The View From Europe
In a matter of days, a task force of five Caricom leaders will meet in Jamaica to discuss a regional approach to the global economic and financial crisis.
The group – the third that the Caribbean has created on this issue – includes the President of Guyana and the Prime Ministers of Barbados, Jamaica, Trinidad and St Vincent. Its principal purpose is to determine a strategy to develop with international financial institutions including the International Monetary Fund (IMF), the World Bank and the Inter-American Development Bank, the creation of a fund that all Caribbean nations might draw upon.
The concept revolves around seeing whether special consideration might be given to creating a special regional financial facility based on the Caribbean’s “unique circumstances of size and vulnerability.” The thinking is that such an approach might involve a change in the policy of these institutions, which at present effectively discriminate against the Caribbean on the basis of its relative wealth. Some sources suggest that this idea might develop around Caricom identifying a regional short to medium-term economic transformation strategy.
Quite why it has taken the region so long to take these ideas forward when much of the rest of the world has been implementing responses to the global crisis since late 2008 is less than clear, given that many nations in the Caribbean are now reaching the point where they have little option other than to enter into full IMF programmes or have already drawn on the IMF’s Exogenous Shocks Facility
Twelve months on from the banking crisis in the US and Europe, almost every nation in the Caribbean is serious economic trouble. From Guyana to the Bahamas, governments are struggling to find ways to finance their recurrent and capital budgets in the face of a toxic mix of negative economic indicators, including falling tax revenues; declining investment; a decrease in remittances; contracting foreign exchange reserves; a fall-off in visitor arrivals; increasing difficulties in raising money on international markets; growing illiquidity in the commercial banking system; and the ongoing cost of repairing hurricane damage from 2008.
As a consequence they are fast running out of options for support other than from the international financial institutions.
So far St Vincent, Dominica and St Lucia have requested financing under the IMF’s Exogenous Shocks Facility; Grenada has requested continuation of a poverty reduction scheme; and St Kitts-Nevis and Belize have received funds under the Emergency Assistance for Natural Disasters Facility. For its part Jamaica has sought a US$1.2B standby arrangement from the IMF, and Barbados, while making clear it has at present no intention of seeking a similar loan agreement, has indicated that it will begin to utilise its IMF allocation of special drawing rights of around US$80M.
Cuba too has not been immune with economic growth this year widely expected to be negative. Although last year its ministers were suggesting its economy would be less affected than others in the region because of its relatively low level of international exposure, this has not proved to be the case. Instead, possibly compounded by some serious economic misjudgements and falling levels of productivity, Havana has in the last months adopted swingeing austerity measures, which are leading to an internal debate about alternative ways in which new forms of ‘ownership’ and external investment might be encouraged to offset plunging exports and a huge increase in its trade deficit.
All these developments have serious implications. So much so that it is hard to see how the region will not become more heavily indebted than it already is.
It suggests that much of the Caribbean is on the edge of an economic precipice given that there is little sign that the global recession is close to ending, and that in regions like the Caribbean its full force may only just be beginning to be felt.
Despite this, there seems to be little awareness that many of the region’s present difficulties stem from systemic problems that existed before the recession. These include an ever less globally competitive tourism product; unsustainable levels of food imports; energy requirements that can only be met as a consequence the concessional supply from Venezuela under the PetroCaribe facility; tax revenues unable to sustain the levels of employment and public services that many have come to expect; increasing numbers of unemployed young people who have little chance of joining the workforce; preferential trade arrangements in agriculture that will have fully eroded within a decade; and a failure to match with action, rhetoric on facilitating private sector-led growth.
Writing this is profoundly depressing. It suggests the economic decline of a region that showed huge promise in the latter part of the twentieth century. It points to developments at odds with the clear, strong and continuing sense of Caribbean cultural identity that exists across the region and indicates a need to find new and Caribbean ways to implement decisions of Caribbean heads of government, in more viable ways than in the past.
Speaking recently about this and the imperative of implementation and the need for Caricom to change fundamentally, Jamaica’s former Prime Minister, PJ Patterson, could not have been more clear: “Mature regionalism will remain a pipe dream unless authority is vested in an executive mechanism which is charged with full-time responsibility for ensuring the implementation, within a specified timeframe, of the critical decisions taken by Heads or other designated organs of the Community.”
Finding viable regional solutions to the economic crisis now facing the region reinforces the message coming from Mr Patterson and the region’s other elder statesmen that this is the moment for considering again the need for long term structural change of the kind that the West Indian Commission envisaged in 1994.
Previous columns can be found at www.caribbean-council.org
(Ed note: There will be no column by David Jessop for the next four weeks. The week in Europe will appear again on September 6.)