FOR AN ECONOMY HEAVILY RELIANT ON TOURISM & EXPORT OF NATURAL RESOURCES, THE PANDEMIC CASTS A CATASTROPHIC SHADOW OVER THE REGION'S PROSPECTS. HOWEVER NOT ALL'S DOOM & GLOOM. HERE'S HOW.
Sunny beaches. Luxurious resorts. Hippy parties. Fun loving people. Massive natural resources. The Caribbean indeed represent a paradise. However, there is trouble in this paradise.
Like every other region of our globalized world, the coronavirus has caused massive disruption. Tourism & trade have stopped. The demand for natural resources are at an all time low. This does not bode well for a region heavily reliant on both of them.
The graph below (sourced from Statista) shows the projected losses to the Caribbean economy due to loss of tourism:
The numbers are indeed not good for such small scale economies who relies heavily upon tourism as a source of income (again shown below).
Now that the basis of my assumption has been proved, let's see how can we counter the situation & improve the economic prospects:
RENEWED FOCUS ON CARICOM
In times like this, politicians may undertake isolationist policies & urge self reliance. However, for countries with such small economies, this strategy can backfire. So in my opinion, CARICOM should be given paramount importance in such tumultous times. It would lead to further integration of their economies & will have various benefits like:
Will have upper hand in negotiating trade deals with larger economies like USA if they act as one on the negotiating table.
Free trade agreements between these economies with other countries will open up new tariff free markets for domestic sellers/producers. For example, CARICOM has a free trade agreement with Cuba.
Free flow of goods, services & people will lead to higher degree of innovation & employment avenues.
Geo-politically as well, it will be advantage Caribbean. A more common stance on global forums like UNGA will help these countries to leverage more power on the international stage. For example, a common stance on Israel-Palestine issue by all member nations will attracting wooing by both the parties.
EXPLOIT TAX HAVEN STATUS
Tax havens are countries where income taxes are negligible or nil. So major corporations & wealthy people set up shell companies to transfer their wealth (tax free). I know this stuff is illegal but in such unprecedented times, any consistent source of income is a gold mine. Even during the pandemic, the elite earners have amassed more wealth & income inequality has widened.
As illustrated below, the scope for money laundering & thus the demand for tax havens will only increase. The Caribbean nations have an opportunity to mint money as tax haven countries get benefits like:
Some Countries may offer a lower tax rate to large corporations, in exchange for the companies locating a division of their parent company in the host country and employing some of the local population,
Generate several fees like incorporated business entities, annual renewal fees, and licence fees payable by service providers (banks, solicitors, accountants, and trust companies.
The Caribbean is already home to some tax havens like Bahamas & the notorious Cayman Islands.
MORE EXPORT OF SECONDARY GOODS
The main exports of this region are gold, ferronickel, sugar & coffee. Basically, they are all primary goods (cultivate raw materials without manufacturing). The governments can encourage export of secondary goods (manufactured & processed). Obviously as the islands are small in size, manufacturing of basic goods requiring unskilled or semi-skilled workers is more feasible. Examples are paper, & iron nails. This will provide much needed foreign exchange by boosting exports & provide employment to the labor class.
AS PER MY UNDERSTANDING, THESE THREE STEPS WILL HELP THE CARIBBEAN IN WEATHERING THE ECONOMIC STORM. THANKS FOR READING. SHARE IF
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