Manufacturers lobby BOJ for forex facility
Avia Collinder, Staff Reporter
Local manufacturers have been pushing for a special facility from the Bank of Jamaica (BOJ) to access foreign exchange for raw material purchase as commercials banks continue to limit sales of US dollars.
Brian Pengelley, president of the Jamaica Manufacturers' Association (JMA), said on Tuesday that after four meetings with the central bank, the JMA is no closer to solving the problem of adequate foreign cash to pay for imported inputs.
Foreign exchange is traded by banks and cambios. BOJ regulates the market, but is also an active player.
"We are not speculators. We are asking for facilitation which will keep the economy turning and keep us producing," said Pengelley, adding that if the central bank prefers to remit the funds directly to suppliers, this would be acceptable to the JMA.
However, the central bank has signalled that the JMA's push for special consideration will not be accommodated.
"This is something which they have raised before," said BOJ Senior Deputy Governor John Robinson on Thursday.
"We still think that the market mechanism provides the best way of allocating foreign exchange," Robinson told the Financial Gleaner, while noting that the central bank does not have the "capacity" to accommodate the request for a special facility.
"They have said each request to the bank leaves them short. I don't think we can intervene in these banking relationships - those are private relationships. We do not ration foreign exchange. The limits placed have nothing to do with us," said the senior central banker.
Pengelley said that to cover their funding needs, manufacturers have to buy cash from different banks, each of which have a US$1,000-a-day limit, but that even then producers often come up short.
"The limits vary for every manufacturer, but they need foreign exchange for very bona fide reasons. The majority of raw materials we use are imported and we have to meet these obligations. If you cannot get the amount of money you need, what you do is buy less. However, when this happens, the supplier says you are buying less, and the price goes up," said the JMA president.
Still, Robinson said companies have to negotiate with their banks for the cash they need.
"This is what they have traditionally done," he said.
From January 1-15, USD transactions in the foreign-exchange market have totalled US$273 million in buy trades, whereas the volume of sell trades was much higher at US$316 million - a gap of US$43 million.
Meantime, the foreign exchange rate continues to slide, averaging $106.76 to the USD on Wednesday.
"The BOJ says that there is no problem (with foreign exchange access), but our manufacturers are not getting the funds. They need US$30,000 to US$50,000 to meet bills. If the bank wants to wire the money for us, this would not be a problem," said Pengelley.
He made the comments at The Bold Ones 2014 ceremony to announce the annual selections of SMEs to be assisted by Continental Baking Company in their marketing efforts.
Trumpeting the importance of manufacturing to the economy, Pengelley said the sector contributes over eight per cent of GDP, employ more than 75,000 persons and earn more than US$900 million in exports.
"We also pay taxes, lots of taxes - at latest estimate, about 13 per cent of all taxes collected. It is also clear that manufacturing is one of the best sectors to be targeted to grow the economy and start down the road to economic recovery and prosperity. It is time for our Government to treat our businesses better. We need to facilitate our small producers that are showing potential with factory space and affordable financing," said the JMA president.