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Gillmore Hoefdraad, Governor of the Central Bank of Suriname

Interview - October 24, 2011
"The Central Bank of Suriname places a very high emphasis on stabilizing the economy,  the exchange rate,  boosting reserves, raising industrial production, increasing exports, stabilizing exports and balancing the overall economy."
Suriname has come a long way in the past decade. Inflation has stabilized and the economy experienced tremendous growth, which peaked at nearly 7% in 2008, and has remained buoyant ever since. Furthermore, investments from both the private and public sectors have supported growth across all sectors of the economy. Could you please give your opinion to our American readers on the state of the economy in Suriname, and what is your evaluation about the way that the objectives were achieved?

Ok, that’s true. I think that the decade since 2000 was the most positive one for Suriname. We have had exceptionally high growth levels, which have had a major impact in the economy. As you know, Suriname is a commodity-based economy; unfortunately, still too strong concentrated in a couple of products, like mining and oil, but this has set up a stage for further developments. There has been a boom in our commodity prices, but, as I always say, there is no luck without macroeconomic policies, and we should say we had consistent macroeconomic policies over the years that we’ve continued in the same way. That means prudent fiscal monetary policy and being very careful on how we manage our resources.

We’d like to learn more about the Central Bank. In order to give our audience a little bit of background, what has been the evolution of the Central Bank since it was created in 1957?

The Central Bank was created in 1957, first of all, when Suriname was still a colony depending strongly on Dutch assistance. From 1957 to 1975, before the independence, the Central Bank had the main role of the management of currency, and the role of the supervision of the financial system was at that time very limited. From the independence up to now, besides the normal tasks of looking for stability, of the management of currency, and of being the cashier of the state, the Central Bank has become a major element in pushing development as a strong institution that’s capable of providing support to the development of the country and playing a major role assisting the government when practical advise is needed on their economic programs.

Suriname will receive more than two billion dollars in investments in the following years. Bearing in mind the commodity prices and the large investments forecasted, we know that there’s an aim to create some kind of stabilization funds. What is going to be the role of the Central Bank in this context of a growing and emerging economy?

I’m glad you asked this question. The Central Bank currently is involved in a major process of strengthening and modernizing itself, that means that we’ve been doing a lot on capacity building. At the same time, we say that the Central Bank would function in a more effective way if the institutionalization process is taken the right way. One issue regarding this is that there are four laws that need to be passed through parliament. The first law is the supervision of the financial system, which is an update of the 1968 law. We’re also introducing a new law regarding the supervision of insurance, then we have another law on the money-transfer operators, and the last would be on the foreign exchange law. So we can state that the Central Bank is strengthening itself for the task that it has to face.

The economy is currently booming and there are some major investments that will take place soon, you mentioned the gold company, but also the aluminum company might do some major investment in the coming years. The government has also their own plans of setting up new infrastructure and providing needs for the socially unprivileged.

If you look at Suriname’s past over the last 30 and probably 40 years, you’ll see that small open economy has always had experience of boom to bust, and definitely our message to the government is that we should avoid what has happened in the past. And, while we have a window in our commodities, in the prices of the products that we export, we should be creating the necessary instruments that can be used in times when the prices go down. When prices go up, it’s always a matter when the prices will go down. We’ve seen recently with the sharp shift in the gold prices that it can happen anytime, and a small open economy like Suriname is very vulnerable to external shocks. We’ve strongly advised the government that this is the time to create stabilization funds, sovereign wealth funds, and we’ve very much welcomed the President’s speech in which he has announced a couple of times the setting up of wealth funds. That will provide support for future generations to come, and some part of it can be used to trigger growth in areas where it’s needed. For example, there’s a strong call of the government to diversify the economy further, we say that a lot can be done in the agriculture. We can be a major provider of food to the region, and this is the time that we are able to channelize funding, setting up the infrastructure for those sectors that can break our very concentrated production base. If we’re doing it the right way, I think within a couple of years Suriname will be very strong and diversified with good outlets to the region.

Ms. Wijnerman told us that there are some major projects that the government wants to set up, and that they’re trying to find the best way to finance them. She highlighted the close relationship with the Central Bank towards a common goal. How would you evaluate the relationship with the Ministry of Finance?

We have an excellent relationship, the Ministry of Finance and the Central Bank work very closely together. It was even applauded just when we finished the annual meeting in Washington that there’s such a great team spirit among us. We think alike and it comes to proven fiscal policy, which is very important. We remind the government that they cannot spend whatever they want, that they have to live by their means, and we have a couple of working rules that are producing very good results. It’s very important that the Central Bank knows what the Ministry of Finance is doing, and we, as the cashier of the state, have the full picture of the economy. That means that we can always advise the government when it’s needed that they take a policy or when they can push forward.

Bearing in mind the strong economic growth, the prudent monetary policy, and the good economic prospects, the international rating agencies have recently improved Suriname’s risk rating to a level of BB-. Why do you think that the international rating agencies have decided to improve the rating at this particular moment in time, and how would you value the importance of Suriname increasing its credibility towards the international community?

First of all, let me say that Suriname had been very isolated in the past, but this government is now taking the steps to break this isolation, moving strong towards integration in the region, moving to put Suriname on the map so that people say that this is a country where it’s reliable to invest, where you’ll have good opportunities living by the rules of law. So, having the consent of the international institutions such as IMF, the World Bank, or IDB agreeing on our macroeconomic  policy framework, that we move forward, is very important. It is with multilateral institutions that you build up the credibility. Furthermore, getting upgraded by rating agencies, especially in an era where everybody gets downgraded, is a major step. We had the advantage of our commodity prices, but that doesn’t improve your rating. Ratings are improved by the confidence of the international community in what you do. You can have all these good windfalls and spend them like crazy.

For us, it’s a very important achievement to be upgraded by agencies that recognize that there’s work underground, and that we’re moving in the right direction. And, for us, it’s also stimulus to say that we’re doing well, this is the way forward. So, if you want to come back, you’ll see what will happen. You’ll see that with that within the Central Bank, and also within the government, there is a major level of transparency. If you go to our website, you’ll find data that has never been published before. Also, access to information, because we’re very open to the press. We try to inform the public as quick as we can on major developments. We always say that when the Central Bank comes out, it has a major impact on the country. Whenever we come out, it’s well rated and thought over, so that we also bring out the right message. It’s a small and open economy, rumors can run quickly, and any word wrongly stated can have a major impact, so we move carefully. We’re always open to answer questions. Actually, we did a seminar with journalists in January, and I’ve done that in other countries, based on educating them on basic macroeconomic indicators. We’ll try to do that on an annual basis to engage with them.

In addition, we observe that in the IMF’s recent report, Suriname is one of the few countries that received a positive assessment and outlook this year. How would you evaluate the relationship with the multilateral institutions, such as IMF and IDB?

When I came into the office in September, the government just came into power, and we were facing a parallel market in the exchange rate. There were some macroeconomic imbalances that we were looking at, and it was a very difficult situation, because changing a government after having another for ten years is very complicated in any country, and even more difficult in a small country like Suriname, especially when you come out with different coalitions.  So there were some major challenges we had to face on the economic side with a new government that had to get used and another one that left but with the bureaucracy sitting there. We had to take some top measures in the beginning of this year. We had to devalue the currency in order to break the disequilibrium, and, at the same time, some top fiscal measures. There is no Santa Claus in the world, so we had to do it on our own. We push it from the government side, but we also talked a lot to the private sector, we talked a lot to the banks and got their full support. We were able to slow down the growth of money, the government really took to a very careful budgetary policy, and the banks were very limited on their credit, especially consumption credit. This has worked marvelously in stabilizing the economy a couple of months, and then, with the windfall of the prices, we said this is where we need to be, and it has been kept. We always have been engaging with international institutions, IMF of course as a surveillance institution, and we’re very pleased with the development. It looks small, but when you speak to international institutions, they will say that a lot has been achieved in just a year. So we’re glad to get that recognition, that we’re on the right track, especially now when so many countries are actually going down.

On a different note, Suriname recently became a member of IFC. What are the benefits of this membership, and how would you evaluate the potential of the private sector and the importance of strengthening it?

The IFC was necessary. Being part of the World Bank group is getting yourself on a very high level. I always say, if you want to eat, you have to sit at the table. We have some major developments for the private sector in mind, if you heard the President’s speech yesterday, he talked about Public-Private-Partnerships, and he talked about privatizing some companies, even some state banks. So, although the government still has a strategic role in the economy, there are steps that the government will take back so that the private sector can be developed.  It can be developing our domestic private sector, bringing foreign direct investment, just like IDCS is focusing on, and you can’t do it alone. Bringing in a strong international institution with enormous experience like IFC is a major step forward, and it also brings credibility. Foreign direct investors look a lot at this. There is an expression that states: tell me who your friends are, and I’ll tell you who you are. Joining reputable institutions is always good, and IFC can provide advise to the private sector that the government or the Central Bank can’t; they can also partner and participate, become stakeholders in certain companies, even banks. That gives us more credibility, and we will bring even more foreign direct investors if they know that IFC is involved.

We started discussing joining IFC at the end of last year. In February we talked about it, and IFC told us that it would take us at least two years, but we signed in six months. They were surprised that it was that quick, we went into a record in getting this done. IFC is already collaborating with us in establishing a credit bureau in Suriname, so they will be assisting us in this area. They’re working on trade facilitation, and we will engage with them on the idea of the government to have Public-Private-Partnerships or when they need to privatize. That is part of the transparency. The government will not sell public companies just on their own will, IFC will do their evaluation, set up the rules, and it will be done in a very transparent way.

You mentioned that the Central Bank is strengthening itself, that it’s becoming more transparent as well. You’re even committed to engage with the media and organized a meeting with journalists earlier this year. What would you highlight about the new philosophy of the Central Bank?

We’re open. We will answer all questions when needed. We don’t always have the time, you see that we’ve done a lot this year, but it takes us 24 hours, everybody is extremely busy. We’re doing a couple of things, and we will open our embassy in Paris. I’ll be one of the speakers on the state of the economy. We just developed a very summarized brochure on investing in Suriname, a kind of guideline. It was done here based on some other ones that already existed, but more tailor made. People would like to have a quick scan on how the economy is and what can be done, and for more information they can go into something larger. We distributed some copies in the China-Caribbean Forum in Trinidad, because, although it’s still a work in progress, it’s good to get some feedback.

Our strategy is, once we have it in good shape, we will send it to all embassies so that they have it there and, at the same time, on the major government website there will be a link as well, and it will also be tailor made. For instance, I’m leaving tomorrow morning to Seoul for a meeting on investing in Suriname, but we will show as well which Korean companies are already in Suriname so that we offer a possibility for those who want to network. The same we will do in Paris when we open the Embassy, and from there on there will be like a road-show in which we will keep putting Suriname on the map and setting up the right framework for the private sector.

Suriname is moving very aggressively to the rest of the world. One of the major projects that we have right now is the financial crisis, especially in Europe, but we have our reserves and measures, so we should state that Suriname is pretty stable. Although we’re taking all the precautions, we will be able to weather the storm.

Your country and the United States engage in mutually beneficial relations based on the principles of democracy, respect for human rights, rule of law, and civilian authority over the military. Thus, the U.S. remains one of Suriname's principal trading partners, being the largest import provider to Suriname and the third largest export market for Suriname. In this context, what is your opinion on the overall state of Suriname-U.S. relations today, and what could be the role of the U.S. in Suriname´s economy?

It’s always good to do business with the U.S. I think that the U.S. is a strong market oriented economy with good set up rules. Entering the U.S. market also gives you some kind of standard approval for quality. The U.S. has dominated the Surinamese economy since bauxite, becoming this is a major product in the end, in the centuries 19 to 20. Suriname has been a major provider of aluminum to the Second World War, and I think this strong relationship boosted our economy. As a result, we have strong ties, because the politics come with the economy.

The U.S. market should be a window of opportunity for Suriname. We have a lot to provide to a highly industrialized country because we’re basically a commodity export economy, and we’ll even have more to provide in agriculture, they can become a major player for us. At the same time, we’re providing excellent tourism opportunities, since Americans are always looking for something new or different. I think the way tourism will be scheduled here it will be a warm welcome for U.S. visitors. If you take a look at the region it’s completely new, I think Royal Caribbean is developing river cruises, and this might be an opportunity, for example. There are several plans of improving this whole water side up to the market, and make it into a big tourist area; that could bring in potential investors and users of this environment, tourists, at the same time, it works both ways.

The government is now negotiating with Newmont. We have Alcoa here already, and when we have Newmont, we will have two reliable investors from the U.S., that might be a trademark for attracting new investors. One major area that we should improve is communication and transport. I think Suriname is the only country in the continent that doesn’t have a direct flight to the U.S., but I think there’s a market good enough to the U.S. If we can improve in this area, it would be excellent.

We can see that Suriname and the U.S. recently came to an agreement to regularize Suriname’s financial debt.

We had some arrears with the U.S., and these were rescheduled, so I think that has solved a longstanding issue. I’m glad that the government took the decision to solve it as quick as possible.

Bearing in mind that our audience is comprised by top decision makers and investors, what sectors of Suriname’s economic activity would you highlight as the most attractive to receive FDI?

Agriculture, for sure; especially if you look at how the world food prices will develop. In Suriname, we say that you throw a spike in the ground and it will grow. There we have massive opportunity, it’s just a population of half a million living on an enormous vast of land, very fertile land, I would say. There’s a massive opportunity on going into agriculture, and it will be profitable. We can cut down all expenses, but people still need to drink and eat, that basic. It’s not just an issue of making profit; it’s also an issue of being able to provide it. Food is important, it will become more important, and we need to feed the world. Suriname can be a major player in that. When you look at where we are, we’re a hub, we’re at the top of this continent with the Atlantic Ocean on the north, we’re a major step towards Europe or Africa. Suriname is very strategically located.

If it comes to setting up industrial parks, it might be a very good opportunity. Another issue is the outsourcing companies. Looking at the time-zone, there are 4-5 hours to Europe, when Europe is still very busy, Suriname opens up, and when you need to do some outsourcing, you just need people four hours earlier, not 12 or 15. We’re in a good area to cover Europe, to cover the U.S., so we can be very attractive as an outsourcing station.

But of course in tourism, Suriname provides tremendous opportunities. There was an article in the New York Times about Suriname, and that’s the strength of communication, because it has been picked up by so many people. Suriname is like some kind of exotic place, but nobody knows about it. For instance, somebody called me and said that Survivor had an interest in Suriname. That would be very interesting, and that would put the country on the map for the whole world.  That would be very good for us.

Those areas are crucial if you look at the amount of traffic that passes between South America and the U.S., and we’re strategically located for these kinds of businesses.

Suriname is the undiscovered gem of the Caribbean. Bearing in mind the strong media impact of this communications campaign, in which all our interviewees are acting as ambassadors of Suriname’s image at an international level, how would you like your country to be perceived by the U.S. community?

I’d say that we’re friendly, and that’s what everybody says when they visit Suriname, that the people are very friendly. I returned back after 18 years, and I still feel it. It’s very friendly, and it’s very peaceful, if you take a look at the crime rates. Suriname is breaking with the isolation, and we’re doing it the right way. We’re setting up the institutions, we’re creating the capacity, and we would welcome any foreign direct investor or tourist to come to Suriname.