– CARICOM Chairman warns
In the Caribbean, the fall-out from the global economic situation has presented severe challenges; and its consequences are being felt in the financial sector, the real economy and the social sector, Chairman of the Caribbean Community and Prime Minister of Belize, Dean Barrow said during the opening ceremony of the fifth Summit of the Americas, Friday in Trinidad and Tobago.

Barrow said the Caribbean’s economies are extremely open as reflected in an average trade/GDP ratio of more than 70 per cent. He said, added to that, foreign investment accounts for a very significant proportion of total capital formation.

Prime Minister Barrow said the Community’s highest earner and largest employer – tourism – is crippled as a result of its market being predominantly drawn from the two regions most severely affected by the crisis – Europe and North America. 

Due to the decline in tourist arrivals some locations have reported a drop of more than two thirds in visitor flows and hotel occupancies.

The CARICOM Chairman said in such circumstances, and with an absence of surpluses to fund large-scale stimulus packages, the fear is that should the global crisis persist for another 18 months, a large proportion of the region’s population will regress into poverty. “We will then be even more unable to contain an already unacceptable high level of violent crime,” he said.

He said that for some time now, the Community has been facing the phenomenon of ever increasing crime, fuelled in large part by trafficking in illicit drugs and arms, and by deportees from the developed countries.

“In the Caribbean we are sandwiched between the largest producers of cocaine to the South and the largest consumer countries to the North. But the pencil of God has no eraser. And so the policies to deal adequately with transnational crime and citizen security must not only be multidimensional in scope, but anchored by international cooperation,” he said.

Barrow said against this backdrop of the protean problems, the Caribbean Community has not been passive, especially with respect to the economic and financial crisis.

He said as early as November 2008, Member States were urged by the Heads of Government to take prudential measures. These were targeted at the areas of foreign exchange reserves, deposit insurance, capitalisation ratio, local assets ratio, cross-border supervision, and supervision of non-banking institutions such as insurance companies. It was also understood at that time that Member States might need to seek multilateral assistance to engage in counter-cyclical policies.

Such policies were to include: changing the composition of bank lending towards more productive and export related activities, streamlining contingency planning with respect to the financial and non-financial sectors, and undertaking public investment that facilitated production of tradable goods.

On the question of multilateral assistance, Barrow said the Caribbean looks forward to at least one positive development from the international crisis: the opportunity for reform of the global financial architecture.

“We therefore, particularly welcome the declaration by the G20 of the determination to reform and modernise the international financial institutions, to ensure they can assist members and shareholders effectively in the new challenges they face, he said. The chairman added that even more critical is the assurance that emerging and developing economies, including the poorest, must have greater voice and representation.  

Barrow noted that in respect of the international financial sector, there are two reforms that the Caribbean countries regard as sine qua non. One is the need for special treatment to be accorded to highly indebted middle income countries that, because of well known structural vulnerabilities, are finding it difficult to, on their own, relieve their debt burdens.

He said under these circumstances, graduating CARICOM countries out of access to concessionary loans on the basis of mere per capita income seems like the unkindest cut of all.

A second reform relates to the need for more understanding and greater perspective regarding the treatment of offshore jurisdictions in small developing countries.

He said the combination of large finance and small state means tax rates can be low. That is why the Caribbean has become the fourth largest banking sector in the world, led primarily by Bermuda, the Cayman Islands, the Bahamas and BVI.

Touching on the topic of climate change, Barrow said CARICOM has been diligently working to adapt and mitigate. 

He noted that this is done principally through the Caribbean Community Climate Change Centre, which has been working assiduously, but with far too limited resources.

“On this question of funding, the magnitude of the mobilisation required is spelled out in a 2006 World Bank report, which estimated that developing countries would need US$ 10 to $ 40 billion a year to cope with climate change,” he said.

Among the proposals being advanced to meet these costs is a significant injection of new money over and above the traditional ODA target, specifically devoted to adaptation.

Barrow posited that this new financing must be stable and predictable; and should derive from mandatory contributions from developed countries, as well as levies on the carbon markets and other emissions trading schemes.

He also thanked the Organisation of American States (OAS) as an institution, and the individual countries of the hemisphere, for their continuing special support to Haiti, one of CARICOM’s member states, adding that the Community is also heartened by recent steps to change the relationship between the United States and Cuba.

The Fifth Summit of the Americas bearing the theme “Securing Our Citizens’ Future by Promoting Human Prosperity, Energy Security and Environmental Sustainability’ began Friday in Port-of-Spain, Trinidad and Tobago. (GINA)