Continuing Caribbean post-recession difficulties

The ruling last week by a Trinidad & Tobago court making awards to investors in Clico and a statement from Prime Minister Denzil Douglas of St Kitts and Nevis, as Chairperson of the Eastern Caribbean Currency Union, on the fate of the Antigua ABI Bank, remind us that difficulties emanating from the 2008 recession continue to be unresolved, and are forcing themselves on Caribbean policy-makers.

As Clico policy-holders in Trinidad & Tobago have continued to express dissatisfaction at the offers of compensation made by Minister of Finance Winston Dookeran, the High Court ruled that six Clico Executive Flexible Premium Annuity policy-holders should be paid a total of TT$58.7M plus interest, among them being the St Kitts and Nevis Social Security Board. This judicial decision serves as a reminder that particularly in the Eastern and Southern Caribbean down to Guyana, the fates of policy-holders of Clico remain to be decided. In Trinidad specifically, hopes that a change of government after the last election would bring a better offer from the Peoples Partnership administration have proved to be largely illusory, while the issue has tended to become somewhat politicized.

And at the same time, last week also, Trinidad newspapers reminded the public of the wider consequences of the Clico tragedy, when they published a report from the United States ratings agency Moody’s that while the country’s overall credit, country and bank deposit ratings are considered stable, “longer term key concerns are the dwindling oil and gas reserves” and that “the rise in debt due to crisis-related fiscal deficits and the bailout costs of a bankrupt financial company (CL Financial) also limit the rating.” Other observers tend to focus on what would appear to be a certain paralysis in government decision-making on the Clico matter, and at a now defensive central bank which has become the subject of much criticism. These situations would appear to be increasing public apprehension in the Eastern Caribbean, where policy-making in Barbados over both Clico and the British American Insurance Co seems to be laggard. And in the midst of all this, Moody’s has also described Trinidad’s growth as “anemic, 2.5% last year and we expect a modest 2.1% for 2011.”

In the Eastern Caribbean, Prime Minister Douglas announced the transferring of responsibility for the management of the ABI Bank of Antigua and Barbuda to the Eastern Caribbean Central Bank, given “the challenges that the ABI Bank has been facing… and the danger this could pose to the banking system of Antigua and Barbuda and the entire [ECCU] Currency Union.”  Douglas holds the chairmanship of the ECCU Ministerial Subcommittee on Banking established in the wake of the Clico/BAICO and Bank of Antigua crises, when the central bank was authorized to intervene and take control of that bank’s functioning. By general accord, the ECCB’s intervention at that early period in the onset of the global recession, and its further intervention in relation to the Stanford affair, have been deemed to relatively successful in inhibiting undue pressure on the collective monetary system of the OECS countries.

There is, in the OECS, much consciousness of the fragility of the countries’ economies, not only in the wake of a recession which has reduced tourism receipts and investment in the islands, but also in relation to the medium-term implications of the WTO’s decisions relating to the banana trade. Even prior to the onset of these circumstances, however, a situation of rising debt to GDP led Dominica Prime Minister Roosevelt Skerritt’s government in cooperation with the ECCB, to bite the bullet and pursue an IMF programme, with its necessary introduction, as shown in Jamaica more recently, of substantial austerity.

Some observers presently take the view that the intense concentration on these domestic difficulties is one of the factors that would appear to have persuaded Caricom governments from an active pursuit of the Single Economy and, it would appear, even some aspects of the Single Market. On the other hand, the opposite would seem to be the case in the Eastern Caribbean where the collective strength of the Currency Union and the increasing sophistication, now recognized by the international financial institutions, of the central bank, is seen as giving confidence to individual governments finding themselves in economic difficulty to seek collective institutional support.

There are signs, in that connection, that in some Eastern Caribbean quarters, there is regret that Barbados, for so long the headquarters of private financial and industrial investments made in the OECS states, has been rather hesitant to use the situation of the Clico/BAICO disasters to strengthen monetary policy cooperation in these matters in the Eastern Caribbean zone as a whole, given what is taken as the unlikely easing of recession, and post-WTO difficulties, and the need for more acute policy responses to economic transformation in the EU-Caricom EPA era. Indeed followers of the Barbados press, surveying the mood as the government prepares a second post-David Thompson budget, must sense much focus on local matters and much apprehension as to what can be done to lift the pace of lagging economic growth, and a degree of pulling up the drawbridge as far as the migration issue is concerned.

Domestic financial and  economic difficulties, including the stickiness of employment levels in the Caricom area would, if the last Caricom Heads of Government communiqué  is taken as reflective of governments’ collective thinking, seem to indicate a mood of defensiveness in contemplating economic strategy; a suggestion that a regional approach to the economic organization of Caricom countries is not a matter for collective discussion and planning – a possible exception being in the realm of making more adequate arrangements for provision for food security. But even in respect of this latter, we see no acknowledgement in the communiqué, of an offer by Prime Minister Persad-Bissessar, in her opening speech at the conference, to support a focus on transportation in the region, including sea transportation, which would be critical to the region’s food security effort.

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