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Caribbean Attitudes Optimistic

Economic performance continues to improve but some weaknesses prevail


December 30, 2004
Copyright © 2004 CARIBBEAN BUSINESS. All Rights Reserved.

The economic outlook for the Caribbean region as a whole continues to improve, with recovery from the fallout and aftermath of the 9/11 terrorist attacks almost regionwide and in spite of the devastating impact of hurricanes and tropical storms during the past year.

These optimistic attitudes prevail according to both the Caribbean Development Bank (CDB) and the United Nations Economic Commission for Latin American & the Caribbean (Eclac), two major multilateral agencies monitoring their performance.

The tourism sector was an important contributor to the improved economy with increases in both overnight visitor arrivals and cruise passengers in general, according to the CDB. Perceptions of the region as a safe destination, coupled with increased marketing and an appreciating euro against the U.S. dollar are cited as major reasons for the Caribbean as an attractive destination.

While increases also were recorded in construction and international business (financial services), the CDB cautioned that the manufacturing sector continued to struggle, with most countries registering declines in output. Cited by the CDB as principal reasons were increased trade liberalization and strong competition continuing to plague the region’s manufacturers. Dominating the competition is Asia in general and mainland China in particular.

The exception to this was Trinidad & Tobago (T&T), rich in both oil and natural gas, where output increased in the production of chemicals, nonmetallic goods, and assembly operations.

In its overview, Eclac noted a 4.5% growth, which had been corrected upward midyear, and indicated the continued recovery benefited almost every country in the region.

Eclac observed domestic economic policies are reflecting signs of more fiscal and monetary control, along with more competitive exchange rates that have made it possible to take advantage of favorable external conditions.

How long this new growth phase will last depends on future trends in both domestic and external factors, Eclac cautions, noting that domestically, the weak demand apparent in many of the region’s economies raises doubts about the likelihood of the recovery consolidating. In the external context, it observes, some social imbalances must be faced sooner or later and, while they don’t post immediate risks, suggest the world economy will grow more slowly in the medium term.

FTAA more elusive than ever

In the Caribbean context specifically, the elusive Free Trade Area of the Americas (FTAA) has become more and more elusive with the U.S. initiative virtually stalled and the original target date of a Jan. 1, 2005 launch now impossible. At the same time, the kickoff of the Caribbean Single Market Economy (CSME) in the 14-member Caribbean Community (Caricom) also is lagging with really only three nations, Barbados, Jamaica, and T&T, set to implement it in 2005.

"The region’s low profile in U.S. foreign policy since 9/11, the preoccupation of the Bush administration with Iraq and terrorism, and regional disillusionment with free trade being oversold by the U.S. as the regional solution to poverty, unemployment, and inequality, have all served to relegate Latin America and the Caribbean, with one or two exceptions, to a sort of peripheral status among U.S. policymakers," said Prof. Anthony T. Bryan of the University of Miami.

Bryan doesn’t expect a change in a second Bush administration either, U.S. Assistant Secretary of State for the Americas Roger Noriega differs, however, noting "those who believe the Bush administration hasn’t been paying attention to the Americas haven’t been paying attention to us."

Most Caribbean leaders would like the president to put more meaning into his description of the region as the "third border of the U.S." They point out that the region traditionally buys much more from the U.S. than it sells, with the exception of T&T, which supplies 75% of liquefied natural gas imported into the U.S. The Dominican Republic (D.R.) is the largest trading partner of the U.S. in the region with two-way trade exceeding $9 billion.

Millions of Caribbean nationals, as well as people from elsewhere in the world, now live in the U.S. and their remittances to their countries of birth exceed billions of dollars and are important factors in their economic well-being. For example, the remittances of Dominicans in the U.S. now total more than $3 billion annually and are a close second to earnings from the country’s dynamic tourism sector ($3.4 billion).

"Cooperation between the U.S. and the Caribbean isn’t limited to trade," observes Enrique Iglesias, the president of the Inter-American Development Bank. "The Third Border Initiative of President Bush covers many other important areas of cooperation, among them security, cooperation to fight HIV / AIDS, education, and disaster preparedness and mitigation."

Progress needed more urgently

But Iglesias cautioned that "the slow pace of the FTAA negotiations, and the rapid formation of alternative free trade agreements throughout the hemisphere, progress on consolidating bilateral, U.S.-Caribbean trade and investment relations appear to be quite urgent."

Caribbean countries have been developing lists of problems in their relationship with the U.S. and they increasingly refer to them. Topping them would be the more stringent Homeland Security regulations on trade and travel between the U.S. and the region.

Stricter immigration requirements have translated into more difficult access into the U.S. and Puerto Rico for visitors from other countries, whether for shopping, healthcare, education, or other business. The increased costs of security arrangements have translated into higher costs of goods as well as stricter airport and port security requirements, the costs of which have proved to be burdensome to the other countries.

Rising costs of aviation fuel also have been an added burden to airlines serving the Caribbean. They not only are the vital links for the dominant tourism industry in most countries but also important elements in trade and movement of local residents as well. The increased costs of fuel have translated into higher costs of tickets and, in some cases, airlines have gone out of business or reduced their flight frequencies in order to cope. For example, Air Jamaica has decided to suspend service to Antigua, a small tourism-dependent country, which needs all the seats it can muster to attract more visitors.

"There is no overall U.S. policy toward the Caribbean nor is such a thing likely," declares University of Miami’s Bryan. "Some countries will be more important than others; Haiti, Cuba, T&T (because of U.S. energy security), the D.R. and Jamaica."

What are the options? Bryan sees the region as an alternative for the U.S. to counterbalance Europe and Asia. He advocates the Caribbean should develop a regional proactive and dynamic agenda for Washington and cites the actions of Chile, the D.R., Panama, and the Central American countries.

This Caribbean Business article appears courtesy of Casiano Communications.
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