GEORGETOWN, Guyana – The Caribbean Community (CARICOM) has identified reform of the international financial architecture and the need for special treatment of Member States among the elements that needed to be taken into account when crafting a response to the current global financial and economic crisis.
The Community’s position and concerns were articulated at the Group of 20 (G20) Summit in London by the United Kingdom and Canada who advocated on the Community’s behalf at the Meeting. The Summit ended Thursday.
The Community pointed out that the reforms that were of particular interest to Member States included the need for special treatment to be accorded to highly indebted middle income countries (HIMICs) who found it difficult to grow out of their debt without special assistance from the international community, because of a number of structural vulnerabilities. The Community further argued that CARICOM countries should not be graduated out of access to concessionary loans on the basis of mere per capita income, particularly since such a level of income may not be sustainable.
In addition, the international community needed to level the playing field with regard to the treatment of the offshore jurisdictions in small developing countries.
This was important because of the limited scope for structurally dependent economies to diversify their economies. In addition, the countries in CARICOM were encouraged to diversify into services not only by local advisors but, also, by the international community who suggested that services were the best alternative to real sector production.
The Region was also concerned about the worsening security fall out from the crisis, pointing out that hundreds of thousands of persons may slip back into poverty if the crisis persisted for another 18 months, as was the worse case scenario. The Community was of the view that it would be hard pressed to contain the crime situation, which was already grim as a result of the drugs and related guns trade.
The Region’s financial distress, as a result of the crisis was on two levels. The Community pointed to the effect of the fallout of regional conglomerate CL Financial Group (CLICO), which has had a very adverse effect on the operations of CLICO subsidiaries in the Bahamas, Barbados, Belize, Guyana, Suriname and the Turks and Caicos Islands, owing to the interlocking nature of the conglomerate and the high incidence of related party transactions.
The Region was also hit by the effects of the United States ponzi scheme-like operations in the United States banking subsidiaries whose impact was severely felt in Antigua and Barbuda and St Vincent and the Grenadines.
Underscoring the impact on other sectors in the regional economy, the Community pointed to the tourism sector which has experienced a dramatic decline in tourist arrivals and low occupancy rates in spite of reduced rates. The effects of the economic and financial downturn have also been felt in tourism-related entertainment such as beach sport, food and beverage and handicraft sales. Complementary input activities including airline and ground transportation, fresh fruit and vegetables suppliers, horticulture have also been impacted.
The crisis has also meant staff cuts, slow down or the shut down of businesses in several Member States.
In the non-food commodities sector, the impact has been equally severe. For example, declining global demand and a related fall in petroleum and petro-chemical products have forced Trinidad and Tobago producers of ammonia, methanol and urea to shut down operations or bring forward maintenance work. (In addition, state-owned oil producer, Petrotrin, reported a loss in 2008 of TT$200m. after making a profit in 2007 of TT$2 billion). The country’s steel plant has also been closed since last October.
CARICOM also pointed to the effects on the bauxite industries across the Region and noted that in the Jamaica bauxite/alumina industry, all the major expansion projects had been halted as foreign investments from both Alcoa and Rusal had dried up and it is likely that two plants may also close down.
The Jamaican-Brazilian sugar divestment project has also fallen apart, as the Brazilian purchases had been unable to source the funds in the USA to close the deal. In Guyana, the bauxite and timber/woodworking industries have also reported a slow-down in activities.
