Economy of the carribean

Economy of the carribean

Anicia Brown Mr. Kensel November 30, 2013 The Caribbean’s economy By international standards, the nations of the Caribbean are not rich in natural resources. According to Ben Vosloo, The resources that make significant contributions to domestic economies and regional Job sectors include fisheries, bauxite, iron, nickel, petroleum and timber. It has been noted by some that the Caribbean’s most important resource is “its tropical island setting, which has generated a unique tourism sector” (Vosloo).

According to West and Schandl, “The greatest concentrations f minerals most valuable on the international market are found in: Cuba, Jamaica, and Trinidad and Tobago. ” Cuba’s economic rebound in the early 1990s is often associated with increased production in tourism, oil, and nickel, spurred by foreign investment in these primary industries. But a drop in the international prices has since reduced Cuba’s earnings. Notably, most new resource expansion in Cuba has concentrated on petroleum deposits, including offshore fields.

Jamaica’s bauxite and alumina industry are “second only to Trinidad’s petroleum sector as the leading export within CARICOM” (Vosloo). Jamaica’s bauxite and alumina industry is dominated by North American firms, and hence these resources have traditionally been exported northwards. The leading Caribbean export comes from Trinidad and Tobago, which possesses substantial petroleum reserves, and is regarded as the richest country in terms of natural resources. As a result of this, Trinidad also maintains the regional role of producer of heavy industrial products, such as asphalt, ammonia, and iron.

In Addition, the Size, population, race, ethnicity, density, political structure, and language separate the Islands in Caribbean Sea. Moreover, products and services of these islands are similar so, the integration of economies is not promising in the future. On the other hand, these islands face similar problems such as “insufficient investment for physical/human capital, lack of technology, and increases in narcotics traffics” (Barajas). Market failure of these Islands occurred due to the small size and the low population.

Since trade volumes of small countries are insignificant, countries may take some economic measures against international trade rules without a trade sanction. In terms of the Human Development Index onstructed by the United Nations, the highest scores are in Barbados, the Bahamas, and Antigua and Barbuda. Medium levels are in St. Kitts and Nevis, Trinidad and Tobago, Dominica, Grenada, Cuba, St. Vincent, the Grenadines, Jamaica, the Dominican Republic, and St. Lucia. The lowest score is in Haiti.

Some of the economic problems include, Cuban GDP falls by “35% between 1989-1993 after Soviet Union collapsed and machinery imports are declining’ (Rosales and Herreros). The Cuban government’s new economic strategies are diversifying exports, searching new trade partners and promoting tourism. Thus, the total number of foreign visitors has Dominican economy suffers from strong government regulations. For instance, the current electric production satisfies “60 % of the domestic demand.

According to Rosales and Herreros, the Dominican government has tried to privatize state enterprises and establish free trade and export processing zones and the Haitian political stability is very shaky. It is also said that International Community has implemented sanctions against Haitian undemocratic governments. Barbados cannot attract chained hotels to increase number of visitors. Curacao and Bonaire have very high salary level, which have created high rates of unemployment.

In Guadeloupe, agriculture production is subject to variable weather conditions such as hurricanes. To make matters worse, the reduction of oil prices decreases revenues in oil producing countries such as Aruba, the Bahamas, Netherlands Antilles, and Trinidad and Tobago. Because of this, the Caribbean economies continue to struggle to recover from the global economic meltdown. The economies have been hard hit by the global recession, and some countries in the region are among the most indebted n the world.

Because of this the Caribbean countries has to look for others ways to add to their GDP, such as agriculture and tourism. Agriculture also contributes to the Caribbean’s GDP, but it also contributes to domestic food supply, and provides employment. While agriculture is the major economic land-use activity in most Caribbean countries, agriculture accounts for less and less of most islands’ GDP. However, unlike many developed countries, this trend may be accounted for by a “growing tertiary sector, as opposed to industrial growth except for Trinidad and Tobago and Mexico” (Pryor).

Some of the associations representing the agricultural industry in the region are: “the Caribbean Food Crop Society (CFCS); the Windward Islands Farmers Association (WINFA), with headquarters in Saint Vincent,” representing the interests of Fair Trade certified producers in Saint Vincent, Saint Lucia, Dominica and Grenada (Pryor). The agricultural sector’s contribution to the economy has declined in the past two decades. As a result, the agricultural sector has not generated sufficient employment or foreign exchange earnings.

This has meant that the industrial sector has not been able to sustain development. Even though agriculture was a huge part of the Caribbean economy as we know it may come as a surprise to many that this industry is not as strong as it once was. Factors such as the “declination of the natural environment, abject poverty and natural disasters” have played a part in the agricultural sector only being a prominent industry for a handful of the islands (Mundaca).

Over the past years, the Caribbean has moved from one that was largely agriculture-dependent and preference based, requiring government’s constant intervention, “to one that now has to a significant xtent been driven by tourism, an industry that is private sector led,” largely without subsidies and dependent on the region’s natural environment. Of the 10 countries in the world most dependent on tourism, 7 are in the Caribbean. (Mujattevit, 2011) Tourism is vital to the entire Caribbean region, contributing an estimated 14. percent of the region’s Gross Domestic Product (GDP) in 2011, more than any other region in the world and is expected to increase its share by almost two percentage points to 16. 5 percent by 2014, according to the Caribbean Tourism Report. Tourism equivalent areas. Similarly, Travel & Tourism in the Caribbean today generates “15. 5 percent of total employment, and this is forecast to rise to 17. 1 percent by 2014” ( MuJattevit, 2011) . The industrys vital role as a generator of wealth and employment across all parts of the region is indisputable. It directly and indirectly employs 3 million people in the Caribbean (1 in every 8 Jobs).

According to the Caribbean Tourist Report, It also acts as a catalyst for growth in other areas such as agriculture, construction and manufacturing, which would decline if demand for Travel & Tourism were reduced. It is also an export industry. Visitor exports account for 16. 7% of total exports in the Caribbean or IJS$ 26. 2 billion. Investment in Caribbean Travel & Tourism will total of 11. 6% of all investment in the region. It continues to be the most Travel & Tourism intensive region of the world where the industrys total contribution amounts to 14% of GDP, 13% of employment, 12% of investment and 17% of exports.

Even though results demonstrate clearly that the Caribbean is the most tourism intensive region in the world, majority of this income as high as “80 cents in every dollar leaks out of the Caribbean” (Mujattevit, 2011). It aces many challenges as both governments and the private sector in many developed economies seek to reduce their debts, and as the prices of oil and other commodities rise and this will pose particular challenges for the Travel & Tourism economies of the Caribbean as source markets continue to struggle financially.

Not only that, but many of the Jobs that tourism creates are seasonal and very low-paid, while the money generated by internationally funded projects fails to reach locals. Many of the hotels source their food and cleaning products from abroad rather than purchasing them from local producers. Local farmers cannot compete internationally and have suffered from a decline in the banana trade. However, more hotels are sourcing their food from local farmers, and by doing so keeping the tourist income within the community and supporting farmer’s efforts to diversify their crops.

The travel and Tourism still has a great chance of maintaining or even increasing its success because the long term growth for the region is steady at 3. 3 percent per annum over the next ten years and globalization. Continued government support for the industry, in the form of investment, skills development and intelligent taxation ill help ensure that this growth forecast is achieved. Globalization has become a prevalent global framework; many viewing it as a process that is beneficial to a countrys level of development and growth.

Others believe that it increases inequality with and between nations, threatens employment and living standards, and hinders social progress. The course of globalization reflects “advances in technology, allowing international trade and financial flows to be completed quickly and easily’ (Baker, 2012). It is an extension of human economic activities, village markets, urban ndustries, or financial centers beyond the national borders, making them accessible to all.

Globalization is really a world-wide phenomenon that differs with regard to rich and powerful countries versus poorer underdeveloped countries like those of the Caribbean. It promotes growth, providing countries worldwide, especially developing ones, with many opportunities for them to capitalize on. These opportunities of globalization do not come without risks. Because of this the Caribbean countries has to prepare themselves to embrace the policies, strategies and benefit more from the opportunities of present day globalization. Globalization has brought both advantages and disadvantage to the Caribbean.

Some of the advantages includes, increase in tourism, higher income and new Jobs. The Caribbean travel industry has also been booming as a result of technological advancement. This increases the number of visitors vacationing in the countries of the region, helping one of their main sectors; “the heart of globalization:” tourism. This enables countries to reduce their dependence on single commodities such as cocoa, cotton, sugar and bananas stated by Barker. Globalization also promotes growth in developing countries through a number of channels.

For example, as a result of technological advances, “the region has been able to attract foreign students from the U. S. and other industrial countries” (Barker, 2012). The region exports highly skilled labor to industrial countries, and there are large Caribbean communities outside of the region whose remittances have helped raise the living standards of those who remain in the region. According to Baker, the experience of small open economies world-wide shows that globalization offers tremendous benefits in terms of new Jobs, technology transfer, and higher incomes.

It has also facilitated the ecrease in infant mortality, and an increase in literacy rates, which have risen to more than 70%. World poverty has declined – in the 5 years after 1993, the number of people living on less than $1 a day “fell by more than 100 million. Life expectancy in developing countries is now around 65 years, only about 10 years less” than in the industrial countries (Baker, 2012). Economic growth has also raised the demand for democracy and representation. A large part of the world’s population now lives under elected governments.

For Caribbean countries specifically, the impact of lobalization on trade has been reflected in increased liberalization and market- opening policies and increased open regionalism. Caribbean countries moved away from inward-looking policies to policies that established greater links with their neighbors. According to Baker, The sub region took steps to strengthen the Caribbean Community (CARICOM) and with the creation of the CARICOM Single Market and Economy (CSME) it took even bigger steps to increase the competitiveness of these countries in the global economy.

Although there are a quit a few of advantages, the disadvantages outweighs the advantages. Globalization is also a hreat to the Caribbean and it is therefore the ministers and heads of government within the Caribbean has been trying to prepare themselves to “mobilize stakeholders, civil servants, business men and women, other non-governmental organizations and citizens to help in minimizing the risk and capitalize on the benefits of globalization” (Baker, 2012).

Globalization has not witnessed any rapid growth in investment in most Caribbean countries, nor has it resulted in Caribbean states being able to expand their trade significantly by expanding exports to any of the regions controlled by the triad. The Caribbean markets have been more exposed o imports from the developed countries. Where some Jobs have been created in areas such as informatics and data processing, they have tended to be low-waged and to have attracted females and white collar workers.

Caribbean countries are quite small when compared to the other western countries and are measured largely by population size and their GDP level. Because of their small populations and GDPs, few firms which mean low domestic competition. In order for the Caribbean to improve, or to be able to compete on the international market,” it must be able to produce sufficiently and receive enough profits” (baker, 2012). Caribbean countries are not gaining as much they would like from exports as a result of the high production costs and fluctuating exchange rates.

They are depending on only a few export earnings, making them particularly vulnerable to changes in the international markets. This vulnerability has also been contributing to the diminishment of the economy of many Caribbean countries. The Caribbean was therefore forced to integrate to face the threats that they are bombarded with by globalization, and work together towards better economic harmony. This allowed the region to have “access o larger domestic markets; assistance from a stronger economy; reduction of the fear of extra-regional competition; and avoidance of hostility’ (Baker, 2012).

Since the Caribbean countries are becoming more globalized, tourism is booming, meaning more importation of goods. According Peerayuth Charoensukmongkol and Shaun Sexton, the Caribbean use to be one of the most fertile regions on the planet and that it was colonized primarily for agricultural reasons, but now the Caribbean countries are now designated as Net Food Importing Developing Countries??”meaning that they cannot grow their own food; this is highly problematic. About six to seven million stop-over tourists, over half are from the United States, visit the Caribbean annually and increase the demand for U.

S. products in Caribbean food service outlets. The food imports for the tourism sector were estimated at a value of “US$366 million, representing 20-25% of total agricultural imports” (Charoensukmongkol and Sexton, 2011). Across the Caribbean, food imports have become a budget-busting problem, prompting one of the world’s most fertile regions to reclaim its agricultural past because the cost of imports have roughly doubled in price over the past decade. The demand for imported food products is largely inelastic.

This is also due to insufficient amount of arable land, scant water resources in some islands, no economies of scale, and a limited food-processing sector, so the Caribbean countries must import the majority of their food needs. The Caribbean import theirs good Europe, Canada, South and Central America and the US. The US is the largest supplier of food products to the Caribbean. According to Charoensukmongkol and Sexton, “the US exported a record high US$874. 3 million worth of consumer-oriented products to the region, a 6% increase from the previous year.

Consumer-oriented products account for 72% of US agricultural exports to the Caribbean, with poultry, red meats, snack foods, dairy products, and processed fruit and vegetables rounding out the top five export categories”( Charoensukmongkol and Sexton, 2011). The reason why the Caribbean has a strong interest in U. S. suppliers and products is due to: close proximity, long-standing reputation of high quality products, and superior quality of service. The cost of importing goods is increasing rapidly.

In some countries like Jamaica, the total food and beverage imports increased by “two-and-a- alf times, to $503 million before doubling after that” (Charoensukmongkol and Sexton, 2011). Much of the initial growth coincided with agriculture surpluses around the world and changing tastes, as more Jamaicans favored meat and processed food. Many of the countrys farmers cut production because they found it hard to compete. new heights. Countries found that exporting countries were holding on to food for their own populations.

With concerns that climate change will make future bad years even worse, an intensified regional focus on food security followed and they gave out free seeds to farmers. Most of the farmers who received free seeds gave up on farming once they saw an increase in their water bills. Now countries are looking for new solutions. Even though t Caribbean is geographically unable to provide 100% food security, a few of the countries with comparatively larger land masses, are doing a great deal to reduce the region’s vulnerability.

As stated by Charoensukmongkol and Sexton, Guyana and Trinidad have announced the creation of a food-security facility with hopes of increasing agricultural and livestock production, reducing dependence on foreign food imports, and at the same time encouraging the regional oal to reduce food insecurity by 25% by the year 2015. Jamaica has recently announced in April that it would be launching a $1 50 million, 2,000 acre rice cultivation project. Caribbean officials have emphasized that food security, primarily availability and access, is a top priority.

Many countries are now responding, by branding foreign food like meats and high-calorie snacks a threat, and locally grown food responsible and smart. They are unveiling a national food security campaign with the slogan “grow what we eat, eat what we grow. ” Grocery stores now identify local produce with large stickers and prominent displays. Members of rival political parties have also been mostly “unified in support of expanding agriculture by experimental means; Jamaica is now one of several countries that have given out thousands of seed kits to encourage backyard farming” (Charoensukmongkol and Sexton, 2011).

Schools are heavily involved in the effort: over 400 in Jamaica now feature gardens maintained by students and teachers. In Antigua and Barbuda, students are now sent out regularly on planting missions, adding thousands of avocado, orange, breadfruit and mango trees to the islands, but in Jamaica, gardening and cooking are often part of every school day. These are all promising steps in the right direction. The Caribbean economy is that not that strong due to the fact that they are still a developing nation and they are very small in size, which makes it even harder to compete against other countries.

Since agriculture is no longer part of their economic growth, they have to strictly rely on tourism. Tourism is giving them hope of moving up in the economic system, but with the rapid increase importation of goods could bring them down. They will have to find a way to keep increasing exportation and tourism and decrease their importation of goods. If their conomy continues like this, there might not an economy because if tourism fails in the future, they have nothing to rely on. They need to think “backup plans” in case something goes wrong in the tourism industry.

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