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Jamaica as an international financial centre

Published:Friday | April 30, 2010 | 12:00 AM
Wilberne Persaud

Wilberne Persaud, Financial Gleaner Columnist

In modern Jamaica, for at least a decade and a half, the idea of creating an inter-national financial centre has been alive, with greater or lesser enthusiasm as the country's projected economic fortunes ebbed and flowed.

It is an interesting, though not unwarranted, irony that the physical space with which the idea has been generally associated is Port Royal.

The 'sin city' of Captain Henry Morgan, the pirate, became home to English and Dutch privateers plundering Spanish shipping, as well as enterprising merchants taking advantage of the need for manufactured goods in the colonies which 'forced trade' plunder at sea allowed.

Merchants sponsored trading activities with the Spanish. But they simultaneously outfitted and bankrolled privateers to hijack Spanish shipping and plunder their settlements and coastal towns in the New World.

The city, by no means a misplaced title - it was a flourishing hub for the time - became the heart of a thriving trade in prized plundered commodities. It was one of the richest communities of English North American holdings.

Indeed, historians estimate its income generation far surpassed profits made from sugar cane production and export.

The city, by the mid-17th century, had gained, not unjustifiably, the reputation as the Sodom of the New World. Contemporary dis-course and the work of historians attest to the residents being mostly cut-throats, pirates or prostitutes.

The 1692 earthquake would certainly have been viewed by far-right evangelicals of today's North America as the wrath of an angry God.

Fast-forward to 2010. There's no need to build a Port Royal legend, no need to claim some ancient recipe handed down in secret through generations. Port Royal was once a thriving international centre.

Although US SEC filings and behaviours on Wall Street remind us uncannily of plunder culture and piracy, we can certainly envisage a new Port Royal as an offshore financial centre of excellence.

We need not invent pre-existing conditions: financial meltdown, Ponzi and fraud - they have already occurred. We weathered those storms and created legislation to combat such eventualities. Today, the country possesses the legal and regulatory framework upon which to build a thriving financial centre. At least, this is how the story may be told.

So what's the reality? What, indeed, is an offshore financial centre? The International Monetary Fund (IMF) lists 70 or more jurisdictions as offshore financial centres, including the United States, Delaware in particular.

First problem

The problem before one might even begin the discussion is definition. The simplest take is the one that views a jurisdiction with financial holdings and activities disproportionate to its population and local economic activity as an offshore financial centre.

In this view, all Caribbean centres would fit: British Virgin Islands, Barbados, Cayman Islands, and the list could go on.

Yet if one considers the actual value of financial holdings of Latin Americans in Miami, that city might be the largest offshore financial centre in the hemisphere. On the other hand, the British Virgin Islands, with a population just shy of 25,000 persons but with thousands of offshore companies and legal firms dedicated solely to servicing them, managing hundreds of millions of dollars in assets, the comparative factor begins to make sense.

But why does capital seek an abode foreign to its place of accumulation, and what does Jamaica have to offer relative to these? What of the competition? What are the attractions and requirements that need to be in place? How does the Organisation for Economic Cooperation and Development see these jurisdic-tions and their impacts on their economy and society: taxation, terrorism finance and money laundering?

These are issues that Jamaica must highlight - the Rastaman might prefer 'foresight' - with blinding clarity, without the benefit of hindsight.

We consider only one aspect of these questions today: why capital seeks 'offshore financial centres'.

The reasons are many, but they all fall smack under the rubric: protecting accumulated wealth. Every wealth holder first wants his/her holdings to be secure; second, to grow. This, of course, assumes legitimate activity as the driver of prior accumulation. Thus, security and positive return must be a guaranteed sine qua non!

The legal framework, the regulatory environment, the requisite reservoir of qualified skilled professionals to manage and oversee compliance with regulations are not optional, but mandatory. A powerfully attractive side attribute would, of course, be an ethos that includes honour, integrity and reliability. The latter, strangely, is nevertheless required, even when dodgy offshore money seeks a laundry.