that the BS Initiative had kept it for nine months previously, signalling its eventual demise six months later.
But while it lasted, Jamaica was a country reborn.
On the 17th anniversary of that still-to-be explained action by the central bank, the local dollar is trading at approximately $90 to US$1.
But one can speculate as to where it might have been, had it not been for the historic Butch Stewart Initiative.
“The Jamaican dollar was devaluing at supersonic speed,” said Stewart, recalling what was going through his mind in April 1992 when he launched his campaign to stop the precipitous slide of the dollar.
“Every night, the radio and television reports spoke of the new rate of exchange. With each movement of the currency, the nation felt the sting in the tail, as prices spiralled out of control. Jamaicans were in a state of despair never before seen. It was difficult to sit back and do nothing,” Stewart revealed.
Stewart, who earned US dollars from his Sandals hotels, didn’t stop long enough to calculate the cost of his plan. Before it ended an unbelievable 15 months later, he had lost roughly US$23 million.
“I never see it as a loss. I prefer to believe that it was a gift to the Jamaican people. In effect I subsidised the Jamaican economy to the tune of US$23 million at the time and I am glad I did it,” he said in an interview with the Observer, of which he is also chairman.
He remembered that P J Patterson had just taken the reins of government from the ailing Michael Manley. Deregulation was the order of the day and the national cupboard was almost bare. Under extreme demand pressures, the Jamaican dollar screamed. The currency speculators were having the time of their lives.
“At whirlwind speed, the dollar flew from J$17 to US$1 in almost a week. It then picked up momentum and crashed the J$27 barrier in almost no time at all,” said Stewart. “It seemed like nothing could stop this free-fall. Before long it was J$29 to one on the official market and speculators were trading at J$31 to one.”
Patterson called a meeting of the captains of industry to discuss the state of the economy and appealed to them to draw on their Jamaican creativity to respond. Stewart was at the meeting.
On his way back to his office, Stewart agonised over what he could do. I’m in a unique position, he thought to himself.
On one hand, his highly successful ATL Group was buying US dollars on a weekly basis to import appliances, motor cars and the like. On the other hand, he was earning US dollars through his Sandals tourism entities.
He found himself mentally reciting a verse of the patriotic poem: “Breathes there a man with soul so dead, who never to himself hath said, this is my own, my native land…” And a plan began to take shape in his mind.
Stewart’s strategy was simple. He knew that the currency speculators determined the unofficial rate of exchange to the extent that they could price their US dollars. He also understood that the BoJ, with its weighted average formula, determined the official rate. The challenge, therefore, he argued, was to be able to skew the weighted average by the amount he could pump into the market.
The hotelier also reckoned that by setting the example, he could inspire other Jamaicans to do the same. This would have the effect of taming the speculators, who could only have their way in an environment of a deteriorating dollar.
Stewart gathered his financial gurus, led by Patrick Lynch, and together they worked out the finer points of the plan. Everyone agreed it was going to be an unprecedented corporate sacrifice for the good of a nation. But it had to be done.
Then he called a first of a kind press conference to make the amazing announcement that would galvanise Jamaicans in a patriotic rally that compared only with Michael Manley’s declaration of May 23 as National Labour Day in 1972.
In the conclusion tomorrow, the Night Doctor takes the dollar’s temperature.