Can CARICOM nations catch up?

Dennis Morrison, Gleaner Writer

The joint University of the West Indies-Commonwealth Secretariat Conference at Mona last week brought together prominent figures in the Caribbean integration movement to discuss urgent development issues. The conference has come at a time when the Caribbean is rapidly falling behind in the pace of economic development, losing ground in the competition for domestic and export markets, and, as a conse-quence, suffering permanent setbacks in some critical industries.

The slippage in the fortunes of the region has not come about overnight, but has been under way at least for the last two decades, even while critical development issues have been the subject of numerous proposals, studies, and conferences. CARICOM heads of government and the secretariat spent several years and undertook extensive negotiations towards the establishment of the CARICOM Single Market and Economy (CSME). Indeed, legislation was enacted in countries across the region to pave the way for the CSME.

But if one were to ask the more informed among us, they would not be able to say where we have reached in the process, and what have been the results. It would seem that the process has been stalled. Not even the pressures brought on by the great recession of 2008 have been sufficient to push CARICOM leaders to take bold and specific actions in areas that can provide mutual economic benefits. By contrast, regional integration in Central and South America has accelerated in the past decade, after earlier stops and starts, injecting vitality into their economies that helped to mitigate the worst effects of the recession.

Stark contrasts

The review of the performance of regional economies put out by the Economic Commission for Latin America and the Caribbean (ECLAC) makes clear the stark differences in economic performance between Latin American countries and the Caribbean. While the Caribbean barely managed to escape another year of negative growth with an increase in GDP of 0.5 per cent last year, Latin American countries saw their national income go up by six per cent. In effect, the Caribbean is still to make up for the decline of 2.3 per cent in economic output in 2009, whereas Latin America completely reversed their decline of 1.8 per cent.

Some individual Latin American countries were among the best performers globally, including: Argentina, with growth of 8.4 per cent; Brazil, 7.7 per cent; Chile, 5.3 per cent; Panama, 6.3 per cent; Peru 8.6 per cent; and Uruguay, 9.0 per cent. Only two of these countries, Brazil and Chile, experienced minor declines at the height of the recession in 2009. In its Preliminary Overview of the Economies of Latin America and the Caribbean 2010, ECLAC has forecast that these economies will enjoy further strong growth in 2011. All but one Latin American country (Venezuela) recorded positive growth in 2010.

In the Caribbean, the Dominican Republic (not a member of CARICOM) is by far and away the most dynamic economy. Not only did it escape the recession, registering growth of 3.5 per cent in 2009, but last year, it surged ahead, with GDP increasing by 7.0 per cent. But among CARICOM countries, economic conditions remained weak in 2010, and indications are that the recovery in 2011 will be modest.

Of the 18 borrowing member countries of the Caribbean Develop-ment Bank, 12 recorded negative growth. Antigua and Barbuda, St Kitts and Nevis, and Haiti - catastrophic earthquake damage - were the worst-performing regional economies last year. On the positive side, The Bahamas, St Lucia, Belize, and Guyana saw growth, with the Guyanese economy achieving the strongest rate at 3.6 per cent. The most positive indicator across the region was the recovery in the leading industry: tourism.

Industries under pressure

Across the region, the construction, mining and manufacturing sectors were hard hit by the adverse external environment in 2009 and remained under pressure in 2010. Construction activity, which had declined in 2008 and 2009 as foreign financing for tourism and real estate projects dried up, began to stabilise in 2010. In the mining sector, Trinidad and Tobago and Belize experienced increased oil production, while prices rose at the same time. Jamaica also saw improvement in its bauxite industry, with the restart of some bauxite mining and alumina plant capacity.

The weak linkages between the regional tourism, agricultural, and manufacturing sectors meant that the increased demand for supplies by the tourism sector, as the recovery took hold in 2010, was met from outside the region. While the region's food deficit continues to rise, placing increased burden on foreign-exchange reserves, agricultural resources remain idle or underutilised. Moreover, the response to the loss of markets for the main export crops, banana and sugar, has been weak, with more land becoming idle and rural unemployment rising.

Regional countries also have not moved aggressively to harness complementarities in manufacturing industries. A glaring example is that energy resources in Trinidad and Tobago should long have been combined with bauxite resources in Jamaica to develop a competitive aluminium industry (including light manufacturing). In other regions, economic integration has gathered momentum from the level of firms to industries and across economies. What is it going take to get Caribbean business leaders and policymakers to break out of the stranglehold of complacency?

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