Caribbean Economies in Crisis

Posted on 04. Oct, 2009 by admin in Business, Politics

By Janelle Julien

At a time when the world’s economies have taken a nosedive, where has that left the economies of Caribbean nations?

Jamaica, among others, is having a rough go of it. Unable to meet its debt obligations while keeping the country running, the government has had to take drastic measures, including freezing wages for public employees and calling on the International Monetary Fund (IMF) for help. Forced to rethink how to do business, Jamaica has realized it’s time to diversify its economy.

But Jamaica isn’t alone. St. Vincent and the Grenadines, Dominica, St. Kitts and Nevis, and St. Lucia (all with sagging economies and crippling debt) have made similar requests for aid from the IMF. However, Jamaica’s petition to the IMF for funding has been met with mixed reviews: critics demanding the resignation of government officials and staunch supporters applauding the move.

The Economics of Diversity

According to a recent Miami Herald article, a banana plantation in Annotto Bay is a shining example of how Jamaica is reinventing itself from a country that once shipped fresh produce to one that now processes and packages them. Instead of solely exporting bananas, they are also exporting banana chips. “We are building a business slowly but surely,” said Rolf Simmonds, commercial director for Jamaica Producers Tropical Foods, a division of Jamaica Producers Group.

Caribbean nations should take heed: shipping fruits, vegetables, sugar, coffee, and cocoa in its raw form won’t be enough to survive a shaky global economy. Jamaica’s government officials have shifted focus and demanded their farmers add value to these products, whether it’s canned or boxed. “We have to deal with two significant challenges at the same time,” Prime Minister Bruce Golding said in a recent interview with The Miami Herald. “One is how to charter our way out of this global storm, but secondly how to address long-standing structural deficiencies in our economy . . . and how to do that in the midst of the global storm.”

For too long, many Caribbean nations have relied too much on a narrow range of industries like bauxite, petroleum, and tourism with limited manufacturing. While developing nations like China, India, and Brazil have diversified their evolving economies, economic growth has remained painfully stagnant in the Caribbean. Coupled with increasing interest rates, devaluation of local currency, and smaller economies, the current recession only made matters worse. Jamaica’s external debt alone is almost $6.2 billion with earnings down by $100 million.

Jamaica’s government is exploring agro-processing as the key to diversifying economy by exporting more processed foods to a ready market: the Jamaican Diaspora. Financed with grants and low-interest loans from the European Union, Food and Agriculture Organization of the United Nations, and the Caribbean Development Bank, Jamaica has implemented bold changes and will provide technical advice to farmers while promoting locally grown, durable crops.

But what are the incentives for farmers to grow new strains of crops and manufacturers to develop more marketable products for sale in the global economy? Will the Jamaican government offer larger agricultural subsidies? Only time will tell how much involvement the people will have in the growth of their economy.

Who Should Work?

Trinidad and Tobago’s government faces a different yet just as challenging dilemma. Despite a mounting jobless rate, a greater number of immigrant workers have been drawn to T&T from other Caribbean islands, Latin America, and Asia since the local economy is performing better in relation to others. Recent job loss data for T&T shows more than 5,000 jobs were lost between the end of 2008 and the first six months of 2009 from the construction, energy, distribution, and manufacturing sectors.

In a recent Conference of the Economy focused on the current global economic downturn and its implications on T&T, Dr. Alvin Hilaire, chief economist and director of research at the Central Bank of T&T, said, “We are attracting more immigrant workers with projects that employ Chinese labourers.” Hilaire also acknowledged that jobless growth is likely to accompany a global recovery.

That’s bad news for the local economy. If the T&T government openly advocates an economic policy embracing cheap, foreign labor, where does that leave locals? With Minister of Education Esther Le Gendre justifying her choice of Korean contractor Hajji to build early childhood centers over local contractors, because she claimed local contractors charged too much, she, as an elected government official, has devalued the contributions of local entrepreneurs. At a critical time when diversity across industries is needed, the T&T government has taken a risky approach to managing its economy.

How long before the already high criminal and murder rates spiral out of control as jobless rates rise? Fear of foreign labor is nothing new and Trinidad and Tobago is not immune to it. The probability of a backlash against immigrants increases as more locals lose their jobs, take pay cuts, or are priced out of contracts. Even though Trinidad and Tobago’s economy continues to perform better among Caribbean nations, the T&T government can still learn from Jamaica’s efforts to diversify and strengthen its economy and workforce while protecting itself from a prolonged recession.

Sources
Amid global crisis, Jamaica rethinks its business plan

http://www.mcclatchydc.com/world/story/76114.html

Jamaica seeks to diversify battered economy

http://www.miamiherald.com/news/southflorida/story/1254031.html

More foreign workers attracted to T&T labour

http://guardian.co.tt/business/business/2009/10/02/more-foreign-workers-attracted-tt-labour

Education Ministry focuses on rebuilding schools

http://www.newsday.co.tt/news/0,106761.html

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