CARICOM deficiencies leading to fragmentation and weakness

(This commentary is a shortened version of a Feature Address to the St Lucia Hotels and Tourist Association on 19May, 2016)

I start with the now proven premise that no CARICOM nation is able to prosper on its own. No protestations to the contrary erase the evidence that, without aid from external sources, these countries could not deliver the goods and services that their people expect.

The countries of CARICOM started the process to their separate independence 54 years ago when Jamaica and Trinidad and Tobago became nominally sovereign states in 1962. Yet, while rightly they have shed colonial rule and assumed control of their affairs, after half a century of sovereignty in not one of these countries – or the others that followed them – is the picture rosy. The opposite is true – each is being severely challenged, and the economic prospects for all appear gloomy.

A Commonwealth report on small states, just published, says that on its current development path, the Caribbean in 2050 will face unmanageable debt, poor growth, and greater socio-economic problems. The report - Achieving a Resilient Future for Small States: Caribbean 2050 - considers current policies and trends in seven Caribbean countries - Bahamas, Barbados, Jamaica, St Lucia, Grenada, Trinidad and Tobago and Guyana - and makes a 34-year projection across different sectors.

The research shows five out of the six countries under study would have a debt-to-gross domestic product (GDP) above 100 per cent while two of them could exceed 200 per cent. These projections suggest that expenditure of debt interest will probably become a major drain on public finances in the future, reducing the funds available for development and giving rise to greater socio-economic problems. It is a serious regional issue, particularly as it affects sovereign credit rating and has led to higher sovereign risk premiums in international capital markets which mean borrowing costs for Caribbean countries are very expensive.

It was precisely to meet these circumstances more effectively that in 1973 CARICOM was created and before it CARIFTA. The leaders, at the time, recognised that while rightful separation from Britain gave them domestic political independence, none of them – not even Guyana with its vast natural resources or Trinidad and Tobago with its oil and gas – could prosper on their own. But, sadly, CARICOM wandered from its purposes. The unity that was envisaged as the locomotive for delivering benefits was derailed by proclamations of nationalism and the sanctity of sovereignty.

By the 1990s, it was clear that the Caribbean was in danger of becoming a back water. The 1992 West Indian Commission Report, "Time for Action", was a recognition of the dangers confronting the region, and the centrality of putting back on track the locomotive of integration. The Commission recommended: deepening economic integration through the creation of a Single Market and Economy so as to draw, for the common good, on the resources of the entire region – human, capital and know how; and strengthening the institutions of governance and operations of CARICOM by the establishment of a Caribbean Commission to implement decisions of Heads of Government and Ministers.

In the ensuing years, the CARICOM ship slipped from its moorings and is now in danger of fragmenting into separate small boats adrift in a perilous sea. Today the Single Market has been on pause for five years, and the Single Economy has been all but abandoned. Governments are each trying to go it alone, striking other alliances where they secure immediate benefits, and often, by doing so, weakening the cohesion of CARICOM.

The point is that, on all sides CARICOM member states are buffeted by economic forces with which they cannot contend alone, and against which they lack a strong and empowered single regional capacity to fight together.

Clearly, there is an urgency for CARICOM countries as a whole to address their fragile condition, and to recognize that while national initiatives are imperative for economic growth and development and must be pursued diligently, deeper regional collaboration, including economic integration, hold beneficial and sustainable solutions.

With specific regard to tourism. Despite all those who often dismiss tourism as "too fragile" to be a real player in the economic development of the Caribbean, the industry has emerged as a strong and resilient economic activity that has been a fundamental contributor to global economic recovery by generating billions of dollars in exports and creating millions of jobs. It has played the same role in many CARICOM countries.

The UN World Tourism Barometer has reported that tourism receipts increased by US$48 billion in 2014 to reach a record US$1.2 trillion globally. An additional US$221 billion was generated from international passenger transport, bringing the total export earnings from international tourism to US$1.5 trillion. Remarkably, the Americas was the highest growth area for tourism in the world. And while the lion's share of receipts – US$210 billion – went to North America, the second highest share was earned by the Caribbean, though only US$27 billion. But, the biggest beneficiaries in the Caribbean area were the Dominican Republic, Puerto Rico, and Cuba which accounted for almost half of the money earned.

Nine years ago, I wrote a commentary entitled, "The Big Three and Little CARICOM" which posited the view that the three Caribbean Spanish-speaking islands would forge an alliance, creating a market of 23 million people that would marginalise the market of 6 million people in the English-speaking Caribbean. I warned that CARICOM countries would delude themselves if they believe that with their individual small markets, high investment costs, high costs of doing business and vulnerabilities both to natural disasters and external economic shocks, they could each operate successfully in the global market place in competition with the "big three". And I urged that "CARICOM governments would do well to bolster their economies and their capacity for dealing with their Caribbean neighbours and the international community by urgently completing the arrangements for implementing their own Single Market".

That deeper economic relationship between the Spanish-speaking Caribbean countries is now coming to pass, threatening to leave CARICOM behind. Two weeks ago, my friend and analyst of Caribbean affairs for many years, David Jessop, pointed out that "work is progressing on studies on the creation of a new Caribbean economic block that might bring together Puerto Rico, the Dominican Republic and Cuba with objective of uniting the Spanish-speaking Caribbean and capitalising on new trade opportunities". He quoted Carlos Rivera Velez, the President of the Puerto Rico Association of Industries as saying: "We hope that in the not too distant future, we can see the Dominican Republic, Puerto Rico and Cuba working together as a productive economic block for each of our countries and to strengthen the region".

Jessop observed that "these developments are taking place as CARICOM has become less coherent… where 'dysfunction and strife' now militates against the spirit of the Caribbean integration movement". And he concluded, in terms similar to my own statement nine years ago, that: "It is time for the English speaking Caribbean as a whole to develop new thinking about how best to incorporate a future open trade relationship with Cuba, the Dominican Republic, and Puerto Rico, in ways that that deepen in the longer term trade with neighbours in Central and South America. It is time to read the writing on the wall".

Clearly there is a need for a response from CARICOM countries collectively to the economic co-operation process that is being launched with vigour in their own front yard, or they will fulfil the fears that led to the creation of the West Indian Commission in 1990. That fear was that: "against that background of historic change and historic appraisal, CARICOM countries could be in danger of becoming a backwater, separated from the main current of human advance into the 21st Century".

Of all the CARICOM countries, Jamaica has recognised the potential benefits of a tourism alliance with Cuba and the DR with which it plans to forge a Multi-Destination Arrangement. These arrangements make perfect sense for Jamaica located, as it is, in close proximity to the Spanish-speaking islands. But, one has to wonder whether the deficiencies in the CARICOM integration process and its failure to deliver its objectives after 43 years of existence, has not contributed to encouraging Jamaica to seek alternatives which are not limited to tourism.

No one can blame Jamaica for taking a sensible initiative, but it would have benefitted CARICOM to enter these arrangements together. It took the Cuban Vice Minister of Tourism, Luis Miguel Diaz Sanchez, earlier this month to express to the Caribbean Hotels and Tourist Association a strong desire to see the region cooperate in building a stronger Caribbean brand. Encouragingly, the CHTA said they "will be pursuing a number of priority issues discussed during their meetings" with the Cubans. No time should be lost in pursuing these priorities; time is not on CARICOM's side even if, at this point, there is goodwill from the Cubans. Such goodwill will not last forever, and Cuba's national interest will respond to change and the lure of other sirens.

It is time that the countries of CARICOM- acknowledge that there is a loss of momentum with regard to the regional integration agenda. Lack of confidence in CARICOM is causing member states to establish alliances elsewhere.

These issues need to be addressed as a matter of urgency. The next CARICOM Heads of Government Conference is 6 weeks away. It would be appropriate, desirable, and important for the Conference to address how best they might establish mechanisms to halt the decline in CARICOM and return to making it an instrument of development and progress for each of its countries and all of them.

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