09th January 2010
2000-2009: A Decade of Caribbean Decline – Part 2

In part one of this commentary I argued that 2000 to 2009 has proven to be a decade of decline for the Countries of the Caribbean Community and Common Market (CARICOM). This second part explores other aspects of the area’s decline.
In the context of the statement in part one that “in the next decade many CARICOM countries will have to surrender direction of their economic and fiscal policies” if they pursue Stand-by arrangements with the International Monetary Fund (IMF), it is as well to record the Jamaica experience which crystallised after part one was written.
In late December the Jamaican government concluded negotiations with the IMF for a US$1.3 billion Stand-by arrangement whose terms elicited a howl of protests from the private sector, trade unions and the general public. Apart from increases in a variety of taxes, the original proposals included removing exemptions from government taxes on many food items.
Recognising the force of the protests, the government was forced to roll back many of the value added taxes but a burden fell on an unhappy business community to pay a portion of the estimated sales taxes up front with reconciliation at the end of the tax year.
In any event, the Jamaica community as a whole is injured by the terms that the government is compelled to impose. Importantly, none of the much vaunted easing of IMF conditionalties was evident. Thus, at year’s end a cloud of instability lay gloomily over Jamaica. It is a cloud that will spread across the region if other countries turn to the IMF and there is no relaxation of conditionalities.
As 2009 was coming to a close, despite all the declarations of the importance of closer integration and the vital necessity of establishing a Caribbean Single Market and Economy (CSME), governments dragged their feet.
The failure to implement at least the Common Market element of the CSME during the decade 2000-2009 contributed to the lack of Caribbean resilience to both the global financial crisis and the regional financial crises created by the collapse of Trinidad based CLICO, British America and BAICO, and Antigua-based Stanford International Bank and Bank of Antigua.
Had the CSME harmonized regulatory and supervisory systems and created a single regional regulatory body with oversight of CARICOM financial institutions, there would have been a good chance of preventing the events that led to the excesses of the CLICO, British American, BAICO and Stanford institutions.
Integration of production should also have accelerated during the last decade, particularly as CARICOM governments accepted that trade liberalisation was a reality and rules of the World Trade Organisation (WTO) should prevail.
In the absence of special and differential treatment for their terms of trade, it was obvious from the beginning of the decade that the Caribbean would be compelled to acquiesce to WTO rules for opening their markets to competition from much larger and richer nations, and they would have to do so without the benefit of preferential markets to which they were accustomed.
If, at the beginning of the decade, integration of production in the region had been meaningfully encouraged by tearing down the barriers to cross-border mergers, acquisitions and joint ventures, companies with a CARICOM-wide reach would have been established by now better able to cope with the financial crisis, and better placed to deal with the competition in almost every sector that is surely coming from the European Union (EU) under the Economic Partnership Agreement signed in 2008.