Caribbean has lost ground

Dennis Morrison, Contributor

The Caribbean's standing in the world, moreso that of the English-speaking countries, is slipping fast as our political influence wanes and the cracks in the region's economies are exposed. It was not so long ago that this region was held up as an example of the best performing, middle-income developing countries. Our people were enjoying rising educational standards, crime posed no real threat, health indices were outpacing most developing countries, and even some developed countries - underpinned by steady economic growth and political stability.

In the decade that is ending, the 2000s, the Caribbean has definitely lost ground. Several regional countries have joined the ranks of the most indebted with budget deficits running out of control. It is, therefore, not surprising that a growing list of them has ended up in the arms of the International Monetary Fund in recent years. The fallout from the faltering economies is reflected in the worsening crime problem, even in countries heretofore considered staid.

Near to home, countries of Central America and the Spanish-speaking Dominican Republic that not so long ago were under the thumb of military dictators, ravaged by civil wars and destabilised by military coups, are now overtaking the English-speaking Caribbean. They are outstripping us in economic growth rates and, importantly, have managed to sustain higher investment levels - both foreign and domestically generated - which, after all, are what drive economic development.

Debt levels contained

Governments in these Central American countries have, too, done a better job of administering public finances and, as a result, debt levels have been contained. This partly explains why these countries weathered the Great Recession better, and are emerging earlier from the downturn.

The fact is that CARICOM countries, except for Trinidad and Tobago, and to a lesser extent Barbados, have been set back by changing global economic forces. Having structured their economies around import-substitution industries to service small domestic markets, and export agricultural crops benefi-ting from preferential arrangements, these countries found themselves vulnerable to the rapid liberalisation of trade since the mid-1980s. The preoccupation of policy has been with the preservation of preferences for Caribbean banana and sugar exports to the European Union, not the restructuring of the region's economies.

The long-term consequences are grave and they are already upon us. Little progress was made in terms of building export capacity to tap European Union markets for other products for which preferential access was allowed under the various European Economic Community-African Caribbean Pacific conventions. CARICOM countries also failed to utilise duty-free access to the rich United States market for a range of products, except for 807 garment production. This activity was, at the peak, generating over US$600 million a year in gross export earnings for Jamaica but collapsed by the mid-1990s as labour productivity was low and other local costs became uncompetitive.

Central American countries offered lower costs and, by integrating their garment production with producers in Mexico, have been able to exploit the advantages of that country's North American Free Trade Agreement status. This paved the way for them to move into higher value output and to displace production from CARICOM. This was typical of the decline that has taken place in manufacturing activity across our region.

Banana, sugar decimated

In the case of the smaller English-speaking Caribbean countries, a major problem is the decimation of banana and sugar exports; and the tourist industry which has sprung up as the replacement for export agriculture has been weakened by the global recession. Tourism-related foreign direct investment, which was a big source of foreign inflows, has also fallen off. The effects of this are being felt in the construction sector in Barbados, Antigua and Barbuda, St Lucia and others, and in Jamaica, this has been the main contributor to job losses.

Going into a new decade, the prospects are, therefore, not encouraging for the region. Its traditional export crops are in decline; unemployment is rising; tourism, the mainstay of most economies, is not likely to recover in the immediate term; and investment, much of which is tourism-related and externally driven, is down. Moreover, CARICOM countries are spending increased sums to import more and more of their food requirements, even as their agricultural resources remain largely idle. The 'Time for Action' is now but there is no obvious sense that a strategic direction is being developed even after 40 years of pursuing the regional integration project.

Dennis Morrison is an economist. Feedback may be sent to columns@gleanerjm.com.