Pascal Fletcher

Tourists walking along a market after disembarking from the Carnival Victory cruise ship in Basseterre, St. Kitts. The Caribbean’s small island states are struggling to survive the global economic crisis. (Photo: Reuters)

Caribbean Blue as Global Economic Gale Rages

Basseterre, St . Kitts. The Caribbean’s small island states ride out hurricanes year after year, but now they are fighting to stay afloat in a global economic storm that is battering rich and poor nations alike.

Tiny nations like St. Kitts and Nevis, a short chain of lush green volcanic cones set in an azure sea, have felt the shocks of the downturn and credit crunch as keenly as the winds and seas that lash them every summer.

Their dependence on tourism, remittances, investment flows, imports and commodity prices makes them all the more vulnerable to recent worldwide economic tremors that have shaken giants like the United States and China.

Shock has followed shock. First, soaring oil prices last year pushed up energy and food bills and swelled inflation. Then, recessions in the United States and Europe cut tourism and investment flows.

The International Monetary Fund estimates that real 2009 gross domestic product for the eight-member Eastern Caribbean Currency Union (ECCU), which includes St. Kitts and Nevis, will contract by 2.5 percent. The fund said the contraction reflects “a sharply slowing global economy, declining tourist arrivals and foreign direct investment flows, and increased financial sector stresses”.

“It’s been difficult. It’s not without pain, and we have gotten wet,” said Minister of Tourism Richard Skerritt, citing a 12 percent drop in visitors from the United States from January to April.

Since the local sugar industry closed in 2005, tourism has taken over as the economic mainstay on St. Kitts and Nevis, which have a population of 40,000 people. It now contributes an estimated 40 percent of gross domestic product.

Any dip in visitor activity is painful. The drop in tourist arrivals earlier this year forced the country’s biggest resort, the St. Kitts Marriott, to lay off 100 employees.

“That was a shock, because in a small country, layoffs hurt everybody,” Skerritt said.

Nature, too, has taken its toll on the former British territory. Hurricane Omar, which pummeled St. Kitts and Nevis last year, forced the closure in October of the Four Seasons, the biggest resort on Nevis. It still has not reopened.

To the east, Antigua and Barbuda’s hotels suffered a 30 percent decrease in occupancy and government revenue fell by 25 percent, Antigua Prime Minister Baldwin Spencer said.

Skerritt said his government was fighting back. It had removed some duties and taxes to shield consumers from rising prices for basic food, introduced stimulus measures for small hotels and negotiated hard with airlines and big resort operators to try to keep visitors coming.

“We are weathering the storm better than most,” he said.

St. Kitts was banking on the Christophe Harbor project, a big new hotel, marina and golf course development on its southeast peninsula, to attract new visitors.

Skerritt said the new resort was already boosting the local economy, and had created 100 new jobs.

Citing another encouraging sign, he said arrivals of cruise passengers on St. Kitts had increased by 150 percent in the last three years, to 500,000, thanks to the Port Zante cruise terminal which now had more than 50 shops.

But spending by cruise visitors was down sharply across the Caribbean, retailers and tour operators said.

“It’s the same story in Jamaica, the Cayman Islands. All the big retailers are down,” a jeweler in Port Zante said.

In St. Lucia, the government is putting a brave face on the situation.

“Tourism arrivals remain fairly buoyant although there is a fair degree of discounting [of prices],” Minister of Foreign Affairs and Trade Rufus Bousquet said.

“I’m not suggesting it’s a rose garden, but we’re paying our bills.”

At a June summit in St. Kitts of the Venezuelan-backed regional energy alliance PetroCaribe, Jamaican Prime Minister Bruce Golding warned that the recession could stoke social tensions and inequalities.

“Poverty that had been reduced, we are in danger of that poverty returning. We fear a real danger that we will come out of this crisis with the gap between rich and poor countries widening,” Golding said. He demanded “a seat at the table” for small developing countries at global groupings like the G-20.

Some analysts see the cumulative shocks straining Caribbean unity. “There is a growing sense of every country for itself,” said David Jessop, executive director of the Britain-based Caribbean Council, which specializes in Caribbean trade issues.

“We’re now a year, a year and a half into the global economic crisis and the Caribbean hasn’t actually been able to agree on a strategy,” he said.

Compounding its troubles, recent highly publicized fraud scandals and financial collapses have pummeled the region’s financial sector.

Analysts say allegations that Texas billionaire Allen Stanford and his Antigua-based banking operation ran a “massive Ponzi scheme” are another black eye for the Caribbean’s offshore finance sector.

Antigua’s top financial regulator has been implicated, adding force to critics who say the region’s financial sector lacks adequate control and oversight.

Similarly, the collapse earlier this year of the Trinidad-based Caribbean business conglomerate CL Financial has sent shock waves through the Eastern Caribbean’s financial system, the IMF says.

“High government exposures, credit risk and liquidity risk present major threats to ECCU banking system stability,” the fund said in a report.

ECCU members are Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia and St. Vincent and the Grenadines.

Many regional governments view calls from the developed world for the Caribbean to clean up its tax havens as unfair. But some are moving to sign multiple bilateral tax treaties to meet demands for more financial transparency and oversight.

“It’s a good way to show transparency and to generate business,” said Bousquet, St. Lucia’s foreign minister.



Reuters

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