The sun-drenched islands of the Caribbean are enjoying a welcome stretch of good times, with economic growth led by the Dominican Republic—whose gross domestic product will rise 7 percent to 9 percent this year.
Virtually every other country in the region will also finish 2007 with rapid growth, including Trinidad and Tobago (6 percent) and Barbados (5 percent).
In Cuba, where the Castro regime expects its economy to expand by 10 percent this year, caretaker leader Raúl Castro is calling for increased foreign investment and a crackdown on inefficiency and corruption in the state-controlled economy.
Even Haiti—the poorest country in the Western Hemisphere—will see its shattered economy grow by 3.5 percent, while Jamaica, where the long-suffering Jamaica Labour Party has just regained power after 18 years in opposition, will enjoy GDP growth of 2.9 percent.
Yet runaway crime may threaten development. Drug traffickers, who use the Caribbean as a transit point, have driven up crime rates by introducing firearms and narcotics with street value exceeding the size of the region’s legal economy.
And with 30 homicides annually per 100,000 people, the Caribbean now has the world’s highest murder rate, according to the World Bank. This drives away investment and forces small island nations—especially Jamaica—to divert scarce resources to security.
“The challenge of subduing crime and violence is a major issue for our country,” said Sharon Miller, deputy chief of mission at the Jamaican Embassy in Washington. “The government is doing all it can to curb crime and violence and bring it under control.”
In early September, Bruce Golding of the Jamaica Labour Party defeated incumbent Prime Minister Portia Simpson-Miller by only 2,940 votes in one of the closest elections in Jamaican history. Simpson-Miller, whose People’s National Party had been in power for 18 years, now controls only 27 of the 60 seats in Parliament.
Golding, 59, campaigned on his promise of reducing Jamaica’s crushing national debt while improving the lives of its large underclass. He also said he’d hire more police officers to deal with Jamaica’s horrendous murder rate and that he would bring universal health care for the island’s 2.8 million people.
In early July, the 15-member Caribbean Community (Caricom) approved a plan to create a regional trading market by 2015. A blueprint agreed upon in Barbados calls for the establishment of a regional financial services accord and the free movement of workers among Caricom countries over the next 18 months.
Although tourism is the Caribbean’s economic mainstay, the region has also benefited from tremendous expansion in another industry: call centers.
In 2002, some 11,300 people worked at these centers. But thanks to plunging communications costs, English-speaking workers, relatively low wages and the region’s proximity to the United States, today some 55,000 people work at call centers, generating an economic impact of .5 billion for the region.
Jamaica is a leader in this sector, with about 14,000 call-center employees. In the Dominican Republic, 18,000 agents handle calls in English and Spanish. Call centers dedicated to customer service have also opened in Barbados, Trinidad, Dominica and St. Lucia.
“Overall, we see prospects remaining strong but mixed in 2007,” said Olga Kalinina, lead Caribbean analyst at Standard & Poor’s, which issues sovereign ratings for the Bahamas, Barbados, Belize, Grenada, Jamaica, Montserrat, Suriname and Trinidad. “On the real economic side, growth will remain somewhat slower than 2006, but still about 4.3 percent on average for the eight Caribbean sovereigns that we rate [compared to 5 percent for 2006]. This will be backed by construction activity and the tourism sector.
“On the other hand, the fiscal situation will remain challenging for most of the Caribbean, depending on their rating level,” she warned. “We may see some deterioration due to Cricket World Cup expenditures, but at the same time, we are expecting to see more revenues thanks to robust growth and some advancement in tax administration.”
Luis Molina Achécar, chairman and chief executive officer of Banco BHD, the second-largest private bank in the Dominican Republic, said his country’s GDP could grow as much as 9 percent this year. “The Dominican economy is doing very well. We’ve maintained a stable exchange rate with very slow depreciation, and there have been practically no devaluations,” he explained. “The Central Bank has been accumulating reserves and we are meeting all the goals of the IMF [International Monetary Fund]. There’s great interest from overseas investors in our country, and a lot of foreign investment is coming in.”
In fact, in 2006, direct foreign investment in the Dominican Republic rose by 15.7 percent from the year before, said Eddy Martinez, chief of the Dominican Center for Exports and Investment. According to his office, 2007 exports will reach .5 billion, of which .9 billion will come from the country’s growing free-trade zone network.
In addition, the Dominican Republic boasts the Caribbean’s largest tourism venture ever, Cap Cana. The billion project is being developed in stages over the next 10 years and should yield 5,000 residential units and 500 hotel rooms.
Yet some storm clouds have appeared on the Dominican horizon. “I think we’re starting to be a little expensive by Caribbean standards,” said Alejando Fernández, director of BetaMetrix, an economic forecasting firm based in Santo Domingo. He sees the peso as overvalued at 32 to the dollar, and says it should be around 40.
“Because of that, our export business has basically stagnated. Some maquila-type businesses [labor-intensive factories] have not done very well or have disappeared in the last two or three years,” said Fernández. “Some of the most important industrial groups have actually shut down or transferred business to other countries on account of the DR-CAFTA agreement,” he added, referring to the Dominican Republic-Central America Free Trade Agreement with the United States.
A mega-project of a different kind is underway in Port of Spain, the bustling yet rundown capital of Trinidad. The ambitious 5 million Port of Spain Waterfront Development Project includes two 26-story towers and a 22-floor, 428-room Hyatt Regency Hotel, along with a conference complex featuring exhibition space, pre-function rooms and retail shopping facilities.
“Trinidad is booming. The markets are, of course, driven by the downstream energy sector,” said Ian Chinapoo, managing director of capital markets at FirstCaribbean. “Overall, it’s one of the strongest-performing economies in Latin America and the Caribbean, and it’s not only because of oil.”
Trinidad—where Prime Minister Patrick Manning won re-election on Nov. 5—is also a major exporter of liquefied natural gas, methanol and ammonia, and the country’s GDP growth is being driven by the continued high prices and strong demand for these exports. Among major industrial projects being contemplated is a class=”import-text”>2007December.Caribbean Economies Booming.txt.7 billion steel plant owned by Essar Steel Caribbean.
In addition, the Trinidad and Tobago Unit Trust (UTC) launched the Unit Trust Energy Investment Fund earlier this summer. The fund will invest 0 million in the energy sector and is basically a vehicle that allows ordinary citizens to purchase shares in the wealth generated by large energy conglomerates.
Gail Daniel Warrell, vice president of UTC’s marketing division, pointed out that “BP, Texaco, Chevron, British Gas, BHP Billiton, Petro-Canada and others have made billions from oil and gas. Yet until now, the ordinary man and woman could not have a direct stake in these companies that have profited so handsomely from Trinidad and Tobago’s natural resources.”
Although Trinidad itself is not much of a tourist destination, nearly all other Caribbean islands depend on the dollars that tourism generates to feed their people and keep their economies functioning. From Barbados to the Bahamas, the trend is increasingly toward upscale properties and the “luxury second-home” market.
“The bank continues to see a growing demand for project financing in the real estate, hotel, hospitality and tourism sectors across the region,” said Chinapoo. “Major luxury resort developments are under way in several territories, with world-renowned resort brands leading the way.”
Despite rising construction costs, demand remains high, yet not all the news is good. Relatively high inflation, the expiration of preferential trade agreements for bananas, and the new U.S. law requiring passports to travel to the area are expected to present further challenges to the overall performance of Caribbean economies.
“Growth has slowed to some degree in the Eastern Caribbean, primarily because these countries—particularly St. Kitts-Nevis, Belize and Antigua—find themselves overburdened by debt to some degree,” said Lyndon Guiseppi, managing director of RBTT Merchant Bank in Port of Spain. RBTT (Royal Bank of Trinidad and Tobago) is currently financing a number of projects around the region, including a million expansion of St. George’s University School of Medicine in Grenada, an million refurbishment of cruise ship and cargo port facilities on St. Maarten, and a 0 million toll-road expansion in Jamaica.
Meanwhile, Haiti, the region’s poorest country, has earned duty-free entry into the United States for locally sewn apparel. Lawmakers passed the bill in March as a way of helping the violence-plagued nation. Last year, Haiti sent 0 million worth of clothing to the U.S. market, accounting for 90 percent of its exports to the United States.
About the Author
Larry Luxner is news editor of The Washington Diplomat.