GUYANA STOCK MARKET OFFERS LITTLE HOPE FOR LOCAL

UNCLAS GEORGETOWN 000338

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON AFSN AFIN APER BEXP ELAB GY
SUBJECT: GUYANA STOCK MARKET OFFERS LITTLE HOPE FOR LOCAL
INVESTORS


1. (SBU) Summary: The four year-old Guyana stock market is
handicapped by the tiny number of listed companies, low
trading volume, and regulatory problems. These make the
market an unattractive alternative to saving accounts, real
estate, and migration. End summary.


2. (U) The Guyanese Association of Securities Companies and
Intermediaries (GASCI) opened its trading floor in 2003 with
one Trinidadian company listed and four firms certified to
buy and sell stocks. At the same time, the Guyana Securities
Council (GSC) was created to function as the market's
regulatory body. Both GASCI and the GSC drew early budgetary
and organizational support from the British government.


3. (U) Little has changed in four years. The original
Trinidadian company is still the only primary offering,
joined now by thirteen secondary listings. Stocks are bought
and sold--only on Mondays--from four laptop computers grouped
in the center of an otherwise barren room. Volume averages
about two million shares a session. GASCI plans to offer its
first bond in 2007. The British no longer give money to the
project.


4. (SBU) Efforts to attract potential investors collided with
culture and (apparent) corruption in 2005. GASCI launched a
media blitz to make wage earning Guyanese aware that their
traditional investments in savings accounts and pension plans
earned lower returns than the rate of inflation and to draw
them toward the market. Its message should have been
appealing to the middle class. Unfortunately, a longstanding
conflict between the GSC and Guyana's largest corporation
(and secondary GASCI listing) undermined its efforts and
steeled public skepticism about this new mechanism seeking
their money.


5. (SBU) The conflict began when the GSC suspected beverage
manufacturer Banks DIH of insider trading and demanded to
review its financial records. Banks DIH got an ex parte
court injunction preventing the GSC from reviewing the books.
Four years later when the injunction lifted, a mysterious
fire in the Banks DIH records office destroyed the requested
files. The matter was dropped, but potential investors
learned again to mistrust Guyana's institutions and legal
processes: Their money may be dribbling away in traditional
investments, but those are still safer than an essentially
unregulated market.


6. (SBU) Comment: Safer still is abandoning Guyana
altogether: more than two percent of the
population--including ninety percent of all college
graduates--leave Guyana every year for the US, Canada or
other Caribbean countries. Against those odds, GASCI will
grow glacially, if at all, as potential investors continue
choosing to lose their money in a slow trickle against
inflation rather than risking it in a troubled fledgling
market. End comment.

Robinson