Jamaica Gleaner
Published: Wednesday | November 14, 2012
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'No evidence of black market' - Hughes dismisses Shaw's claim of underground foreign exchange trade
Livern Barrett, Gleaner Writer

Financial Secretary Dr Wesley Hughes has dismissed claims made by Opposition Spokesman on Finance, Audley Shaw, of a re-emergence of the black market in the foreign exchange trade.

"There is nothing to suggest black market activity," Hughes told The Gleaner yesterday.

Analysts were yesterday divided on claims made by Shaw who argued that a huge fall-off in the average daily inflows of foreign exchange to the banking system is fuelling a re-emergence of the black market.

Speaking at a Jamaica Labour Party (JLP) press conference yesterday, Shaw pointed to the decline in the average daily intake of foreign exchange to the banking sector, which he said was hovering around US$20m.

This, he said, is nearly half the average US$40m intake reported earlier this year. He said it was evident that the demand for foreign exchange has not fallen.

"Therefore, the question is where has all this foreign exchange gone, and the most likely answer is that this foreign exchange is going into a re-emerging black market where people are trading in dollars outside the formal banking sector," Shaw argued.

According to Shaw, the reported average exchange rate of J$91 to US$1 has masked "the fact that people are purchasing dollars at rates in excess of J$95".

Shortfall created

Siding with Shaw, economist Ralston Hyman argued that a "confluence of negative factors" has created a shortfall in foreign-exchange supplies.

Among those negative factors, Hyman pointed out, were the impact of Hurricane Sandy on the US economy, the local agriculture sector, remittance flows as well as the uncertainty surrounding a deal with the IMF.

"That combination is resulting in a serious supply shortfall. And that is why the black market is redeveloping," he insisted.

Another analyst, John Jackson, said he would not be so quick to make the assertion that the black market was re-emerging.

Jackson said it would be useful to examine the daily foreign exchange trading data for this year as compared to last year, but noted that in recent days inflows and outflows have been "much more aligned".

"Certainly, if you are having the black market situation developing, what you should be seeing is a scenario in which the outflows still are substantially higher than the inflows," he argued.

"That would be telling you that there is an increased demand for foreign exchange," he explained.

In the meantime, Bruce Bowen, president of the Jamaica Bankers' Association (JBA) , said he has heard talks of a re-emerging black market but said there is nothing to substantiate the claim.

"Any time throughout the year when there is more demand than supply, as happens at certain times, I hear people say that, but I don't have any personal evidence of that," Bowen told The Gleaner.

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