The Multiple Trials Awaiting the Caribbean After 2020 And What They Mean for CBIJuly 20, 2020
Dual shocks to both the tourism and CBI sectors is far from the only challenge staring the Caribbean in the face in 2020. The choices we make today will colour the region’s future for years to come.
There is sustained pressure on the Caribbean for its association with Cuba, now targeting the one essential service the country provides to the rest of the region; medical support. This, ironically, at a time when ‘for profit’ medical services in the G7 have been severely exposed and the Cuban model has been a key to the success of Caribbean countries in repelling much of the worst of Covid-19.
The elections impasse in Guyana poses an existential risk for regional stability and the integrity of regional institutions. Unnecessary violence and internal instability in that country is another particularly worrying threat. The ripple effects could touch the entire Caribbean.
The crisis in Venezuela also continues to simmer as a possible flashpoint that could compromise the region’s impressive record as a zone of peace.
The growth of Caribbean economies has been sliced by Covid-19. This is true for Barbados, showing progress from an IMF Stabilization program; for Dominica, recovering from its latest climactic disaster, Hurricane Maria; and much of the Eastern Caribbean states, which were uniformly showing promising growth levels according to the 2020 ECLAC forecasts.
Canaries in the Caribbean coal mine
In business, whilst some would welcome the demise of LIAT as a burden on the collective subsidy purse of the Eastern Caribbean, many more would feel the greater burden of loss of employment across the OECS (especially in the airline’s home base, Antigua), as well as the loss of certainty of schedules that have served the region over decades. LIAT is a paradigm for a greater reality, the collaboration between member states in forging a protected platform for transportation. Given that the free market isn’t necessarily self-correcting, as claimed (bailouts of airlines in the G7 countries confirmed what many have suspected), it is likely that whatever platform is chosen to move ahead, the unanimous support of policymakers across the region is needed.
The related discord that it has struck between CARICOM members was an expected outcome. A commission of inquiry on the new normal for aviation and travel in general within the region should be a critical next stage. It is an opportunity to craft new solutions and an overall framework that will support the needs of a region that relies on interconnectivity.
In addition, the threat of a new cold war that pits the ever-influential United States and its partners against an ascendant China is also a serious concern. In a world where national and developmental interests trump (!) traditionally maintained friendships, China has become a critical partner for Caribbean countries and their growth goals.
With four countries in the English speaking Caribbean amongst the early signatories to the Belt and Road initiative and with Covid-19 placing even more stresses on Government finances across the region, there is little appetite for another round of threats and geo-political posturing.
Yet there are shoots of optimism through this myriad of challenges. The management of public health in the Caribbean has shown the essential strength of Governments who have acted in the best interests of their populations. The regional institutions have functioned exactly as they should have, and the relationship between Caribbean countries and the Pan American Health Organization (PAHO) has held up far better than the extra-regional relationship between G-7 countries and the WHO.
The response of the Eastern Caribbean Central Bank in tandem with the ECCU members in working quickly to extend moratoriums on loans and mortgages across the Eastern Caribbean was a critical intervention. Central Bank interventions stewarded through the ECCU will become more and more critical as the crisis turns into a full-blown economic depression.
With current arrangements expected to expire by the end of August and September, what’s needed is a forward assessment of the next round of fiscal action as the threat to the survival of these economies have only just begun.
A critical juncture
The importance of citizenship programs in the Eastern Caribbean to these economies have gone up, yet the challenges there have also multiplied. Across the OECS, a desire to keep prices from tumbling even further has triggered moves in terms of the definition of dependents. In addition, external CIP programs have acted even more aggressively, preparing themselves for a new reality where personal and financial mobility is even more critical. The US, the UK, and Australia have very publicly signaled their willingness to host Hong Kong citizens looking for new options for residency.
There’s also a lot of noise about the Chinese wealthy and the “new” global taxation for Chinese citizens. China’s citizenship-based tax system, however, has been in place – de jure, if not de facto – since January 2019. Whilst it is part of an emerging PR intensive on all things Chinese, the biggest story most observers are missing is the emergence of the digital yuan as the first central bank supported cryptocurrency. This is much more consequential to the relationship between China and the Caribbean (and everywhere else) than anything tax-related.
This period has also made it clear that thought leadership cannot simply be vested in those who want to put capital into the region. This is not merely an investment issue. It is a developmental and long term strategy issue. Programs have to directly impact citizens and business activity even more now, and even creative financing platforms such as relief bonds cannot achieve the desired effect unless governments and their partners are aggressive in their injection of revenue into the real economy.
Everything we are doing now, we must do with an eye to mitigating the challenges on the horizon, for they are now unyieldingly bearing down on us all.
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