Jan 2006 Financial News

Caribbean economies look bravely ahead...

Jan 26, 2006

Gold prices have soared over the past year achieving record highs and creating greater interest in the mining sector

— Guyana President, Bharrat Jagdeo

As a result of our sound fiscal policies, we earned the confidence of the local and international financial community. Jamaica is now enjoying the largest levels of investment since the 1950’s.

— Jamaica Prime Minister, PJ Patterson

They conspire to block our competitiveness in international financial services, claiming that our competitive tax regimes amount to harmful taxation.

— St Vincent and the Grenadines Prime Minister Dr Ralph Gonsalves


While this country is booming, our Caribbean neighbours are facing an economic uphill climb.

Blessed with oil and natural gas, TT continues to enjoy economic buoyancy but other countries like Jamaica and Guyana are up against some daunting challenges.

TT’s economic expansion will be mainly driven by Atlantic LNG’s Train 4 which began production last month, increasing the country’s total capacity to 15 million metric tonnes or 720 billion cubic feet (bcf) per year and also by the increased production in ammonia and methanol production.

The Review of the Economy 2005 showed the economy expanding by seven percent last year again led by the energy sector, which also contributed to robust job growth and reducing unemployment rate. Prime Minister Patrick Manning is also expecting an active 2006 with investment flows estimated at US$ 7.4 billion.

In Jamaica, prime minister PJ Patterson, who is retiring from active politics, said in his New Year’s day message that although his country experienced its fair share of challenges, it was able to maintain economic stability because of its healthy foreign exchange reserves position.

"As a result of our sound fiscal policies, we earned the confidence of the local and international financial community. Jamaica is now enjoying the largest levels of investment since the 1950’s. We have started a number of development projects, which, when completed, will provide enormous long-term social and economic benefits," he said.

"Weather-related disruptions, arising from the most active hurricane season on record affected activity in every sector, reducing the flow of revenues."

Despite the setbacks, Patterson said the government made every effort to control the Budget which was essential to reducing interest rates and easing its debt burden.

While agriculture was hurt by the bad weather and farmers suffered losses for the second year in a row, other sectors continued to perform well.

In the bauxite sector, growth in output continued and alumina production reached another record.

In tourism, visitor arrivals, both stop-over and cruise passengers, increased, despite the disruption caused by hurricanes in the July to October period, thus achieving another record year for stop-over visitor arrivals and making it the third successive year of record performance.

"Because of the extensive linkages of the tourist industry to agriculture, manufacturing, entertainment, personal services, transportation, among others, the massive expansion of the industry will generate momentum right across the economy," said Patterson adding that the slew of investment projects underway will spur economic growth, create jobs and fuel business confidence.

Jamaica’s opposition leader Bruce Golding was not so optimistic as the prime minister, describing 2005 as a difficult year for the nation’s economy. "The high oil prices hurt us deep in our pockets and inflation soared past the single-digit projection which the government had made in April. "The government tries desperately to meet its balanced budget target for this fiscal year, by tightening expenditure even in the face of the need to provide more resources for the police and repair hurricane damage. But it has placed no such restraint on government borrowing," he said.

Golding said by the end of October 2005, the country’s total debt had climbed to J$827 billion — J$65 billion more than it was at the end of 2004. "Unfortunately, these are not problems that we can leave behind in 2005. They will cling to us and form part of the challenges that will confront us in the new year."

St Vincent and the Grenadines prime minister Dr Ralph Gonsalves, also the Chairman of the Organisation of Eastern Caribbean States (OECS) said the current international environment with emphasis on the dismantling of most barriers to trade is a painful reminder of the benefits once reaped by farmers in the now fast disappearing era of trade preferences.

"Bananas and sugar were then the engines of growth. Now even as the advocates of modern capitalism preach to us the virtues of diversification and greater focus on the services sector, they conspire to block our competitiveness in international financial services, claiming that our competitive tax regimes amount to harmful taxation, " said Dr Gonsalves.

The recent Hong Kong Ministerial meeting once more provided evidence of the growing divide between the rich and poor countries, he said. "Our news media now treat with this matter regularly. This sensitisation of our people contains valuable lessons. It emphasises the point that national/regional development is everyone’s business, with no exception.

"This sensitisation underscores how critically important it is in the present hostile international trade environment for our small and vulnerable countries to stick together and undertake even more initiatives aimed at strengthening the integration process. This will facilitate more effective approaches to the challenges which we face as we continue to seek meaningful and sustainable economic and social development." Gonsalves said while the OECS places heavier emphasis on the tourism sector and related services, they are giving serious attention to the issue of agricultural diversification.

In Guyana, president Bharrat Jagdeo said the South American country had some setbacks with crippling oil prices and the threat of reduced export earnings for sugar.

"However, we have already embarked on the restructuring of our sugar industry with the goal of increasing output, reducing the cost of production and encouraging cogeneration through the utilization of bagasse, a by-product of sugar cane.

"Despite the constraints, there is much to be hopeful about. Gold prices have soared over the past year achieving record highs and creating greater interest in the mining sector. There also continues to be new investment and restructuring in the local bauxite industry which spell good news for mining and neighbouring communities," he said.

This year will also see more Guyanese owning homes and many areas receiving potable water and electricity while squatter settlements will be "upgraded." Many more Guyanese will enjoy enhanced access to education and skills training.

"There is a construction boom taking place within our borders. New and exciting hubs of development are also mushrooming. Local producers and manufacturers are taking advantages of the opportunities opened by the many trade shows held both locally and internationally," he said adding that more production is taking place in areas such as furniture manufacturing and agro- processing.

With tourism improving, Jagdeo said there is robust investment in the hospitality sector and 2006 will see the construction of many new hotels and the upgrading of others already in existence.

Linda Hutchinson-Jafar Special Correspondent
Business Day
Newsday
Thursday, 26th January, 2006.