REPORT #3 1997
INTERNAL REPORT ON THE PROGRESS OF A BELIZEAN STOCK EXCHANGE EDUCATION
AND AWARENESS PROJECT FOR ECONOMIC DEVELOPMENT
Produced by the Belize
The year of 1997 saw a widening debate and discussion within the
country of Belize, of the need for Belize to have it's own Stock Exchange
and possibly an International capability to handle Futures and
Commodities contract trading services. The most encouraging sign of
interest were discussions among the politicians of the cabinet in
Belmopan, the occasional letter in the national newspapers showing that
intellectuals and editors were considering the subject, finished by a
visit by the Prime Minister of Belize, while in the United States of
America, with the head of one of the many stock Exchanges there, in a
discussion to familiarize himself with the subject.
Throughout the Caribbean and Central American region there are about
10 small national stock exchanges. While the Asian markets collapsed
and their economies went into a tail spin, with South Korea leading the
pack with a $50 billion dollar International Monetary Fund loan program
bailout and a NATIONAL DAY OF SHAME declared for mismanagement by the
government. The Caribbean in contrast and in particular the Jamaican
Stock Exchange surprisingly led the world, and was the 10th. BEST
PERFORMING STOCK INDEX IN THE WHOLE WORLD. Jamaica saw it's performance
up by 29%, while Asia had gone into a sinking tailspin.
When you add the capitalization of the top three Caribbean markets
together it comes to roughly $6 billion. Yet, not one Caribbean island
has a stock market even one-hundredth the size of Brazil's market. There
are 95 listed companies among the three top exchanges. The trading
market is very small.
On the economic development front, eight separate smaller island
states in the Eastern Caribbean are creating a common electronic stock
exchange, set to debut next year, 1998. Each island hopes to attract the
trading of eight to ten companies. Jesse Wright of the IDB, a financial
sector specialist has been working with the islands to set up the common
electronic exchange. The idea is that the Caribbean will have similar
regulations so that some day they can move to a greater association. It
is not recommended at this point in time, any such developments in Belize
be confined solely to such recommended regulations, but a common
electronic communications format would be advantageous.
Trinidad and Tobago, Jamaica and Barbados have done about $200
million in stock trading so far this year. That is about half a million
brokerage fees and another half million in agents fees. The real
importance is seen by this Belize Development Trust Public Educational
Project, as getting Belize established with a Stock Exchange, even if it
be only two rooms allocated in Belmopan with telephone lines, internet 24
hour service for a few computers for FREE delayed data downloads and a
back room for accounting purposes. What is needed, is the electronic
capability to trade between the various Caribbean Exchanges and those in
Central America and hopefully access to the international trading world.
The Caribbean already has two companies that are cross-listed. Barbados
based CIBC West Indies Holdings Ltd. is listed in Jamaica, Trinidad and
Tobago, and Barbados. The Insurance Company, Life of Barbados is listed
in Barbados and Trinidad and Tobago, Iton said. BHI of Belize is traded
through the Nasdaq Exchange in the USA.
In the outside world there is nascent interest in these markets.
BBV Latinvest expects to open up a Central America investment fund soon.
Deutsche Morgan Grenfell is working on a fund with the Central American
Bank for Economic Integration. In Panama, a brokerage called, Wall
Street Securities has amassed about $23 million in Panamanian stocks
alone in the past two years, through it's Bahamas based Panama Balanced
Fund. In Belize, the Suisse Belize Trust offshore trading
representative, Ray Auxillou, is also developing the research for
opening an Offshore International Fund for localized regional business
investors to participate in, and is seeking start up capital. Leo
Williams, who runs Williams & Associates an investment firm in Boston,
said he plans to start a publicly registered fund to invest in the
Caribbean next year. Williams is born in Jamaica and he knows of others
who are testing the waters. It is the considered opinion of all of the
above, that the Caribbean has some good value that has not yet been
tapped. The markets and investments are strengthening because the
markets are intergrating.
Jamaica, Trinidad and Tobago, Barbados and the Bahamas have all
bought the same software for trading and clearance and settlement as part
of the plant to integrate electronically. They have basically compatible
issuing requirements and few restrictions on foreign capital. There is
still a problem in Belize, as branch banks of Barclays Bank, Nova Scotia,
and Atlantic Bank still are not servicing foreign dollar accounts,
despite approval to do so by Central Bank, in district areas outside of
one town. No one has yet explained why.
There is a big push in the Caribbean to convert the exchanges from
simple stock trading, to capital markets for investment, said Ray
Auxillou of the Suisse Belize Trust in Belize, and Raul Lacayo, director
of Nicaragua's Stock Exchanges. Progress is slow.
Many politicians do not understand the flow of speculative and
investment capital. Trained accountants in these countries and in Belize
which is our concern, lack the training also to understand Public Company
reporting requirements for investment speculation outside of primitive
balance sheets. They in turn advised the Prime Minister of Belize some
three years ago, that public company reporting requirements should not be
changed in Belize and he announced that the policy would not change as it
was regarded as satisfactory according to his advisors. For investment
and speculative capital this is unacceptable. Without newspaper reports
on book value, price earnings ratios, dividend ratios, the public float
and many, many other technical reporting jargon, the overseas investors
from around the world cannot judge what is happening and so Belize cannot
and will not attract the necessary venture and risk speculative capital.
Many family run companies in the region would rather take out loans for
expansion rather than open their books to strangers. Nor do they
understand the advantages of going public and selling shares. The
mechanics of raising capital for expansion and growth by going public are
still a mystery to most localized businesses in the region. The loss of
control worries some family businesses and the knowledge of how to buy
back the stock if they are successful with their growth plans is
generally little understood.
To emphasize the seriousness of this public education problem, not a
single share was traded last year on exchanges in Guatemala, Honduras,
Nicaragua, or the Dominican Republic. Belize does not even have an
Exchange. Some regulators of stock exchanges have even been
obstructive. Roberto Brenes, general manager of Panama's stock
exchange, said he's been trying for two years to convince Costa Rica to
list Panama's blue chip stock "Cerveceria Nacional SA", to no avail.
There are signs of change coming. Within the next six months, the
Caribbean Exchanges are expected to be set up with compatible clearance
and settlement systems and could have a common standard on the
requirements for listing shares in 1998. If all goes well, companies
that meet the standards will have their shares listed automatically on
all 10 Exchanges. Some will only elect to be listed on their home
Exchanges, and may choose to do so. If, Belize decides to form it's own
Stock Exchange, it is on standards for listing companies that Belize will
differ. The electronic and service accounting compatibility will
probably be the same, but Belize hungers for investment business and
international capital flows. To attract this, they will probably
choose, or should choose, to have a more wild and wooly vibrant exchange
on the style of the Colorado mining stock exchanges and that of
Vancouver, Canada. This remains to be seen and may be affected by the
attitudes of political change and development within Belize. The current
political party in power, the UDP has shown itself to be ultra
conservative and probably would be restrictive in any stock exchange
requirements contrary to the needs of such a development.
Common linked trading between the regions stock exchanges may not
foster a propulsion into major latin market status, but could provide
more funding for the capital strapped region's businesses and projects.
It is in venture and risk capital flows that Belize needs to expend some
investment on a simple trading stock exchange to get off the ground
floor. This is the machine that will make it possible. Nasdaq Exchange
in the USA, started in a similar way. By uniting a cluster of regional
over-the-counter informal trading markets in the USA by computerizing
them, the now large and famous NASDAQ exchange trading platform was
created. Using that technology, the Caribbean and Central America could
also unleash a market potential that is not there now. Robert Riess,
managing director for NASDAQ international market initiatives unit ,has
been working with the existing Caribbean Exchanges to computerize their
trading, so the leverage of world investment could find it's way into
such a very small market, by world standards.
The whole development process is likely to be a slow one. Seed
capital in Belmopan for a Belize Stock Exchange is expected to require
about $150,000 BZ per year for three people, not counting equipment,
rent, telephones and data hookups. There are at least two people with
experience. Trevor Christopher a Belizean with a Series 7, brokers
license from the USA, temporarily located in Panama( E Mail:
[email protected]) and Ray Auxillou,a Belizean with twelve years
experience real time, real money, as an active international trader
investing other peoples funds, currently located in Miami ( E Mail:
[email protected] ). The talent pool is not large for practical experience
in Belize and only time and experience are the real qualifications here.
If academic degrees could guarantee success the world would be filled
with millionaires. It is unlikely that either of these people, or any
others could be attracted to develop a Belize Stock Exchange without a
minimum of a five year contract.
Funding would most likely have to be by GRANTS and whether or not,
the government in Belmopan has yet achieved a level of awareness of the
importance of such a development for the country and has the ability to
attract the initial financing is in doubt. While the moment has not yet
arrived, it is coming.
As Waine Ion, general manager of Jamaica's stock exchange says. " We
need to mobilize savings to fund the various projects we have, the
alternative is high-cost debt."
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