Report No. Q2821LAC
S.
54":: GC COPING Public Disclosure Authorized Cck\HAC~~C-A ,hl _ \ ______X__ _ . WITH CHANGES INTH
5* -55~EXTERNAL
Public Disclosure Authorized E~NVIRONMEN.T
~~~ ~~~~~ ~MICROGRAPHICS Public Disclosure Authorized
Report No: 12821 LAO
- ~~Type:SEC
WorldBank
-Caribbean Division ~~~~~ ~~~~Country DepartmentIll
-Latin Americaand the Caribbean Public Disclosure Authorized Coping With Changes In The ExternalEnvironment
May 1994
World Bank Caribbean Division CountryDepartment III LatfnAmerica and the Caribbean Glossary Of Abbreviations
ACP Afncar,Carlbbear. and HFCS HighFructose Com Padfic Syrup BMP BladcMaiket Prenium HFII HarmoruzedFiscal CARIBCAN Canada'sPreferential Incentivesto Industry TradeScheme for IBRD IntermationalBank for the Commorwvealth ReconstnrtionarKi Caribbean Development CARICOM CaribbeanCommurnty LDCs LessDeveloped Counttie* Secretariat MDCs MoreDeveloped Countiies CBI CadbbeanBasin Initative MFA Multi-FiberAgreement CET CommonExtemal Tariff MFN MostFavored Nation CDEs ConditionalDuty NAFrA NorthAmerican Free BEemptions TradeAgreement CGCED CaribbeanGroup for NRP NominalRate of Protection Cooperationin NTBs Non-TariffBarriers EconomicDevelopment OECD Organizationfor CaF Cost Insurance,and Freight EconorrmcCooperation DFI DirectForeign Investrent and Development EAI Enterprisefor the OECS Organizationof Eastem AmericasInitiative CaribbeanStates EC EuropeanCommunity OFA Oils andFats Agreement ECCB EasternCaribbean Central Bank PSIP PublicSector Investment ECCM EasternCaribbean Program Common Market REER RealEffective Exchange Rate ECDolar EasternCaribbean Dollar RIA RegionalIntegration ECO ExtendedCofinancing Operation Arrangements EFTA EuropeanFree TradeArea SMART Softwarefor MarketAnalysis EPZ ExportProcessing Zone and Restrctionson Trade ERP EffectiveRate of SOE State-OwnedEnterprises Protection UK United Kingdom EU EuropeanUnion UNCTAD United NationsConference FOB Freighton Board on Trade and Development GATr UN General Agreement US. United States of America on Trade and Tariffs USAID United StatesAgeny GDP Gross Domestc Product for International GNP Gross NationalProduct Development GSP General Systemof VA ValueAdded Preferences VAT ValueAdded Tax
uli Adcaowegements
Thisreport wa oreparedby a team led by JoseB. Sokoland conpdlsingFrank Earwaker, F. DesmondMcCarthy, 'lohn D. Nash and AlexanderJ. Yeats. Uaqat AJ, Cados Braga,Badnrl Haque,and AlasdairSindair made major oontibutions.Amnod Mdntyre from the Organization of EastemCanibbean States Secietanat provided valuable comments on the diapteron trade poicy. SirAister Mdntyre,ViceChanoellor of the Uriversityof the West Indies,and Vinod Thomas,Chief Economist of the EastAsia ReWorn The Wodd Bank made importantsuggestons. MichaelLewin, Dan Morrow,Raj Nallar,Axel Peuker, Carmen Scoseria,and Steve Webb contuibutedto the preparationof AnnexL Theteam was assistedby JenniferKeUier, Frands Ng, GingerReid, Geeta Sethi,and GiovanriZanalda. The supportstaff induded Hazel Vargas, DeborahTent, MelissaWiUiarrs, and MibgrosDivino. The layoutof the finishedvdume was done by WendelineDe Zam.
v Preface
Evetytwo yearsthe Wodd Bankprepares a reportfor the meetingof the CaribbeanGroup for Cooperationin EconomicDevelopment (CGCED). The reports objective is to focusattention on the perfomance,problemS needs, prospects and poliaes required by thefifteen Caribbean countries which arememb of boththe COCED and the World Banlc Antigua and Barbuda, The Bahamas, Barbados, Belize,Dornirica, Dominican Republc, Grenada, Guyana, Haiti, Jamaica, St Klttsand Nevis, St Luaa, SLVincent and the Grenadines, Sunindme, and Trnrdad and Tobago.
The1992 report focused on efforts needed to acceleratethe implementation of the reform age- In.iite Canbbeancountries during the rest of the1990s. It alsoexamined the flow of resourcesto thecountres since1978 and related it to theprocess of adjustmentand growth during this period It evaluatedthe stockof humanresources in the countries, indicated the inddence of poverty,assessed the positive and negativefactors affecting human resource development in the Region,discussed policy options, and highlightedthe human resource development issues for the 1990s. Finally, it descibed the ecosystems in the countriesand Identifiedthe linkagesbetween economic activity and environmentalprotection, identifiedcauses of environmentaldegradation, assessed the impactof suchdeterioration on the countries'development, discussed policy options, and pointed to theenvironmental issues for the 1990s. The1992 report Identified three factors - worldand regional trade liberahzatioi, integration of world capitalmovements, and slowing wodd growth - whichare not only increasing the competitive pressures theCaribbean economies face but which can also become serious deterrents to growth It alsobrought out the difficultoudook for the 1990s- the possibilitiesof adverseextemal shocks, the scardtyof traditionalsources of extenal finandng, and the erosion of the countsies' preferential trade arrangements. Tis reportdiscusses in detail the impact of globaltrading trends and what the Caribbean countiies must do to preparethemselves for the transition to thenew environment It is oneof threereports prepared for the June1994 CGCED meetings, the othertwo beingCaribbean Countries Polices for PrivateSector Developmert(Report No. 126174.AC) and EconomkPoliaes for Tansitionin theOrganization of Eastern CaribeanStates (Report No. 12758.LAC).Together, they provide a visionfor the Caribbeanfor the futre CarbbeanCountris: Policiesfor PrivateSector Devlopmert is an in.depthecamination of the legislative,fiscal and regulatory framework in placein theRegion, and of the reforms that are reqN red to positionthe Regionto take advantageof privatesector development,especially in toudsm and in a multitudeof viable servicesector activities. EconornicPolicies for Trnion in theOrganization of Eastemn CaribbeanStates discusses the transitionfor the OECScountries from a worldof protectedmalicet acoess for keyproducts and largeconcessionary aid flowsfrom bilateral donors to a worldwhich is goingto be muchmore conpetitiveand marketoriented. Chapter1 providesan overviewof overalldevelopments affecting the Canbbeancountries over the past 17 years as wel as progressachieved during this period Thsdcapter also providesa perspectiveof global economicchanges which create pressuresupon the Caribbeancountries to become more cornpetiiveas theireconomies are undergoinga state of transitionm Chapter2 discussesthe imporance of quantityand qualityof factorsof productionin the Caribbean countries'growth experience and of thosefactors that couldcontri,bute to futuregrowth. It alsoanalyzes how rapidchanges in the extemalernironment have impactedon the Caribbeaneconomies and draws lessonson howto best addressthem in the future. Chapter3 examinesthe variousfactors that determinethe externalcapital requirements of the Caribbean countries.It reviewsrecent trends in finandngthose capital requirements and assessesfutute financing prospectsin the lightof majordcanges that are takingplace in the intemationalfinandal markets and in
Vi the provsionof offidal developmentassistance. A strategyIs proposedfor the Carbbeancounties to managetheir extemalcapital requrementsand to structurea finandngplan that is to their best advantage
Chapter4 evaluatesrecent and planneddianges regarding trade reform in thnCanibben~untries, evaluatestheir Impad, ecamdnes rernaining policy constraints to expandingtrade within andoutide the Region,and lays out anagenda for futurerefonms
Chapter5 assessesdte magnitudesand potentialeffects of NAFTAand the UruguayRound on the CafbbeancountijeL TrendsIn Caribbeanexports are examinedto determinehow NAFrA and the UruguayRound coxdd affect the leveland compositionof Caribbeanmerchandise trade. The tyes of productsthat playeda centralrole in danng the recentstructure of Caribbeanmerchandise expors are analyzedand the evolutionof the Region'scomparative advantage Is considered Projecffonsare thenmade of the possibleCauibbean expon gains and losses due to NAFrAand the Unrgua Round.
Chapter6 attemptsto assessprospects for bananasand sugar in thelight of thechanging environment In woddtrade in whichexisting preferential market arrangements will eitherdiminish their bertefits or may be phased out
The Country Profiles induded in Annex I highlightcounjyspeafic policy issues, project pfiofties, credtworthinessand the BankGroup's lendingprogram
vi4i Contents
GtOSSARYOF ABBREVIATIONS iii
PREFACE vii
SUMMARYAND CONCLUSIONS S
1. INTlRODUCIION 1
2. 7HECARIBBEAN EXPERIENCE WIIH GROWnI AND EX1ERNALSHOCKS 7 Sourcesof Growth 7 ExtemalShodcs 16
3. CAPITALREQUIREMENIS AND SOURCESOF FINANCE 29 Determiningthe Needfor ExtemalFmiance 29 TheManagement of ExtemalFinandng Requirements 38
4. 1RADEPOUCY IN THECARIBBEAN COUNIRIES 55 sCurrentTrade Polides and Recent Developmentsin the CarbbeanCountiies 55 impactof Recentand Planned Reforms 73
5. PROSPECISFOR CARIBBEAN EXPORTS IN MAJOROECD MARKEIS 85 MajorTrends in CaribbeanExports 85 DynamnicProducts in CaribbeanExports 87 The UruguayRound: Implcatons for the Canibbean 89 NontariffMeasures Fadng Caribbean Exports 92 The Influenceof NAFTAon CaribbeanExports 94
6. EXPORTPROSPECIS FOR CARIBBEAN COUN' RIES PRODUaNG BANANAS AND SUGAR 117 Bananas 117 Sugar 128
ANNEX1 COUNTRYPROFILES 135
ANNEX2 EXTERNALFINANCING REQUIREMENTS FOR THE PUBLIC SECTOR INVESTMENT PROGRAM 167
ANNEX3 INVESTMENTS,SAVINGS AND CROSSECONOMY ESTIMATES OF SOURCESOF GROWTH 173
ANNEX4 EXTERNALSHOCKS AND PERFORMANCEMEASURES METHODOLOGY 183
STATISTICALAPPENDIX 203
MAP
.x Summaryand Conclusions
MaIQrdevelopmnt hv aeplcinte globaleconomic environment: -sinete aiben ou o CoopratininEconomicDevelopment (CGCED) was:created in December 1977. A eo il1oi th ieb .crisstomjr recessionsinthe Organization forEconomic Cooperation and Dvlomnt(ECYOWF; n .'Wkewings4ATi'n exchangerates4ntere#traesandinaioraehvecureWol readlLca Iwsae 'evpaned sArp) n evlpn outishv resonde twte newsetof pesue byi"dftch nmn cws (,~ommpo*sbstibtiO"toexportoriented deeomntstgies., -The CaIbbn onte510eSwh5 longtermsustainabe develop eve i
Thisreport ou inh rn situation,#inthe Caiba,exqminesdosl"' ubro e ise~adotie
sucssuadpaion tothene eooMc envrone'nt "g
-A"".n*,a`ivdhihrtsofgohI threv18$oingtoare nIntusn8stvcs arc& n n,anukcturn~ferentaw marke for -anana,wa amnsadeetoi opnnspae A.. OR oWsome".. aiutura andmanhufactuigatvte.Fn.dlsiPOt
(Et4tradeAs barriers h fallen,--- so topietsrcin . o nentoa aItlI. hscln wih coptr ehoog aefaltid aia flow, bu tMemoiair a enpc4ldb hpdiA opportunitiesthtedti~ ~oacptla*t W hfdfco .j pce pnteP ha,-ben h rees.o oth eryt9Oi the PtCeJ-nnsI4bha nue ogr hnuut j has.benFiwdylw~whi h eoeysae Thearibeanecoomis ar Ina sate f tandto. Goal cnmccags ntaeadndla nre i pu.ntrigpesur oncutist eoemr opttei xptmr.t.l?frnAlmre c erddbt0Alo$to peetto fNf4b h esdWoce nbhn*adb h theUrgaIf on.A esm ie,ofca ao eakl e0getcd hl h~ns PMniicraIn09-soav.-~pot.P' W .o hsrasn h aiba cun~ edt ose u* n *t secu,rdeve!o.-in it,i~e htaecipeeiw.ooeaoh ulcsco up. b dhsin infrastructure~~~~~~~~an.haWpnoin reoredveomn r rm,adpivt etrrepnet maeOfOl74tandrguaon3rmeok.rdiinlgrclrendmn ctig#tvtesaaI impotan,bt.~J~$ met psto hmevst .fnwopruiisa~ ...... 40pbi ...... rdpiaescosnedt eeaie n nNeehv beJ re.eln -bohrvat)n.' lcsco ntaieswl ueirdi h ein st js h potnt thatrea tble I thes II... exan. jtJj.iierieisheftgowgcmoen. ol.
xi COPINGWITH CHANGES IN THEEXtERNAL ENVIRONMENT
TheCarbbean Exerience with Growth Economicgrowth of about 3.5-4 percent per annumis possiblefor the CaribbeanRegion during The Car.bbeancountries as a group,on average, the rest of the decade in an increasingly recorded2.8 percentoutput growth (measured by competitiveworld where the extemalenvironment realGDP at factorcost) during I 9°82-92, owing to is likely to changerapidly. This requiressound extemalshocks in the earlypart of the decadeand macroecononicmanagement, adequate regulatory to inadequatedomestic policy responsesIn the measures,measures to protect the environment, largercountries. However,those countries that labormarket flexibility, and the supporting physical adjustedbetter to the shocks,such as the countries and humaninfrastructure, induding dosing the in the Organizationof EasternCaribbean States existinggap on technicaland vocational education, (OECS)and 6elize,experienced average growth in orderto fadlitatea competitiveprivate sector to ratesof about 6 percentper annum,exceeding developand flourish. To achieve this growthrate, thcse recordedin most developingcountries empiricalanalyses suggest that the Caribbean during the same period. Other Caribbean countrieswill alsoneed to increasepublic, private, countties experienced moderate growth andsocial investment in physicalinfrastructure and performancesof about 2 percentper annumor increasethe productivity of this investment,reduce negativerates of real GDP growthexceeding I government consumption, and increasingly percentper annum. In thehigh growth economies, emphasizehuman capital development, induding humancapital development has been a critically attractingskilled and educatedexpatriates in all importantfactor contributing to growth. Private countnes. investmentrates have alsr been positively correlatedwith growth. On the otherhand, the TheCaribbean Experience With Eternal Shocks growthof govemmentconsumption has had a negativeimpact on outputgrowth. Goodpublic Historically,the Caribbeancountries have been sectorsavings performance, a well structuredand relativelyopen economiesand vulnerableto managedmonetary system, competitive exchange shocksarising from abruptchanges in the external rates,and the capturingof nicheexport markets environment.The countries are characterizedby alsocontributed to the rapidgrowth in the OECS sharp differencesin the structure of their countries. economies, with the smaller economies concentratingin the productionof bananasand Theservices sector emerged as a dynamicgrowth sugarfor export as weUlas in tourism. Both sectorin mostcountries. Increases in this sector bananasand sugarand, more recentiy,a few reflectedthe growth in exports of nonfactor manufactures,have enjoved preferential access to services.For the Regionas a whole,exports of a numberof importmarkets. However, in recent nonfactorservices, which mostlyoriginated from yearsthere has been a major changein global tourism receipts,increased rapidly during the markets as these have become increasingly 1980s, with the Dominican Republic,OECS liberalizedand competitive,while merchandise countries, Belize and Jamaica performing trade,services and financialflows havebecome particularlywetL moreIntegrated and grownsteadily. At the same time, the outlookfor the rest of the 1990shas In the latter half of the 1980s,tourism growth becomemore difficult for the Caribbeancountries accelerated;tourist arrivals in the widerCaribbean, in someresp'tcts: traditionalsources of external indusiveof all islandswhich are not membersOf finandngare: -ly to continueto be reducedand the CGCED,grew twice as fast in the last few the Canbbean countries! preferential trade years. Duringthe 1980s,tourist anivalsIn all arrangementswill be erodedThese developments Caribbeanislands Increased by over 5 percent requirethat Caribbeangovemments pay greater annualyand tourism receipts In U.S.dogar terms attentionto extemalshocks and to the domestic increasedby over 9 percent. Whle the growth responsenecessary to adcress them. patternis similarto world tourismgrowth, it has beenless than the growthperformances of other The major extemalshocks that the Caribbean Island Regions such as the Indian Ocean, countriesexperienced over the past 25 yearsrelate Mediterranean,and Pacific Islands. primarilyto the adversemovements In their terms xii SUMM :-- ANDCONCLUSIONS of tradedue to thetwo oil shocksof the 1970sand Caribbeancountries still needto consolidatetheir one in the late 1980s. On average,each shock economicpolides and develop- over the next generatedan adversemovement in the balanceof three to five years- the physicalinfrastructure, paymentsequivalent to severalpoints of GDP. particularlyin telecommunicationsand airports, Although some of the Caribbean countries and humanresources necessary to complement adjustedrapidly to theseextemal developments, privateinvestment in order to maintainpositive the policyresponse in a few of the countrieswas growthrates and achieve future improvements in to rely excessivelyon external financing. growthand welfarewhile competingwith other Unfortunately,this had two majornegative effects. developingcountries for the scarce official Fit r it delayedthe Introductionof needed resourcesavailable. Key to accessingthese funds structuralchanges; and second, it setin motionan will be to achieve and maintain viable externaldebt spiral that recentlyhas set the stage macroeconomicframeworks, to Improve the for a precariousdebt situationin a few of these incentive framework for private sector countries. The only oil exporteramong the developmentto rapidlyliberalize their economies, Craibbeancountries, Trinidad and Tobago, enjoyed and to Implementpolides that alleviatepoverty favorablemovements in its balanceof payments and preservethe environment.Private sources of due to the oil pricerises duria-g the mid 1970sto financepresent an entirelydifferent picture. The early1980s. However,the failureto providean internationalfinancial marketshave expanded appropriateincentive framework for Its non-oil enormouslyin the past decadeand they offer a sectors reducedthe benefitsof the oil price broadrange of financialinstruments that can be windfall tailored to the particularneeds of individual borrowers. There is evidencethat Caribbean Thelesson to be leamedfrom these experiences is countriesare alreadybenefiting from that trend that the impact of changesin the external with a strongincrease in DFIto the Region. environmenthas to be rapidly addressedby Caribbean govemments through flexible The intemational finandai markets could macroeconomicpolides. Accessto extemal accommodatea significant portion of the extemal financingshould not substitutefor necessarypolicy finandngrequirements oi all Caribbeancountries changes. For this reason,It Is importantthat in the foreseeablefuture providedappropriate Caribbeangovemrnments become fully aware of polidesare In place to fimnlyestablish country policyoptions for moderatingthe impactof both creditworthiness. favorableand unfavorable shocks. So that the Caribbeancountries may manageto CapialRequirements and Sources of Finance their best advantagethe changesthat are taking place with respect to extemal finance, the Therehave been major changes in the sourcesof followingthree-fold strategy should be pursued: externalfinance available to Caribbeancountries overthe pastseveral years. Net capitalflows from a) to increasepublic savings and adoptpolides bilateraland multilateralsources have diminished thatfoster higher levels of privatesavings; considerablyfrom an annual average of US$70per capitaduring the 1980.82three-year period to an b) to placegreater emphasis on mobilizingnon- averageof aboutUS$31 per capita for the 1990.92 debt capital Inflows, i.e, private direct periom It Is likely that the downwardtrend in investmentand therebyavoid adding furher bilateraland multilateraldevelopment finance to to an extemaldebt thatIs alreadyexcessively Caribbeancountries will continuebecause many burdensomein the case of a number of new demandsare being madeon bilateraland Caribbeancountries; and multilateralinstitutions and there is a perceptionin the donorcomnunity that Caribbean countries as c) to placegreater emphasis on raisingcapital in a wholehave now reacheda levelof development the intemationalfinandal marketsonce the where their needs are relativelyless urgent economieshave reached a level of maturity comparedto thoseof African,and Eastemand andof improvedc;editworthiness, and to rely CentralEuropean countfies. Nevertheless,the
xiii COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
less upon traditional channelsof official fundamentalprerequisites. Other factors indude finance. well-structuredfinandal institutions, strengthened localcapital markets, good regulatoryframeworks, Theabove strategy is comparableto the approach favorableincentive frameworks, and a structureof thathas been adopted with greatsuccess in other Interestrates that is transparent,freely determined, partsof the developingworld - particularlyIn a andpositive in realterms. Amongthe Caribbean numberof high performingEast Asian countries. countries,the OECScountfies have had the most Someof thosecountries (such as Singaporeand successIn maintainingreal positiveinterest rates Hong Kong) are not dissimilarto Caribbean because LeSr shared monetary system has countriesin terms of their size and re-.ource effectivelykept inflation under control. The endowment.As early as the 1950sand 1960s they experienceof other Caribbeancountries with cameto termswith the limitedpotential of their inflationhas been more volatile,with negative domesticresource base and activelypursued effectsupon private savings and upon capital flight. polides that attract foreign investment,stress privatesector development, and encourage human Thevery samefactors that haveenhanced public resource development. As a result, they and private savings have also enhanced experiencedconsistently strong growth that, within international perceptions of country a singlegeneration, raised them out of povertyto a creditworthinessand of the potential for levelof per capitaincome not farshort of Westem investmentsin thesecountries in recentyears. DFI Europeanstandards. has increasedsignificantly in the Caribbean countries.A sizableamount of thoseinvestme ts Theabove strategy is alsoconsistent with recent are in part linkedto offshoreassembly provisions nitiativestaken by many Caribbeancountries. of the U.S. Tariff Code 9802, for which the Whereas, in the past, many Caribbean DominicanRepublic, Jamaica and Haiti are the governmentssought to activelymanage economic mainexporters. The U.S. tax preferential treatment growth,there is now a greaterappreciabion of the of investmentsin the Caribbeancountries under privatesector as the principaldriving force. In an Section936 of the U.S.Tax Code also Influ.nces effortto increasepublic savings, the sheersize of DFI decisionswith respect to the Caribbean the public sector has been a major focus of countries.A stepped-upeffort to promoteDFI and attentionand state owned enterprises have been access936 funds is essential,given the likely restructuredand soldin a numberof Caribbean reductionin net official flows. Moreover,DFI countries- notablyGuyana, Jamaica, and Trinidad would provide a larger payoff in an open andTobago. At the sametime, efforts have been env;ronmentboth in volumeand quantity. Greater madeto improvethe financialperformnance of a partidpationof bilateraland multlateral institutions reducedpublic sector that is moresharply focused dealingwith DFI andwith privatesector lending on the developmentof key humanand physical operationsis needed. Also, some Caribbean infrastructure.To that end,measures have been countrieshave increased their borrowing from the introducedin many countriesto control and intemationalfinancial markets although they are reducegovemment expenditures, to improvethe not yet ab:eto get the bestterms. Prospectsfor qualityof publicsector investment programs, and improvingthe terms of borrowing are good, to enhancerevenues by overhaulingand improving however, provided consistently appropriate the tax system.As a result,public savings have polidesare in place. increasedmarkedly in mostCaribbean countries, althoughthey still fall shortof the levelsfound in TradePolicy in the CaribbeanCountries thehigh performing economies of EastAsia. Most Caribbeancountries have madesignificant Increasedpublic savings need to be complemented progressover the pastdecade in reformingtrade by enhancedprivate savings to lessenthe relatively policiesto increaselinks with the world economy. highpast dependenceof Caribbeancountries on By a numberof objectivemeasures, the strongest externaloffidal finance. Experiencein other reformershave reduced their trade regimesbias countriesshows that politicalstability, together towardinefficient production of importsubstitutes with predictabilityof economic polides, are x1V SUMMARYAND CONCLUSIONS and againstexports. Yet, much of the agenda future.First, there should be a furnierreduction of remainsunfir.ished. tariffson agriculturalproducts, which are stiil very high. Second,CARtCOM should reconsider the Many Caribbean Community (CARICOM) decisionthat recentlyset the minimumtariff rate countries,the DominicanRepublic, and Haiti have (appliedto nonKompetinginputs) at 0 percent reducedthe numbo of productswhose Imports Insteadof the previous5 percent. This kdises are restrictedby non.tariffbarriers (NTBs). But, effectiveprotection rates and reducesrevenues, with the soleexception of Jamaica,all still control makingit more difficultto reduceother irnport trade in some goods, espedally agricultural charges.In the periodafter the phaseinof the products,by licensingor througha state-owned newCET, CARICOM should begin moving toward Importmonopoly. The Oils and Fats Agreement, a a tariff structuremore consistentwith more systemof managedtrade enforced with NTBsin competitiveeconomies, ie, a uniformtariff of 5 the CARICOMcountries, ramains in effect,taxing percent.Recent developments under NAFrA have the *deficitcountriese and burdeningtourism and inaeasedthe urgencyof this step. Haiti andthe sonieindpient export sectors. High priority should Dominican Republic have also made some be akcordedto completingthe removalof all advancesin tariff reform,but still needsignificant NTBs. further reductionand unificationof their tariff structures. Attentionshould also be focussedon eliminating the plethoraof stampduties, import surcharges, To promotenon-traditional exports, the CARICOM and discriminatoryrates of the consumptiontax countrieshave relied mainly on fiscalincentives thatare now levied on importsIn manycountries. grantedon a disaetionarybasis, though some have Theseare In manycases a moreserious source of trieeexport processing zones, with mixedsuccess. antitradebias than are formal import tariffs. Some The Dominican Republic has used Export stepsto amelioratethis problemcould be taken ProcessingZones (EPZs) with greatersuccess. Due rightaway, such as unifyingconsumption tax rates to theirdiscretionary nature, the distorionscreated on importsand domestic production In a revenue- by theirtax holidays,and their limitedapplication neutralway, and redudng some rates in the other (mainly to producers who export all their taxesin Lonjunctionwith reductionsIn exemptions production),experience has shown that fiscal to offsetthe losses.Exemptions should be phased incentivesand EPZs are inferior to a well- out in any case,though care should be takento functioningsystem of duty drawbacksand ex ante ensurethat domesticIndustries are not hit too exemptionse'ailable to all exporterson a non- hard.The goal should be a regimewith no import discretionarybasis. Development of sucha system charges- except for CARICOM'sCommon shouldbe animportant policy goal, after rfwich the ExternalTariff (CET) and for theconsumption tax at othersystems can be phasedout. thesame rate as domestic producers pay - andno exemptionsfor producersother than extravregional Manytraditional exports have been taxed,either exporters.But rate and exemption reductions will explidtly (direct taxes) or implicitly through needto be carefullycoordinated with eachother quantitativecontrols, governmental monopoly of andwith otherexpenditure-redudng and revenue- marketingchannels, and requirements to surrender raisingmeasures to avoid unduly exacerbating foreign exchange eamings at belowmnarkcet fiscaldefidts. exchangerates. UniSicationof exchangerates, ,.rivatizationof marketingboards, and elimination Oncethe recentagreements are fully implemented of taxeshave gone a long way In redudngthe in 1997-98,changes to the CARICOMCET promise adverseeffects on the traditionalexport sectors in to bringthe tariffstructures of membereconomies some countries (amaica, Belize, Guyana). moreor lessinto line with thoseof other strong Nonetheless,controls and taxes are still imposed In trade reformersamong developingcountries. somecases. These need to be carefullyconsidered However,individual countries would benefitby to ensurethat they havea reasonablepurpose, unilaterallyaccelerating the implementationof the such as capturing rents from preferential newCEl. On a regionallevel, two furtherreforms arrangementsor internalizingenvironmental costs, to the CETshould be consideredin the immediate rather than protecting ineffident domestic
xv COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT producers Evenwhen there are dear reasonsfor of exports and of output, and further controlDngproduction of primary productson improvementsin welfare. eavironmentalgrounds, there are usuallybetter altemativesthan export controls. The type of Prospectsfor CaribbeanExports in Major OECD Instrumentused and the level of any tax levied Markets shouldbe reviewedto ensurethat they are not overlyrepressive. Over the last two decades,major changes occurredin the level and structureof Catibbean The benefitsof greatercapital and labormobility exportsto the OECDcountries. From their 1970 within the CARICOMRegion have been widely level of US$1.4billion. Caribbeanmerchandise recognized,though concrete actiors to facilitate exportsrose more than flve-fold to a currentvalue thishave been slow to materialize.In additionto of approximatelyUS$8 billion Manufactures the stepscurrently being planned by the Eastem dearlyfueled this expansion as the shareof these CaribbeanCentral Bank (ECCB),a number of goodsin total Caribbeancountries' exports rose thingscould be doneto increasecapital mobility. from under20 percentto about60 percent,while Theseindude eliminatingrestrictions on use of the correspondingshares for both foodsand fuels foreign capital markets by nationals and. fell by morethan 10 percentagepoints. Within the conversely,on the holdingof certaindomestic manufacturesgroup, dothing exports inaeased at investments(induding land and. in somecountries, a remarkablepace duringthe 1980s;they rose equity) by foreigners Foreign exchange four-foldover 1985-1992 to aboutUS$1.8 billion. regulationswhich make it costlyto hedgecurrency However,the most recent trade performance risksalso shouldbe reviewedand modifiedas suggeststhe "dynamicsectors' in the Caribbean required. In short the goal shouldbe a foreign countriesmerchandise exports now extendwell exchangeregime as dose as possibleto full beyonddothing to other typesof laborintensive convertibilityon the currentand capital accounts. manufacturessuch as office supplies,electric power machinery,leather manufactures,office Exchangerate reformns have played a majorrole in machinery,footwear and travel goods. Although structuraladjustment in the Caribbeancountries, the DominicanRepublic is nowthe origin of almost with five countfies (the DominicanRepublic, oneWhalfof the manufacturesoriginating in the Guyana,Haiti, Jamaica, and Trinidad and Tobago) Region,exports from Antiguaand Barbuda,The movingto a floatingrate system in the 1980sand Bahamas,Grenada, St. Lucia,and St.Vincent and 1990s.In mostof the othercountries, the levelof the Grenadinesalso increased at an annualrate of the realexchange rate is currentlyout of line,more 10 percentor moresince 1980. Moreover,trade so in somethan in others. Thesecountries wiU in all servicesIs raoidlyexpanding. needto devaluetheir currenciesin real termsto resolvemacroeconomic disequilibria and regain Two recent developments,NAFTA and the competitivenessin world markets. While condusionof the UruguayRound. will havean experienceIn mranycountries demonstrates the importantimpact on the Caribbeancountries! difficultyof achievinga realdevaluation without an exportprospects. This report condudes that the adjustmentof the nominalrate, the questionof overall impact of the UruguayRound on the whetherthis is the best way to proceedwill Regionas a whole shouldbe positivealthough ultimatelybe decided by the drcumstancesof each someindividual countries, like Dominica,St. Luda, country. Nevertheless,the rapidly changing St. Vincentand the Grenadines,Jamaica, the external environment and increased global DominicanRepubli, and Haiti, are likely to competiton wiil require that the Caribbean experiencelarge net export lossesdue to the countriesrapidly achieve and maintain competitive CaribbeanBasin Initiative (C8I) tariff preference exchangerates, restrainwage increasesand erosion, Export lossesare projected for all increase productivity levels through human Caribbeanexports that receive CBI or Lome resourcedevelopment. Ttis will allowthem to take Conventionpreferences, but thesenegative effects advantageof the OECDcountries' movement out couldbe morethan offset by potentialgains from of a recessionand. thus, sustain rapid growth rates tariffreductions on footwear,textiles and dothing
xvi SUMMARY AND CONCLUSIONS where Caribbean countries currently face North Caribbeancountries are fearful that NAFTAwill American tariffs that often exceed 20 percent. causea majorexport displacement.Yet, over one- These will be reduced In accordancewith the third of all Caribbeanexports (in termsof value)to UruguayRound. Althoughpredse estimatesof the the U.S.encounter no significantcompetition from effects of nontariff barrier; are not available, either Canadaand Mexico. About onehalf of the evidence suggeststhat the effident Caribbean remaininggoods for which suchcompetition exists producers could experience major additional encounterno U.S.trade restrictions(i.e., tariffs or export gains from a UruguayRound liberalization nontartffbarriers). With no U.S.barriers in place, of NTBs on sugar, textiles and clothing. The NAFTA will not be able to alter the overall magnitudeof NAFTAinducedDFI diversionfor CBI competitivebalance between the Caribbeanand countriesremains an open question. Stifl, unless Mexico or Canada on these items. However, majorchanges in U.S.fiscal and productionsharing textilesand clothing,although benefiting from the import programsoccur, some Caribbeancountries Uruguay Round liberalization, will be highly will continueto be an attractivelocation for export vulnerableto a NAFTAinducedtrade displacement platforms. in the U.S., significantlyaffecting the Dominican Republic,Dominica, Haiti, Jamaica,St. Lucia,and The UruguayRound provides Caribbean countries St. Vincent and the Grenadines. Moreover, with a unique opportunity to improve their trade NAFTAs impact on new DFI may become and growth prospects by complying with the significant as new investments, and thus the liberalizationmeasures for services.Freer trade in generation of new export activities,are likely to serviceswill produce two types of income and move to Mexico. In Canada, the potential welfaregains for the Caribbeancountries. The first displacement should be smaller due to the arises from increased effidency in domestic relatively low share of textiles and dothing in producers'operations as national barriersagainst Caribbeanexports. While the overall impact for lower cost foreign serviceproviders are reduced, the CaribbeanRegion as a whole appearsto be while the secondset of gains should come from small, for selectedcountries the impact could be increasedexport opportunitiesas other countries quite large and devastating. The messagethat barriersagainst service trade are lowered.As far as dearly follows from this report is that NAFTAwill the latter are concerned,there are reasonsfor reduce the competitive advantages Caribbean believing that Caribbean countries may have a countriesnow havein North Americaas a result of major comparative advantage as providers of the CBI or the CARIBCAN(Canada's Preferential health care and educationalservices, of financdal, Trade Schemefor the CommonwealthCaribbean) retirementand informationservices, and of other preferences. Thus, there is a need for the services. However,the Caribbeancountries have Caribbeancountries to be includedin NAFTA.The not movedas quicklyas they could in the services Caribbeancountries will needto adopt appropriate area, particularly In developing niches in new polides to addressthe emergingchallenges. emergingactivities. Caribbeancountries have a number of important ConcerningNAFTA, accessing membership in this domesticpolicy options at their disposalto offset preferentialtrade arrangementshould become a competitive lossesthat result from NAFTA. For key and urgentpriority in the Caribbeancountries' example, more rational policies relating to international policy agenda. SuccessiveU.S. transportoperations - particularlyport operations- administrationshave emphasized freer world trade. havea major potentialfor reducingshipping costs Caribbeancountries should further link their trade and therebyimproving the competitiveposition of regime with the U.S. and other current and Caribbeanexpons. More.rational exchangerate potentialNAFTA members in order to enablethem and mor.etary policies, adopting measures to to successfullyparticipate in an expandedWestern facilitate foreign investment and operations Hemisphere Free Trade Area. Moreover, the (particularlyin off-shoreassembly operations), and Caribbeancountries should also look beyond the a more rapid liberalizationof the Caribbean current benefits of NAFTAand look at other countries' own trade barriers, together with the possibilities in services, including access for maintenanceof competitiveexchange rates, a.e temporarylabor movements.
xvii COPINGWITH CHANGESIN THEEXTERNAL ENVIRONMENT among the policies that should be pursued. In Windward Islands, which are very highcost addition, further developmentof servicesactivities producers,is likely - be substantiallyeroded over through the developmentof adequateregulatory the comingyears. and incentive frameworks could help offset competitivelosses that resultfrom NAFTA. In addition,the new regimeis not transparent.The lack of transparencyarises because: (a) key Another issuethat will have to be dealt withswhen dedsions are to be made by a Banana joining NAFTArefers to the equal treatment the ManagementCommittee, which has, among other Caribbeancountries will have to provide the EU powers,the ability to issue licensesto import and under the Lome Convention. This would imply a to alter the level of the current 2 million tonnes full tradeliberalization for the Caribbeancountries, quota; (b) the new regime has no dearly defined which makesit the more urgent to lower their transition procedures;and (c) income support trade barriers and broaden their tax base and schemesto provide assistanceto traditionalACP improvetax administrationto offset the shortfallsin producersare not yet defined. A distinctpossibility revenuesfrom tradetaxes that would take placein of the new regime is that the quota rents will suchcircumstances. increasinglybe captured by the marketers as opposedto the producers,owing to the enhanced Export Prospects for Caribbean Countries role of the marketersin the licensingsystem. A ProdudngBananas and Sugar mechanismshould be developed to ensure that, during the transition,the rentsare insteadcaptured Bananas in the producing countries. One way to do this would be to eliminate the import licenses On July 1, 1993,the EU introduceda new regime administeredby the EU and allow the Caribbean for bananamarketing which will have major long countriesthat hold export quotasto sell or auction term repercussionsfor the bananaindustry in the the import rightsbased on their exportallocation. Caribbean countries. Prior to July 1, 1993, Caribbeanp-oducers, who benefit from the EU's Successfuladaptation to the uncertaintiescreated preferential banana ma.rket for the African, by the new bananaregime, and to the erosionof Caribbeanand Padfic (ACP)countries, were able preferentialmarket access, requires a coordinated to sellany amountof productionthey were able to response from the Caribbean govemments, achievein a protectedUK marketwhich gavehigh particularlythose of the Windward Islands,as well returns to producers,owing to a UK policy of as the EU and the donor community. The key import quotas on so-called 'dollar' bananas. issuesinvolve the reducton of uncertainty,the Subsequently to July 1, 1993,Caribbean producers rapid developmentand implementationof a dear are restrictedto sellinga fixed quota of bananasin strategyfor economicdiversification, the institution an EU wide market protected by a tariff-quota of appropriateincentives, and the provision of a systemwhich effectivelylimits imports of 'dollare socialsafety net. bananasto 2 million tonnesper year. The initial reaction of the banana market in Europeto the A credibleplan for future developmentrequires a changed policy has been moderate, as banana stable macroeconomic framework and prices(in PoundSterling equivalent) have stabilized diversificationinto non-agriculturalareas, induding at roughlytheir previousleveL However,this initial tourism and other services,and manufacturing. reactionis deceptive,since this processhas already The pubiic sectorinvestment program needsto be begun to havean adverseeffect on the Caribbean targetedto these objectives,focussing on human producers' export earnings owing to the resource development and provision of realignment of currencies in the EU and the appropriate physical infrastructure for private depredation of the Pound Sterling. In fact the sector development. As a transition measure,a new regime is not likely to be sustainablein the finandallyviable sodal safetynet programneeds to longer term (i.e, it is currentlybeing challengedin be devised,based on an assessmentof the likely the EuropeanCourt and might be challengedby impacts of adjustmenton seriouslydisadvantaged future GATTmembers), and the preferredposition groups, taking espedally into account the age of Caribbeanproducers, particularly those of the compositionof the labor force. In this connection,
xviii SUMMARYAND CONCWSIONS the CDB/USAID-fundedBasic Needs Trust Fund bananaproduction with a view to establishingthe Programrwhich assistsin providingshort-term objectivesand financial parameters of a safetynet employmentand essential services, could be built programfor those most likely to be seriously upon. disadvantaged.These assistance programs should be linked to a dearly defined medium-term Thekey requirementsfor govemmentpolicy in the economicstrategy in eachcountry. affectedcountries are: (a)articulate a credibleplan for the future of the bananaindustry; (b) ensure Long-termdonor requirementsindude: (a) that an appropriate,market-driven organizational financialsupport for a limitedterm and appropriate structurefor the industryis in place;(c) providean socialsafety net programto easethe transitionto incentivestructure that encouragesthe efficent the new trading environment;(b) continued producers;(d) providea finandallyviable sodal supportfor projectsto enhancehuman resource safety net program;and (e)encourage rapid developmentand to improve the physical diversificationinto productiveand competitive infrastructure,induding in particult' infrastructure activities, particularlyservices, to the fullest to supportprivate sector development;and (c) possible. encouragementof regionalinitiatives on policy harmonizationand on provision of common TheEW should be encouragedto: (a) increasethe services. shortrun flexibility and transparency of the banana regimeby adoptingregional (Windward Islands) Sugar quotas, eiiminatingquarterly allocations,and darifying proceduresfor issuing licensesand Somefundamental changes have occurred in the altering quotas; (b) define dearly the price keyelements of the worldsugar market economy objectiveof the bananaregime over the medium which may adverselyaffect Caribbeansugar term (upto 3 years)period; (c) implementa policy exports. The EU is now the world's largest to ensurethat the rentsof the systemgo to the exporter;production increases have occurred In exportingcountries during the transition;(d) define the majorimporting countries of the world As a polidesfor diversification support to theWindward result therehas been an overalldedine in the Idands; (e) darify intentionswith respect to proportion of world consumptionmet from bananasin any subsequentLome Agreement intemationaltrade. Growthof high fructosecom followingexpiration of the currentagreement; and syrupand other altemativesweeteners has also () outline a long term strategyfor bananas, affectedthe world market. In viewof thesefactors, induding the use of targeted development lessthan 30 percentof majorworld production assistanceto traditionalsuppliers in placeof the entersintemational trade. currentsystem which benefits marketers more than it doesproducers. A possiblesource of fundingfor The world sugarindustry is subjectto extensive targeteddevelopment assistance Is the tariff protection. Resourcestend to be divertedfrom revenueachieved from dollar bananaImports, theircomparative advantage use at greatcosts in muchof whichwill be a netgain in revenueto the effidencyand overall sodal welfare. World prices respectiveTreasuries. of rawsugar respond in a volatilemanner to either incrementalchanges in outputor to govemmental Multlateraland bilateraldonors need to rethink policdes.Since most of the Caribbeansugar is theiraid strategy for the WindwardIslands In the destinedto preferentialmarkets, price fluctuations light of the likelyerosion in bananapreferences. are minimaland hence fluctuationsin export Short-runrequirements from donorsindude: (a) eamingsare limited to changesin theirexchange support to transitional measures,induding rate and that of their tradingpartners. In some inemasedtechnical assistance to enhancepublic years,changing U.S. sugar quotas also Influence sectorinitiatives in fiscalreform, project planning exportearnings. and implementationenvironmental planning and other priority areas; and (b) funding of an Caribbeansugar exports are mostly to the EUand immediatein-depth study of the regionaland U.S.markets. All the Caribbeansugar exporters sectoralimplications of a sharp reductionin exceptfor the DominicanRepublic and Haiti are
xix COPINGWITH CH-ANGES IN THE EXrERNAL ENVIRONMENT beneficariesof the EUSugar Protocol quota. Since the industryto improveits productivity. Some preferentialprices under the SugarProtocol are restructuringof the industryhas taken place, but nlindtedto the domesticEU prices, which have been divestitureefforts need to be steppedup in a well abovewodld free marketprices, the Sugar numberof countries. Diversificationinto other Protocolhas sustained Caribbean export earnings sugar-basedproducts should be soughtand some at a relativelyhigher level. Thisis true evenwhen high-costproducers in whichthe industryexists on takinginto accountthe depressingeffects of the subsidiesshould withdraw the subsidies(e.g., EU beet sugarexports into world markets,which Barbados,Trinidad and Tobago)so that only lowersthe unit pricereceived for the non-protocol commerdallyviable enterprisescontinue to sugarexports. Quotasavailable under the Sugar operate. Many of the Caribbeancountries Protocolare muchmore stable than those under successfullydiversified out of sugarin thepast. For the U.S.quota. The EU Sugar Protocol relates only thoseproducers that will not be able to operate to quantities,not to prices,and sugar prices may commercially,a phase-outperiod would be be squeezedIn the EU by dedinesin domestic necessary. Given the significanceof the prices. preferentialmarkets, it is importantthat any reductionin accessbe phasedin overa periodof Prospectsfor most Caribbeansugar exports yearsto reducethe shockeffect and to allowfor depend entirely on the continuationof the resourcesto move more easily into other preferentialmarket arrngements. A keyaspect of productionareas in thosecountries where sugar thesearrangements is their unilateral haracter, will not be able to survivethe changingworld their benefitscan be endedthrough a general environment. reductionof trade bariers In this respect,the intemalharmonization of the EU marketposes a Repositioningof Economies threat to the continuationof the preferential arrangementunder which Caribbeancountries Theglobal economic environment is in a stateof enjoy prerniumprices for their sugar expors rapid transition.Central and EastemEurope, the Similarly,the ratificationof NAFTAwill, in the Former Soviet Union Republics,China, India, longer t.enr, adverselyaffect Caribbeansugar Pakistan,other countuies of Asia and Africa,and exportsto the U.S.market. Moreover,food and most of Latin Americaare undergoingmnajor agriculturelegislation In the U.S. has gradually structuraltransformations which differ in degree reducedthe U.S.quota. Becauseof the Uruguay but haveone commontheme - to open up their Roun4all U.S.and other OECD countries' quotas economiesto marketforces, and in the process on sugarand other agriculturalproducts will be redefinethe state'srole in the economy.Industrial convertedto tariffsand thesewill be reduced36 countriesare loweringtrade barriers and looking percentIn stages. Prospects for sugarexports from for Irvestmentopportunities In a world-wide Caribbeancountries are not promisingin the long framework. run, owingto reducedU.S. quotas, an impending pricesqueeze In the EU mar-ket,and the general At the sametime, the CaribbeanRegion is fadnga trendtowards trade liberalization. Sugar prospects changing extemal environment. Preferential for the Caribbeancountries will not dependon market accesswill be increasinglyeroded by their quota allocationsin the future but In how implementationof NAFTA,by revisedEU policies competitivethey ar The industryneeds to on bananas,and by successfulcompletion of the improve its effidency,but revenuelosses are UruguayRound. High-cost Caribbean producers of certain to occur if the preferentialmarkets bananasand sugar will not be ableto survivethe disappear. Hunmanresource development Increasedglobal competition. Moreover,officdal programsare neededto Improvediversification capitalflows will continueto decreaserapidly, and prospects. if Cubawere to reestablishIts economiclinks with industrializedeconomies in the shortto medium While it is impossibleto predictthe future, a terrm the Caribbeancountries would face strong reasonablescenario for sugarIs that preferential competitionfor exportsof goodsand services. If arrangements,In the long run, are likely to all theseexternal shocks were to takeplace at the disappear.This will placeincreasing pressure on sametime, the Caribbeaneconomies would suffer
xx SUMMARYAND CONCLUSIONS severely.In sum,the countriesof the Caribbean Increasedemphasis must be given to increasing Regionare fadng major uncertainties regarding the factorproductivity, both from labor and capitaL externalenvironment. The successexperienced by some of the Caribbeancountries in achievinggrowth by The above are highly worrisome potential improvingthe effidencyof investmentand the developments.At the sametime, there are also qualityand productivity of the laborforce through positivedevelopments taking place. In particular, humanresource development should not only be thereare massiveflows of DFItaking place in the replicatedbut stronglyemphasized by all. The world and em..rgingopportunities of the rapidly existinggap in technicaland vocational education expandingtradr in services.In this context,the will need to be rapidlyaddressed in order for primarychallenge to the CaribbeanRegion Is to improvementsin factor productivity to takeplace. repositionitself t. take advantageof newmarket realities: front protectedmarkets and reduced In the future,economic progress in the Regionwill officialaid flowson the one hand,to newmarket be measuredmore by a large numberof small, opportunitiesfrom reducedtrade barriersand privatesector initiatives than by a few,large-scale Increased flows of private Investment to publicsector activities. Investment and growth in developingcountries on theother. the Regionwil increasinglybe linkedto tradein goods and services. This will require a Ir, thisrepositioning, Caribbean govemments must complementaryrelationship between the public empowerthe privatesector to generateeconomic and privatesectors, with more understandingby developmentby providingthe appropriatephysical bothsides of the methodsof operation,objectives infrastructureand by implementinghuman and constraintsrelevant to the other. A major resourcedevelopment policies that will leadto a overhaulof govemmentregulations is required healthy,well-trained, and sidlIedlabor force,and from govemmentsin a widevariety of areas:tax that will allow sustainableeconomic growth. policy, incentives,regulatory framework, land Carbbean govemments:ave an extremely ownership, accounting standarc4 fnancial importantleadership role to playIn termsof: (a) institutionsoversight, labor codes,and so on. deliveringsocial services; (b) providingpoicies to Govemmentoperations must become more reducepoverty and improveincome distribution; effident in one-stop shopping, customs (c) creatingregulatory framewarks which provide administration,tax collection,road maintenance, an enabling environmentfor private sector ports and airport operation,and other areas. development,encourage sustainable growth, and Consultation,regional cooperation and political will protect the environment;and (d) providingfor are key ingredientsto the successfulevolution of justice, law, and order. Achievementand the roleof the stateto meet the requirementsof maintenanceof viablemacroeconomic frameworks successfuleconomic development in the twenty- andopen and competitive economies should be at firstcentuty in the CaribbeanRegion. the top of their policy agenda. Govemment policiesmust be gearedto generatingdomestic There are many safety nets in place in the publicand private savings, through fiscal surpluses countriesfor the transitionin additionto the large on the publicsector's recurrent account brought by level of remittancesCaribbean national receive. restraintson currentexpenditure and cost recovery Theseneed to be supplementedby donorsupport ratherthan by Increasingthe alreadyexcessively for retrainingand for improvingfactor productivity. hightax burden,and throughpolides that lead to Govemmentsshould develop a dear agendaof the development of an efficient finandal howthey will takeadvantage of newopportunities. framework to encourage private savings. Donors,on the otherhand, should support these Legislation must also encourage foreign agendasand their efforts to developthe social and investment,both direct and portfolio. Private physicalinfrastructure so as to attractnew private sector activitiesmust also evolve, with less investment emphasison traditionalindustries and more willingnessto move into new areas,induding emergingopportunities in the rapidlyexpanding informaticsindustry.
xxi Introduction
n1977,t wasagre thatmiDevelwopmnfth (CGCED) a cethed nDcm197 7.adoubeqenoil shocseon r heeso -ancdsbilateoraltechncealandt finacl assistancefor unempoymentoopthReion, andeeomajor (export wh Regioond rieaswongbl ternseandoniate,iont;rpit markets,anindudiingehv toucrrsm, worldae imacted .heobiliationepaddshr anddevelopmeton ingeous ntresgatvelyrEspondedic gothe nfe.etl, premploymn --sources;(iii manyThee reaiojecive coo~ rdntomvaid n 194,butthyampongsdtwontor einc.rleased, icrese n adelomtsga migrationpessuThespies n17 n morunted.95 u aondreiienstabeunsr o the moestefectiv mu mseof Lareachpitaed inflwth requisre eto susitalienat etmlrsesourcges;and(iv)te dvlopmn,terof prcaiusan1deequlibfium.. Sugarexpo.rttines cutr iwes 8reateoricoeration amongCar.ibbean cosunfes.e sorecesvef gawtempoacyreptentefm eaeraof shcsh arpt Thewsae pob,eNrthemeaincalin 1994e btrdAgemn(NFA, inraeithey ugroprieanUion1974prndo975, bth ~rof anecomwicy framwor wthei9nergach countr an pretrexpntianarrangemsul forbaanse sugar)wnfl n that povtinesappr~op fiate iutcentivesfottpivatle ifsoundathecnmsevsqikly t nfica and aloyfarnewof0beu ste.to.ractivit,l e suppdrtiobl adequIiatelevlomnfcurn p entdifclesaym whcn thnesuoa bemoomnt tendd pubicothmobies irroestm.enhumanreourceatricton anDF thdvelopmet,'J development fintr woialmorstutre an ofIngenous (iand mo th E negatively.hsxbempovdl ecnmisaswelbyrrowisandEonomicgrow77,there povider teprr fell, unemp..e support . shudfcso:()temobilizationmhobildou nprvaelorigilowafrthera 1 h ofoization multiatera Regionfaio Worldg staloawo broorrugtbthifato both inegaionann th einonreasonable terms andarnd conditioncondiontionmakes, s; (i)u indudignduding mresh ilsokoi hckf 197374rwsnt97ouriwsmawoerer werer implactedofmlacter nth resfiztricteto, DncI.osdvlomnto egtvents. Eonlowingr197,thercafe, inemquickn resurcs;resorce;betercoodintioettr corcUatin (II)iii amng ono sucaeasedo,sucaeassio, a scndmiraiomirtoil pressurefaliprssurck mounted. untermo.o anWWh epentheepent tohensurED toCE wasurthetemstefel mostaefecivhedus shee man ofn Largde,tarade,captrmlhihealexptrmlhiheal nnostererqirsto ererqirsdtoIntos ra suste,aindsts,aindthah getrcoeainaogCaribbeanwerevecountrieswrcountries.stilloarfeeling tOfein h efetsooxtraldbfciifeko recevdate the mporarybcrespiteof1 192a In2 of theifrmhr ofiaoiasoc sharp ThesevaD objctivesIn 1994,butrmain they Increasein sugar rices In1974 and1975, bu COPINGWITIH CHANGES IN THEEXrERNAL ENVIRONMENT occurredin 1989. Naturaldisasters in the form of beenprovided by the profit makingopportunities hurricanesadded to the economicdifficulties of thatexist in globalcapital markets. severalCaribbean countries. In spite of these problems,some Caribbean countries, particularly In the 1970s,private banks provided the vehidefor the smallerisland economies, achieved high rates capitalflows, but in the 1980sand 1990sother of growthin the 1980s,owing to expansionin institutionshave played increasinglyimportant tourisn, services,agriculture and manufacturing. roles in facilitatinginternational capital flows, Preferentialmarket accessfor bananas,sugar, includingmulti-national enterprises. Foreign direct garnents and electroniccomponents played a investmenthas rebounded from earlierlow levels significantrole in the growthof someagricultural andnow constitutes an important source of foreign and manufacturingactivities. Financialand capitalto manycountries. In 1993about US$60 technicalsupport from the donor community billion worth of DFI flowed into developing assistedmany countries in their stabilizationand countries,about US$30 billion of whichwent to adjustmentprograms. On balance,the successful Asiaand US$13 billion to LatinAmerica, sharply up economieswere those that adopted viable from the 1980s. This DFI is takingtwo forrns: exchangerate, fiscal,monetary, trade and wage financingof nev fixed capitaland financingthe policies,and which supportedprivate sector purchaseof assetswhich are being pnivatized. The development.Sodal Indicators-lifeexpectancy, plan of privateportfolio investment, both bonds infantmortality, daily calorie intake, literacy rates and equity, has been stimulatedby portfolio and school enrollment rates-have shown diversificationpolidies of institutionalinvestors encouragingtrends in manycountries, but poverty, suchas pensionfunds and insurance companies, insufficienthuman resource development, and ladc and such flows from developedto developing of employmentopportunities remain too common economieshave the potentialto becomevefy throughoutthe Region. Recently,increasing significantin the future. Financingof private attentionis being given to the environmental infrastructurefacilities is an importantpotential consequencesof economic development target for private capital flows. Given that multilateraland bilateral aid flows to theCaribbean Outsidethe CaribbeanRegion, substantial change are expectedto fall evenfurther from the current hasoccurred since 1977. Trade barriers have failen levelsthat are low by historicalstandards, and that in bothdeveloped and developing economies, and commercialbanks are unlikelyto re-enterthe large regionaltrade blocs have been formed,in privateloan marketin a big way, it is criticalthat particularNAFTA and the EU. LatinAmerican the CaribbeanRegion adopt policies which will countrieshave moved to reducetariff and non-tariff allow it to tap into these direct foreign and barriersto trade,folowing the exportled growth portfolioinvestment flows. strategiesof many countriesin SoutheastAsia. Caribbeancountries have, through the Caribbean A third factor which has impactedupon the Community(CARICOM), moved to reducetariff Caribbeaneconomies has been the recessionof barrierson a phasedscheduled to 1998,but the the early1990s in the Organizationfor Economic pace of change is slow and many other Cooperationand Development (OECD) countries impedimentsto tradeexist in theRegion. whichhas endured longer than usual,and which hasbeen followed by slowgrowth in the recovery As trade barriers have fallen, so too have stage. OECDunemployment levels remain high, restrictions on intemational capital flows. particularlyin Europeand Canada. Growth Transactionsin foreignexchange on a dailybasis projectionsfor the mediumterm for the OECD areof the orderof US$1trillion world wide, only a countriesare moderate, but growthis expectedto smallfraction of which is directlylinked to the be sufficientlystrong to supportreasonable growth finandngof internationaltrade blocs in goodsand performancein the Caribbeancountries given the services. Improvedtelecommunications links, adoption of sound macroeconomicpolicies combined with computer technology have combinedwith suitableincentive and regulatory facilitatedcapital flows, but the motivationhas frameworksThere are three reasons for optimism
2 1 INTRODUCIION
Rexl.J: lrade in Services:Opportunities for Expansion WoW`wide trade liberalization and the eliminationof tradepreferences will forcecountries to concentrate in areaswhere' they have a comparativeadvantage. Services provide an areawhere several Caribbean ,o:ntriesehave alreadyrevealed comparative advantage and many new opportunities are emerging.World in icesIs expanding at.a fast pace arid the shareof commercialservices in totalworld exports has Inreased:,from17 percent in 1980to 2'1percent in 1991. Caribbeancountries are well positioned to expandtheir services sectors given their demonstrated capacity Inthe tourism.,sectorand the qualityof theirhuman resource base. Moreover,the t blurrtingof frontiers amongeconoric sectorssuggests that theavailability of efficientproducer (e.g., professional services) and 4lstrive { ,(eg,transport and telecommunications) services has become an importantpre.condition for an outward-orientedmoded be it basedon manufacturing,primaty productlon or services. the wo'd, the expansionof the servicesector is usuallydominated by domesticforces and'most :rIc activitiesare shielded from international competition. In thecase of Caribbeancountries, however, prtu,nities"for' development of the servicessector are stronglyassociated with futureprospects for interationialservice transactons. International consumer movements (tourism, health and education svies), possibilitiesopened by aoss-bordertrade in services(long-dstance services) and temporary labor movieentsprovide some obvious examples. Lasscenarioentails both opportunitiesand challengesfor the Region. As barriersto entry In certain ervice ctivities.rapidly 'decine' (ais illustrated by the fall in'lnstallationcosts of teleports),the Regioncan ateits bhumanArresourcebasandDutch, 'EnglishJiFiend, and Spanish-speaking workforce to tap Wh,eNl,tthA,merican mal*et for longdstanceservices (financial and business services, typing, 1.800 aervces,medical record-keeping, and so on). At the sametime, as the life cycleof corventional andnew servies ihortens(as a consequenceof' growingcompetition), a service-orienteddevelopment tr 'hast be charaterized,by flexibility and a modemregulatory environment. Openness to foreign & investment9 in servic for exa4mple,becomes a necessarycondition for aneffident servicesoriented
inthiscontext, capital and labor mobility must be enhancedand joint ventures(e.g., jointly owned hospital complexes)should be promoted.Mobility of key professionals,espedially former residents living abroad, houd be ensou'raged..Company law, accountingand fiscal systemsneed 'to be simplitiedand stndat.ized. intellectualproperty rights laws (in particular,copyright laws) and their enforcement need to bebrounh into,line 'with:industrialized countries! standards. In, general, governments should revise their "Igulto'ypracti-ices 'concerning service industsles with a viewto Improvingconditions of marketaccess and to proiding'national treatment to foreignfirms. 'At the sametime, they should step up theirefforts in favor f theemoval.i of bariers to their exportsin key consumermarkets, engaging foreign companies as trategicaliesin these'activities.Domestic reform and better conditionsof marketaccess abroad can pvde Xth bassfor a private-sectorled expansion of servicestrade.
e*nteUdneTtgade 919-9 -StafIsks (Gene. GATt.1"93), pl. on this matter (i) manyCaribbean countries have globalizationhas opened up growthprospects for undertakenthe difficult processof structural low cost, efficientcompanies in the Region;and adjustmentand are muchbetter poised today to (iii) the volumeof worldtrade between 1988 and reap the benefitsof earlierpolicy initiatives;(ii) 1992increased at more than twice the rate of 3 COPINGWTH- CHANGES IN THEEXTERNAL FNVIRONMENT world output growth. Exportopportunities exist long-ternsustainable economic growth. Changes andsupply capability in the Caribbeancountries is in preferentialmarkets, the completionof NAFTA expanding. andUruguay Round negotiations and the reduction in offidalaid flows all pointto theneed for change. The policy frameworkrequired to meetthe new An exampleof rapidchange and the needto adapt competitivechallenges has been outined In quickly is provided by developmentsIn the previousreports and discussedat earlierCGCED informationindustry (informatics). Only a few meetings.Many of the detailsof the necessary Caribbeancountries have moved aggressively to reformsfollow upon their successful application in developthe policiesand infrastructure needed to the emergingeconomies of SoutheastAsia. Trade attract firms in this fast-dcevelopingarea. liberalizationis at the heartof the reforms.Other Opportunities exist in data entry, image keyingredients are a soundfiscal balance, tax and processing,design, software developmentand regulatoryreforms and a programof privatization. services,electronic publishing, voice center operations,remote secratarial services and similar Caribbeancountries through CARICOMhave areas. The Caribbeancountries have important agr8dto reducethe CommonExtemal Tariff (CET) advantagesin competingfor informationbusiness, in a phasedprogram to 1998. Given the indudingin manycountries relatively affordable agreementon NAFTAand changesin the EU, labor costs, good quality telephoneservices, Caribbeancountries should seek to integratetheir languageaffinities with large markets,time zone economieseven more quiddy into thosetrading and locationaladvantages, and relativelyefficient blocsby establishingcomparable tariff levelsas air freightservices. soonas possible and by movingto takeadvantage of the opportunities that increased trade In order lo gamer a shareof the information opportunitieswith NAFTA and the EUwould bring. industry'smarket, the Caribbeancountries will On balance,the tradecreating effects of doser needto undertakequiddy some important reforms lnks with NorthAmerica and Europe will outweigh where thesehave not yet taken place. First, thepotential losses in somespecific trading sectors althoughtelecommunications service has improved (i.e.,garments) and provide a basisfor expanded in the Caribbeancountries, monopoly suppliers economicgrowth. may hinderthe developmentof an informatics network if suitable arrangementsare not 'The need for sound fiscal policieshas been negotiatedby governmentsto ensurequality and demonstratedrepeatedly in the Caribbean competitivepricing. Immediatesteps are required countriesby observationsof the problemsthat in thisarea in manycountries. Second, the current follow immediatelyfrom policiesthat are fiscally regulatoryframework is ill-suitedto the informatics Imprudent. Governmentsare recognizingmore industry,since the currentframework is designed dearlythe advantagesof fiscaldiscipline and the around manufacturing and agro-processing needto improvedomestic savings in the public enterprises.As in Singaporeand Hong Kong, what sector. Tax and regulatoryreforms have been is requiredis a one-stop,one-day procedure for much discussedin recent years, and some localand foreignfirms that meetsimple eligibility governmentsare moving to enact real change criteria.All Caribbeancountries have a longway intheseareas. Much remainsto be done, as to go to meet this challenge. Tax, tariff and detailedlater in this reporL. Broadbasedtax regulatoryprovisions need to be competitivewith systemsbased on income and/or consumption thosein Uruguay,Costa Rica and elsewhere. The taxes, plus transparent,simple and efficient designationsof free zones may be helpful in regulations,need to be implemented.Privatization initiating reform without engenderinglocal programsin mostcountries are underway, but the opposition. Tiird, developmentof foreign and processneeds to be accelerated. localinformatics firms requires active promotional activitesabroad and at home.Given the natureof Thefast-moving nature of recentchanges requires changein the informaticsindustry, countries which thatCaribbean countries move quicdy to enhance do not proceed now to prepare for the their competitivenessand provide a frameworkfor developmentof the industrywill simply lose out to
4 1 INTRODUClION more aggressivecompetitors. The reforms manufacturingactivities remain important,but requiredto generatean informaticsindustry will countries must position themselvesto take generatepositive spill-over effects in otherareas, advantageof newopportunities in tourismand in induding manufacturing(ust-in-time inventory other servicesector activities. In tourism,eco control,for example),finandal services, tourism tourism, residentialtourism, medical tourisn, and education (on4ine distance education retirementhomes and other forms of tourismneed availabilityat ail levelsof the educationspectrum). to be fostered.In otherservices, the locationand manpoweradvantages of the Regionneed to be Caribbeaneconomies are in d stateof transition. exploitedin a wide rangeof activities,induding Global economicchanges in trade and capital financialand businessservices, offshore medical marketsare putting pressureon countriesto services,hospitals, medical record keeping, typing, become more competitivein export markets. 1.800 answering services, and so on. Preferentialmarket access is beingeroded by the Communicationnetworks are critical for success- implementationof NAFTA,by revisedEU polides telecommunications,fax, e-mail,sateWites, and air on bananas,and by the successfulcompletion of transporL The respectiveroles of public and the UruguayRound. Caribbean countries need to privatesectors need to be examinedand, once foster public and private sector development thesehave been redefined, both private and public initiativesthat are complementaryto one another sectorinitiatives will be requiredif the Regionis to public sector support for social and physical graspthe opportunitiesthat are availablein these infrastructureand humanresource development rapidlyexpanding areas. World trade in servicesis programs,and privatesector response to export- thefastest growing component of worldtrade, and onented macroeconomnic,tax and regulatory thistrend is likelyto continue. frameworks. Traditional agriculture and
5 2 The CaribbeanExperience With Growth And ExternalShocks
SourcesOf Growth infrastructurewhich resulted from the passageof hurricaneHugo in September1989. Recovery The Caribbeancountries are characterizedby fromthe effectsof the hurricanewas constrained sharp differencesin their economicstructure, by the OECDeconomic slowdown, particularly in export base,and stageof development As a the U.S, the UK andCanada, which are the main group, they recordedan average2.8 percent marketsfor exportsand tourism. annual output growth during 1982-92. This exceeds2.4 percent growth recorded during 1980. Figure 2.1 shows the comparativegrowth 90. If Haiti is exdudedbecause of its spedal performancesin the Cadibbean,Central America!, political situation in recent years, the output andSouth Padfic 2 in termsof realGNP per capita growthperformance shows improvement from 2.6 growthrates during 1980a90. While the Caribbean to 3.1 percent Simultaneously,variation in the Regiondid well relativeto the CentralAmercan growthperformances of the CGCEDmembers has countries,the Region'sperformance was poor dedined.The coeffident of variationfell from146 comparedwith thatof the SouthPadfic countries. percentof the meanto 114percent. Exduding In particular,real GNP per capitafell by an annual Haiti,the coefficientof variationfell from 136 to 96 averageof 0.3 percentin the CaribbeanRegion as percent(Table 2.1). a whole and by 3.2 percent in the Central Americancountries. However,on average,the Despiteimprovement in output growth in the SouthPacific countries experienced a growthrate Region,the averagegrmwth rate remainslow, in of 1 percentper annum. part becauseof the externalshocks suffered in the earlypart of the decade,and in part becauseof Despitethe low overallcomparative perfornance inadequatedomestic policy responses in the larger by the CaribbeanRegion, the highperforming countries.However, those countries that adjusted OECScountries and Belizeexperienced a growth betterto theseshocks, such as most countriesin rate of 3.9 percentin per capita terms. This the Organizationof EastemCaribbean States superiorperformance relative to the economiesof (OECS),experienced accelerated average growth that exceededgrowth in most developingcountries during the same periods. But in the 1990s, 'CentalAmerica conrsts of CostaRica. El Salvador. Guatemal. economicgrowth slowed, especially in somehigh- Honduras,and Nicaragua. performingcountries of the OECS. The slower 2 growth has been due to a combinationof factors, SouthPaific conssts ofFJi Solmon slnds, vanuatu. and induding damage to agriculturalcrops and
7 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
Figure2.3: ComparatIveGrowth In RealGNP Per Capita in the Caribbean, CentralAmerica and South Pacific, 1980-90
Percent
.4 ' 1 HlehPote$n oifal I SV, P.8mb
2 Ibbeta _ [j_
.5
Note: HighPerformingCaribbean a Countries of the OECSand 8elize; Moderatey-PerformingCaribbean - TheBahamas, Barbados, Dominican Republic, and Jamaica,and Other Canibbean - Guyana, Haiti, Suriname, and Trinidad and Tobago.
the SouthPacdfic is partly attributableto higher privateand publicinvestments, especially DFI, in -heOECS and Belize. For example, DFI per capita Tabe 2.1:Avera8e Real GD? GrowthRats 19804 an 1982490 in the OECScountries amounted to US$79during (in pe) 193-835compared wvith US$20 in sixSouth Padific'84 929 countries. Bythe 1990-92,ECSandBelie.or this xampe, had increasedFI er cpit to AntiguaDTalenic1:AvnetAGDCowand Babuda Rl*984.35.989 6.792.9 US$351in the OECScountries, but to onlyUS$35 TheBlahamas 3.6 1.9 in the SouthPacific countries. Barbados 1.7 1.3 BelIze 5.3 6.0 In addition,exports and nonfactor services in the (ominicaanRepubic 1.9 1.8 higperforming countries expanded rapidly Grenada '5.8 4.7 becauseothey:(i) benefited from preferentialtrade Gubaa 2.7 1.0 agreementson bananas,sugar, and manufactures; ti -0.7 2.7 (ii) located niche market for their goods and St ittts andNevl 4.8 5.9 services and were able to develop the St Lucia 6.3 7.3 infrastructurenecessary for increasingtheir share in St Vncentandthe Grenadines 6.9 6.1 Surinarm -2.6 .0.5 the global economy, notably tourism; (iii) Trinidadand Tobago .4.3 O2.7 maintainedsound macroeconomicframeworks; Memorandum Items: and(iv) investedin humanand physical capital. In Ovlai Average 2.4 2.8 the low performingcountries, the macroeconomic Coefficientof Variation 1460 114.0 fundarnentalswere weak. However, polico Aveage(excL Haiti) 2.6 3.1 reformsin Guyana,Jamaica, and Trinidadand Coefficientof Variation 136.0 96.0 Tobago,beginning in the late 1980s, have laid the a.Compound grovth rate foundations for their improved econc=c performance.
3 ai.i PapuaNew Guinea,Solomon Islands, Tonga, Vanuatu, and WesternSamoa.
8 2 THE CARIBBEANEXPERIENCE WITH GROWTH AND XERNAL SHOCKS
Trendsin OutputGrowth, 1980.90 agrculturaloutput reflected favorable responses to policies introduced during the late 1980s, During 1980.90,only four countriesexperienced particularlythe liberalizationof the exchangerate, sustainedgrowth - Antiguaand Barbuda, Grenada, theexport regime, and domestic prices, while in St. St. Luda,and St. Vincentand the Grenadines- Luciaand in St. Vincentand the Grenadines,the whileIn Guyana,Haiti, Suriname, and Trinidad and trend reflectedthe output responseto banana Tobagooutput declined for five or moreyears. In price increases following the U.S. dollar the latter part of the 1980s,the growth pace depreciationin 1985.Of theother three countries, Improvedin the smallercountries and in Jamaica. the trends in Haiti, and Trinidadand Tobago Sectoralgrowth has been very unevenfor the reflectedthe relativelyslow declinein agricultural Caribbeancountries. Growth in the servicessector outputcompared with thatof othersectors, while hasbeen most rapid, while agriculture has dedined Suriname'sagricultural output recorded some moderately,and manufacturinghas declinedby modestgrowth. about 2 percentannually for the Regionas a whole.(Table 2.2). The manufacturingsectors performance in the Caribbean countries was also volatile. 'Theshift in agriculturaloutput growth is shownin Manufacturingcontracted in six of the fifteen Table2.3. Between1980 and 1990,agricultures countries.The sectors activity ranged from about econtributionto the Region's output fell slightlyfrom 8 percentreal annual growth in Grenadato annual ab :i 13percent of GDPto 12percent. However, derces redingal growt in Trinidadannd thi'; de-Jiningtrend was not uniform across dedinesexceeding 9 percent in Trinidadand ccunties. In fact, agriculturebecame more Tobago. Becauseof the weight of the larger importantin six of the fifteencountries by the end contractingcountries, manufacturing dedined by of the decade. In Guyana,the resurgencein about2 percentper annumfor theRegion.
Table2.2: Aveie SectoralGrowth Rates, 198040 ngeCent Tourimand Agriculture Indusby Manufacturing Ohef Services Antiguaand Barbuda *0.5 7.5 (4.6) 6.6 TheBahamas ...... ( ..) Barbados -2.5 0.5 (4.08) 1.5 Beiize 3.3 5.7 (1.7) 4.8 Dominica 4.8 4.3 (6.9) 4.4 DominianRepublic 0.6 1.1 (0.5) 2.5 Grenada 1.3 82 (7.5) 4.6 Guyana -2.6 -5.4 (-5.9) -1.7 Haiti *0.8 -1.8 (-2.4) 40.2 hamaica .0.5 2.1 (2.4) 1.2 St iattsand Nevis -2.8 4.5 (-1.1) 7.3 St Luda 6.6 7.0 (7.4) 6.8 SLVincent and the Grenadines 10.4 5.0 (3.8) o.0 Suriname 0.5 40.7 (-3.8) -1.2 Trinkdadand Tobago *4.1 -6.2 (-9.2) -2.1
MEMORANDUMITEMS e OECSand Seize 3.5 6.0 (3.2j 5.9 Barbados,Dominkan Republic, and 0.4 0.6 (0.3) 1.6 Jamaica Guyana,HaiW, Suriname, and -2.3 -5.6 (-7.8) -1.8 Trinidadand Tobago TOTAL(exduding Guyana, 0.5 1.6 (1.2) 2.2 Haiti,Suuiname, and TrinWadand Tobago) OVERALL_0.1 -1.4 (-1.8) 0.9 a. Weightedby the 1980GDP. ... not availabb. Source:The World Bank, World Tables 1993
9 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
Theservices sector emerged as a dynamicgrowth growthperformances of otherIsland Regions such sectorin mostcountries. Increases in this sector as the IndianOcean, Mediterranean, and Padfic reflectedthe growth in exports of nonfactor Islands(Table 2.5). services.For the Regionas a whole,exports of nonfactorservices, which mostlyoriginated from Savingsand Inveshnent tourismreceipts, increased from over30 percentof Economicgrowth is stronglytied to Investmentand exportsin 1980to about49 percentin 1990. In saving ratioswhen sound macroeconomicand termsof GDP,nonfactor services increased from regulatorypolides are in placein a politicallystable 15 percentto 24 percentduring the sameperiod. environment.The extraordinary growth of the East These growth patterns were uneven across Asiancountries suggests the importanceof high countries,with the DominicanRepublic, OECS savingsrates, the accumulationof physicaland countries, Belize and Jamaica performing humancapital, the allocationof thesefactors of particularlywell (Table2.4). productionto highlyproductive Investments, and the acquisitionof technology.In the Caribbean Within the servicessector, tourism has become countries,investment rates have been positively vetyhimportanthesricesThectr B as, Bbados, J icme correlatedwith economicgrowth, as in the high- veryimportant in TheB3ahamas, Barbados, Jamaica, performingOECS countries and Belize, and in the and DominicanRepublic and, over the past lower-performingeconomies of The Bahamas, decade, it has become the most dynamic Barbados,Haiti, and Suriname. economicactivity in virtuallyall the high.performing OECScountries. In somecountries, it hasreplaced agricultureas the largestsector of the economy. Tourismreceipts in the OECScountries inaeased fromover 30 percentof aggregateGDP in 1983to aver38 percentin 1992. Simultaneously,value Tabk2.3 TheShareofAgncuitureinGDP,1980and1990 addedfrom tourismto their economieshas also 1980 1990 increased. Antiguaand Barbuda 7.1 4.1 TheBahamas 3.8 2.1 The tourismsectoes contribution to GDPgrowth Barbados 10.3 6.6 acceleratedin the latterhalf of the 1980s. Tourist Beize 29.8 21.9 arrivalsin the wider Canibbean,indusive of all Dominica 30.7 25.9 islandswhich are not membersof the CGCED, DominicanRepblic 21.8 1a8 grewtwice as fast in the lastfew years. During the omnana 21.8 16.8 1980s,tourist arrivalsin all Caribbeanislands Grenada 24.7 16.9 increasedby over 5 percentannually and tourism Guyanaa 23.4 30.6 receiptsIn U.S.dollar terns increasedby over 9 Haiti 337 34.9 percent. While the growthpattern is similarto Jamaica a9 4.9 world tourismgrowth, it has been lessthan the St Kittsand Nevis 1S.9 8.7 St Lucia 11.7 13.8 St Vincentand the Grenadie.s 14.6 19.3 Suriname 9.1 11.1 Trinidadand Tobago 2.2 2.8 AGGREGATE 12.8 11.9 a. 1989. Source:The World BankWorld Tables 1993
10 2 THECARIBBEAN EXPERIENCE Wi-rH GROWTH AND EXTERNAL SHOCKS
The high.perforningCaribbean countries have a developingthe infrastructurethat made this somewhatsimilar experience to that of the East possible,and by rapidlyadjusting inappropriate Asiancountries. For example,during the 1980s, polidesto changesIn theeconomic environment the averagetotal grossdomestic investment rate exceeded30 percentof GDP in Antiguaand Grossdomestic investment In the Caribbean Barbuda,Dominica, Grenada, and St. Kitts and countrieshas been fundedby nationalsavings,
Table2.4 NonfactorRecelpt, 1980 and 1990 1980 1990 1980 1990 - percentof exportsof goodsand - percentof GDP- services- Antiguaand Barbuda 41.7 89.5 46.8 96.1 TheBahamas 81.6 82.3 79.6 54A Barbados 64.8 78.3 50.3 43A4 Belize 25.3 43.7 18.0 284 Dominica 11.5 21.8 11.9 23.1 DominicanRepublic 23.6 63.0 5.1 28.8 Grenada 52.7 69.8 33.2 43.1 Guyana 19.9 8.7 20.5 35.3 Haiti 29.1 33.6 6.4 3.2 Jamaica 27.9 49.6 16.1 27.2 St Kittsand Nevis 12.0 19.5 15.2 21.2 St.Lucia 46.3 54.9 41.4 48.9 St Vincentand the Grenadines 44.7 30.4 35.3 23.2 Surinane 15.4 4.2 7.9 1.3 Trinidadand Tobago 17.7 15.2 9.2 7.0 AGGREGATE 31. 48.9 14.9 24.4 Source:The World Bankl World Tables 1993.
Nevis.These countries experienced GDP growth privateand public,and foreignsavings. As a performances ranging betweeni 4-6 percent. general pattern, the private sector saved more Theseperformances compare favorably with the than it invested and the public sector invested newly industrializedcountries (NICs) of Hong more than it saved. This is in contrastwith the Kong, Korea, Malaysia,Taiwan, China, whose high-performingEast Asian countrieswhere high inwestment ratios averaged between 20-30 levelsof both privateand public investmentwere percentof GDP and output growthaveraged recorded,and where private investmentwas about 6 percentper annum for the period 1960. higher than public investment. With the 1985. exception of Dominica in the early 1980s, Guyanain mostyears, and Surinamein 1983, all However,the Caribbeancountries differ from the other countries generated positive national East Asian countriesin severalother important savings. In the Region as a whole during the respects, incuding the higher savings rates, 1980s, gross national savings fell short of smallerand leanerpublic sectors,significantly investmentneeds in elevenof the countriesfor lower effective rates of protection, smaller everyyear and most of the time for the other four externalcurrent account defidts with respectto countries. This gap was filled by foreign savings. GDP,and greater emphasis on humanresource Nationalsaving rates averaged between 11-24 developmentof the EastAsian economies. Also, percentof GDP duringthe 1980s,except for In the EastAsian economnies, the state playedan Guyana(-1 percent)and Haiti (7 percent)(Table important role by increasinglysupporting the 2.6). The savingseffort in the CaribbeanRegion private sector to lead the growth process, fell well below the average for the high-
11 COPING WITH CHANGESIN THEEXTERNAL ENVIRONMENT
Table2.5: Growthof Intemational Tourism The experienceof a few Caribbean countries In Major IslandRegions, 198090 suggeststhe danger of low public savings. In (in percent) thesecountries, it becameincreasingly difficult to 1980D- 1986-90 1980-90 financethe excessof publicexpenditures over -internationaltourist arrivals- revenues. When the fiscal defidts became WorieTlaO 328 7.6 4S5 unsustainable,some countrieschose inflationary IndianOcean 0.9 11.8 s.1 financing.That led to overvaluedexchange rates, Mediterranean 4.3 14.3 83 loss of external competitiveness,decreasing exports,and worsening fiscal crises. Guyana,for -intemationaltourism receipts in USS example, maintained an investment ratio Work TotaW 5.4 16.1 9.5 comparableto thatof the AsianNiCs, averaging CaribbeanIslands 82 10.7 9.1 30 percentof GDP. However,as this level of IndianOcean 4.5 23.5 11.7 Mediterranean 5.0 26.0 12.9 investmentwas sustainedby debt financing,it PadficIslands 16.8 14.3 1S.8 ultimatelyled to a seriousdebt crisis, and Guyana Source:World Tourism Organization, experiencednegative real GDP growth averaging Compendiumnof Tourism Statistics (various). over3 percentper annum during 1980-90.
With policy reforms introduced in several performingdeveloping countries in the world, countriesbeginning in the late 1980s, more whose gross domesticsavings averagedabout pruntfis and mnetar lices1are nowi 38 percent of GDP in 1990. prudentfiscal and monetarypolides are now in 38percent of GOPin 1990. place, with payments on external and intemal Public sector savingshave been mostly weak in arrearsbeing made, and exchangerates being the Caribbean countries, but they generally allowed to better reflect market fundamentals. improved in the late 1980s. Traditionally, Overallsavings rates have improvedas a resultof govemmentexpenditures play a key role in the the reductions in fiscal deficits and greater economic performance of the Caribbean confidencein the economieshas resultedfrom countries and constitutea large percentageof the returnto macroeconomicstability. each country'sGDP. Govemmentconsumption expenditureshave increasedin order to maintain Foreignsavings or capital inflows,inluding aFl, in cuntiesfacebyadvrse supplementednational savingsin almost all aggregatedemand in countries faced by adverse countries. Only in Barbados,Belize, Suriname externalshocks. At the same time, government and Trinidad and Tobago were foreign savings revenuesremain susceptibleto commodityprice negative in selected years. Otherwise, on movements given the open nature of the average,foreign savingshave ranged from 2 economiesand the dependenceof revenueson a percent in Barbadosto 30 percent in Guyana, narrow export base. This has been reflectedin with largevolatility. low overall public sector savings during the 1980s,which have been negativein Guyana(-25 Drl has traditionallybeen low relative to total percent of GDP),in Jamaica(-1 percent)and in investmentand has focused mostly on tourism- Suriname(44 percent). In the other countries, related activities. Among the four high. Sername(.14ngsrangedbetween03 percent).Inntheperforming countries,Antigua and Barbuda,St. averagesavings ranged between 0.3 percent in Kitts and Nevis, and. St. Luda attracted DFI Haiti to 5.2 percent _' GDP in St. Lucia and in averagingover 10 percentof GDP per annum. It Trinidadand Tobago,with high volatility and the has been low or negative in the remaining savingrates skewed towards the low-end. Caribbeancountries. Yet, given the Caribbean's proximity to major markets and language 4Grossdomestic savings = grossnational savings -100 x (net factorincome + currentintemational transfers)/GDP.
12 2 THECARIBBEAN EXPERIENCE WITH GROWTH AND EXrERNAL SHOCKS similarity,the Regionhas tremendous prospects Total factorproductivity growth is measuredas for a varietyof service-relateddevelopments. For the differencebetween the actualgrowth rate of example,the establishmentof a teleport in realGDP and the sum of the contributionsof Jamaicahas brought the coutitryto the forefront eachfactor input to outputgrowth. Table2.7 of the informaticsindustry In theRegion. comparesthe factorproductivity growth in the CaribbeanRegion with 10 EastAsian countries However,during 1990.92,investment efforts and 58 other low middle-incomecountries. In dedinedin mostcountries. They improved only this table,factors of productionare capitaland in Belize,Dominica, St. Kitts and Nevis, St labor in the Caribbean,and capital,land, and Vincentand the Grenadines,and Guyana. These laborin the otherregions. About 32 percentof higher investmentefforts were financedwith realGDP growth in the CaribbeanRegion during increasednational savings in all countriesexcept 1979-90is attributableto factoraccumulations, Guyanaand St. Vincent and the Grenadines,and and 68 percentof the growthis due to total with increasedforeign savingsfor all, except factorproductivity growth. This compareswell Dominica.National savings in Guyanadedined with that in the other regions. In the high- sharplybecause of the largepayments of interest performingEast Asian countries and 58 low on its exteral debt. Simultaneously,public middlemincomecountries, factwr accumulation investmentefforts increasedin Belize and accountedfor 45 and31 percentof the Regions' Guyanabut public savingsimproved only in growth during 1960.87. In other words, the Belize. CaribbeanRegion experienced relatively more rapidimprovement in factorproductivities than the EastAsian countries. This may havebeen EmpiricalEstimates Of due to the catching up to best-practice DeterminantsOf OulputGrowth technologiesin the CaribbeanRegion. However, countriesin the CaribbeanRegion, as a whole, Economicgrowth is determinedby factorsof experiencedproductivity and economicgrowth producton- land,labor and capital - andby the rates without increasingemployment. In technologyand organizational skills employed in particular,the estimatedrate of total factor combiningthem for production. Labor and productivitychange of 2.1 percentper annum capital are the more readily measurable and averagepopulation growth of 1.1 percent conventionalfactors while the othercontributing equalthe average output growth.' factors are captured as a residuaL Recent developmentsin growth theory suggestthat 6Averagereal GDP growth here is the simpeaverage of annual humancapital should be indudedas a separate growthrates and it is for theperiod 1979-90. factorof production.In this chapter,a widely 7China,Hong Kong Taiwan(ChinaL Indonesia, Japan. Republic used metodology is used for isolatingeach of Korea,Malaysia, Philippines, Singapore and Thailand. factorscontribution to growth. In the empirical formul-ation,output growthdepends on factor 8Theoveralg improvement in the CaribbeanRegion's total factor accumulationand on othervariables. productivitygrowth and implication for employmentgeneration maskimportant country differences. Generally, countries with high economic growth also experienced high factor Sourcesof economicgrowth equations for the productivitygrowth. In the restof the Caribbeancountries that Caribbeancountries support the assertionthat are membersof the CGCED,moderate or negativeeconomic boththe qualityof the factorsof productonand growth have been associatedwith negative total factor productivity growth. Given the measuremnt problems the use to which they are put are important. associatedwith labor, whichhas been proxiedby population Fourdifferent estimates are presentedin Annex growth,the prefece is to fogcuon the generaldireeion of the tota factor productivitygrowt rathe than place muich 3, Tables4-7, al based on cross.economy significanceto the quantitativemagnitudes. Changes In the estimatesof alternativegrowth models.5 total factor productivitygrowth in the Caribbeancountries reflectmore than technical progress. In all Caribbeancountries, thereis considerablescope for improvingthe efficencyof the STheestimated models are neoclasskal or endogenousgrowth- factors of productionby using new technologiesand by typedepending on theestimated retums to scalefor the factors improvinghuman resources as well asby removingall kindsof of productions distortions.
13 COPINGWITH CHANGESIN THEEXTERNAL ENVIRONMENT
Table2.6: AverageInvestment and Savings,1980s and 19909 (in percent of CDP) A. AggegateInvestment and Savings 1980489 1990-92 1980.89 1990-92 1980-89 1990-92 Cos DomestcInvestment NatonalSavings FomignSaving Antiguaand Barbuda 39.5 24.0 14.9 11.8 24.7 12.2 TheBahamas 17.4 ... 13.1 ... 4.S 5.9 Barbados 19.S 1S.9 17.8 16.9 1.7 0.9 Beie 23.S 29.8 18.4' 22.6 S.0 7.1 Dominica 32.1 33.2 10.4 13.4 21.6 19.8 Doinican Republc 23.4 22.0 17.9 18.1 6.0 4.2 Grenada 3s 36.1 12.9 20.2 23.6 1S.8 Guyana 29.6 3&7 .0.6 -7.1 30.2 45.8 Haiti 14.7 6.6 7.2 2.3 5.3 4.3 jamaica 20.8 20.1 11.3 14.1 9.6 6.0 SLKitts and Nevis 37.6 44.3 23.5 2S.1 14.2 19.4 St Lucia 25.3 2S.1 12.3 9.4 13.0 1S.7 St Vincentand the Grenadines 30A 31.3 16.9 16.3 13.5 15.0 Suriname 21.1 17.7 13.7 1S.6 S.3 2.1 Trinidadand Tobago 22.7 12.6 19.1 16.2 3.7 -3.6
B. PublicInvestment Savings and Overai Bances 1980.89 1990.92 198089 1990.92 1980>89 1990-92 Public nestmnt PublicSaving Pub Sector OveralBalance Antiguaand Baibuda 16.1 2.4 2.1 -3.8 412.3 -5.3 TheBahanas 2A 3.0 1.2 O.S -2.1 -2.S ba4dos 7.4 4.9 3.8 3.2 -3.3 -1.8 Be1lze: 10.S 21.2 4.7 11.3 -5.5 -82 Dominica 18.2 17.7 2.3 2.S 41S.3 -14.3 DoninicanRepublc S.3 6.9 1A S.S -63 2.0 Grenada 2S.3 8.0 1.S 1.4A 24.1 -&6 Guyana 24.6 27.9 -25.1 -20.4 -51.6 -43.3 Haiti C 5 - 3.4 0.3 -2.1 a83 -3.5 Jamaica 9.1 7.0 41.2 7.9 -10.4 -0.4 St Kittsand Nevis 12.2 4.5 2.0 44 -9.1 0.6 St Luda 9.3 13.6 5.2 10.8 .4.0 -2.6 St Vincentand the Grenadines 12.5 13A 4.S 8.0 -.1 -SA Suriname 5.2 1.9 -13.3 -14.2 18.3 -15.7 Trinidadand Tobago 10.2 2.3 5.2 0.8 S.0 -1A
C. ForeignDirect Investment 1980489 1990-92 Antia andBarbuda 12A 8.9 TheBahaas 0.3 0.0 Barbados 0.3 0.9 Bele -02 3.8 Dominica 2.6 S.S DominicanRepublc 1.0 2.1 Grenada 3.9 &1 Guyana 0.4 12.9 Haid 0.4 .0.7 Jamaica 0.1 2.8 St Kttsand Nevs 8.9 18.5 St Lucia I1A 13.5 St Vincentand the C iines 3.0 4.3 Sudwname 40.7 -0. Trinidadand Tobago 1.7 2.6 - -not availabl. a. Centl Government bh ConsoklatedNonfinancial Pubic Sector. c. 1991-92esiated. Soure: Ar.ex 3 TabesIt o 3.
14 2 THECARIBBEAN EXPERIENCE WITH GROWTH AND EXTERNAL SHOCKS
Reet xerienein amca eosratd- tha te compositionof investmentis as importantas its egatv $rit rae ofra . e aia whereasinxth lat 198Qs an ead 1s investm_ent1to COP rais hihaeagdaot Spren,' wer.easoca.tedwith generally posiiv .rowh ratesof realGO;P pe aita.¢Whietol.X.sten andgrwath e orrelatedup to 1977,no significantcorruelation- exists thratr Wivt IWsmfta hr of COPhwO,eve., there ios a significantpoSitive effect on groth xtnsivecnomcreerchI eet yer:s-}haseen devotedto-the develomnt of morerealistic
;expkndtaccumulateonoigowtcptatandlbrgo* earlhumr thet suet capitai4brtcntgrwhmdl. Prvteinestandlnbo opsenneastointrimatinonao thg thrate,inameasure byhrve besi eneraterspSmitin extenamicgothiese throg leaPrnstng.oCiDPrtioalsoIthnase tigeifcantpoitataaive overgimeond. asste ia rdc flbr aondtriesTiittrcs (and rentrast wthe stiled laovrntam eede In the ciigonthecoomeof Dodenica,hnoKitts consuamationtoDPraigeeso,whbichhshadnvesativento 197d Neos 198 apueart haveScrowdedt prnvathe sepctr onvethenotptgohinheRin.Theiseealoyasfpo Grennaines gwth,cued humn capitaloratiosd o plevelate havstnpaticularl f rourrdicnt butaaHalso, be ter napproylatgeecnomd s oignfian.Ofe theportanr Suiasme, and Trwing idadI JandTo i latgo. ubi nexprieanvetoeryvariblies ontplsy disouraedmn
Telesimnatethseofecthedtriat.ftegot letwt eaieipc hsute rthelsonfreal GD alsoinu iedaperoxyc for thuan imublicmandinthe human cavptmitasedtod ane cfasitruaur(Anne 3,maabresou6ad7)Toteveloc tasporsriteectorn rdce ovrment nsu6mptionleminathe OhEC that wtheaesetim grwteycrated eqatosatureth
Beyortndauelationt of cptal anodulabor growth,n suges thahlohuman c bandstocksiapital yita and lsaborS exotse toeg Praio,,tealggso thas significantmpositivceRegieoint s.esbRortJ aoan ng e.Se countries Thisorisoinconducast withi thegovrnent m in thserhihn WnelsJconomie rot Cofl ProceeinicsSt Kiet ronumsrptioentnGPrtowhichhatoe hadnegatie,and Anenal S caLufee DeeSmtand Vicenoktanrd thek impactsvgonwthe eoututgowthein Thes Regtion.this Geae,tehmncptlso lvla
has artculrlyoccrredinuyaa, ait, ben vry arg an sigifiantOf he the COPINGWInTH CHANGES IN THEEXTERNAL ENVIRONMENT countries should have a large impact on their ExtemalShocks future output growth. Overview In the moderatelyperforming economies of Barbados,Dominican Republic,and Jamaica,the The external environment plays an extremely growth of investmenthas been important. These significantrole in determiningeconomic progress, or lack thereof, throughout the Caribbean
Table2.7: TotalFactor Productivity Growth in the Caribbean,East Asian andLow Middle-IncomeCountries Total Factor GDP Growth GDP Growth Due Productivity a to Factor Changeb Accumulationb
15 CaribbeanCountries (1979.90) 3.1 1.0b 2.1 10 East AsianCountries (1960.87) 4.7 c 2.1 2.6 58 Low MiddleIncome Countries 1.5 C 0.4 1.1 (1960-87) a. Simpleaverage of annualgrowth rates. b. Factorsof producdonin theCaribbean are physical capital and labor. In theother regions, factors of producdonare physical capital, land and labor. c. Simpleaverage of 1960.90growth rates. Source Annex3, Table9, andThomas and Wang. GovernmentPolicy and Productivity Growth: Is EastAsia an Exception? The World Bank, 1993.
countries could benefit more from increased countries. Historically,the Caribbeaneconomies wnvestmentand improvementsin its efficiency. have been relativelyopen economniesand exposed However, in Guyana, Haiti, and Trinidad and to a variety of -shocksarising from abrupt changes Tobago, labor force growth has been the most in the externalenvironment. Export commodities Important factor contribufng to growth. The have traditionally been concentrated in a few importaintofactd cntbucatin tborgrow. thes principal items such as bananas, sugar, and mnigrationof skilledand educatedlaborfrom these bauxite, and more recently, a few manufactures, countriesto North America and Europeaffected most of which have enjoyedpreferential access to their growth potential. These countries could a number of import markets. However,in recent benefit more by retaining such labor and/or years, there has been an increasing tendency attractingit back. towardsglobalization of trade,services and capital flows as global marketshave been liberalizedand In prindple, Dfl may supplement or substitute have becomemore competitive. Thishas brought domesticinvestment efforts. In St. Kitts and Nevis, into sharperfocus the Issueof extemalshocks and St. Lucia and St. Vincent and the Grenadines,a of how to deal with them. Generallywhen shocks and foreign componentsof were unfavorable,some governments treated them separationof domestic as temporary and relied heavily on extemal total investment suggests that direct foreign financing to ease the impact of adjustment. investmenthas been most importantto the growth However,when shocksturned favorable,they did of their economies(Annex 3, Table7), while lower not seek to reduce their external indebtedness. DR in Haiti, Suriname,and in Trinidadand Tobago Consequently,excessive external indebtedness in the late 1980sadversely affected growth in these contributedto a generaldeterioration in economic countries(Annex 3, Table5). performance.The analysisof theseshocks and the policy responseto them providessome insightson how these economies fared, but even more
16 2 THECARIBBEAN EXPERIENCE WITH GROWTHAND EXTERNALSHOCKS importantly,it offerssome guidance on how similar problemsof Dominica, St. Luda, and St. Vincent situationsmight be best addressedin the future. and the Grenadinesare discussedlater In the chapter. The first three countries are all oil Caribbeangovernments have adopted a numberof importers and were thus vulnerable to the oil measuresto addressthe impactof extemalshocks, shocksof the 1970s. Trinidadand Tobago,being induding fiscal, monetary and exchange rate an oil exporter, benefited from these price polides and in most instanceschanges in external increases. There were also significant swings in finandng. They have also involved structural commodityprices, both favorableand unfavorable, changesin the traderegime or an incomespolicy if where volatility posed a further challenge for the latter has been deemed appropriate to policymakerstrying to steer a prudent course. moderate aggregatedemand. The appropriate Many countrieswere also affectedby changesin type of responsehas dependedon many factors; interest rates as they went from negative real characteristicsof the spedfic type of shock - interest ratesin the 1970s to over 10 percent In whether it is permanent or not, or whether Its realterms in the early 1980s. primary impact is on the supply or demand side; the existingdegrees of freedomfor policyaction in The broad pattern of growth rates and external the particularinstitutional framework; and access,if shocksis summarizedin Table 2.8 and presented any, to external finandng. In this chapter, the graphicallyin Figure2.2 for the first four countries. resulting performance responseis estimated by In the 1970s,all three of the oil importerssuffered computinga number of measures: (i) how much adverse shocks, often exceeding several the countries increasetheir share of the global percentagepoints of GDP in a single year, while market(export promotion); (ii) the valueof imports Trinidadand Tobago experienced favorable shocks used per unit of GDP (import intensity);(iii) the When shocks became favorable for commodio1 decreaseIn the economy'sgrowth rate (economic exporters in the early 1980s, Jamaica and the compression);and (iv) increased borrowing to DominicanRepublic took someadvantage of them. address the shock (additional net external However, in the second half of the eighties and fin.icing). (SeeAnnex 4 for a discussionof the early nineties,a period when Jamaica,Dominican methodologyutilized.) Republic, Guyana, and Trinidad and Tobago undertook strong stabilization and structural The impact of the externalenvironment is assessed adjustmentprograms, the adverseshocks impacted in this chapter by consideringthree direct shocks negativelyon their growth performanceand the and one indirect one.'0 The direct shocksare beneficial responses originating from policy generated by changes in a country's terms of reformswere mitigated. trade", by the impact of changesin globaldemand on a country'sexports (export volume effect),and Jamaica by global interest rate changes on a country's external debt. Moreover, the resulting indirect Shocks shock reflects the cumulative impact of net increased extemal borrowing in response to In the 1970s,Jamaica experienced adverse shocks policiesadopted to addressprevious shocks. that averaged3.0 percent of GDP per annum.12 Thesewere primarily due to deteriorationin its Countriesare consideredon an individualbasis to terms of trade. In the 1980s,the averagevalue for reflect their distinct economicand sodo-political terms of trade shockswas much lower, but the features. Four Caribbean countries - Jamaica, cumulative effect of additional net external Dominican Republic, Guyana, and Trinidad and finandng increasedsteadily so that the total shock Tobago- are consideredin detailand some spedal in that decadeaveraged 4.3 percentof GDP. t°Othershocks such as Huricanes Gilbert and Hugo are not considered expictly. '2Thismay be interpreted as a changein the current account of a certainpercent of GDP comparedto whatIt would havebeen if tA country'sterms of tradeare affected by changesin accessto the extemalenvironment had evolvedin a 'normal"manner. preferentialmarkets. Normalis explained quantitatively in AnnexIV.
17 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
The adverseshocks in the 1970s were due Thefailure to adoptmore restrictive measures such primarilyto thetwo oil shocks(see Annex IV, Table as achievinga REERdepredation laid the ground 1).13 In the early1980s, a differentpattem evolved work for the sharpdeterioration in the middleof as depressedglobal marketswere somewhat the decadethat led to the adoptionof more compensatedfor by favorablemovernents in stringentpolicies. The lack of timely policy Jamaica'sterms of trade. Towardsthe endof the measuresalso had the unfortunateside effect that decade,the GulfWar againhad a majornegative whenthe globaleconomy did tum morefavorable impacton Jamaica.This time it affectednot only in the mid-1980s, Jamaica was not well-positioned the termsof tradebut alsohad a majordepressing to takefull advantageof this development.As the effecton tourisrm The adverseoil shocksin the authoritiesdepended unduly on externalborrowing 1970s,and again in the late 1980s,were supply- to get throughmost external shocks, the country's sideshocks. The appropriate response would have externaldebt rose dramatically,to over 200 suggestedimproving incentives for the supplyside percentof GDPin 1985. Thisburden severely and possiblyhigher gasoline taxes, and prudent limited the scope for productivenew policy fiscalpolicies. This would havemaintained the initiatives.Moreover, a largepart of the increase fiscalaccounts In balanceand reduced the needfor in debtwas not usedfor investmentpurposes but largeamounts of externalfinandng. Depressed ratherto maintainconsumption. The investment globalmarkets for J.-maica'sexports in 1975and sharedropped from 25 percentof GDPin 1972to again in the early 1980s could have been 14 percentof GDP in 1980. Only when the addressedby strongerexport promotion efforts, authoritiesintroduced a newset of policiesin the particularlythrough a depredationof the real late1 980s did the investmentshare begin to return effectiveexchange rate (REER). to around22 percent of GDP(Annex 4, Table 2).
PerformanceResponse Summary
The responseto both oil shockswas somewhat Jamaicasuffered severe adverse shocks in the similanadditional extemal borrowing, weak export 1970s and early 1 980s. An appropriateresponse performance,reduction of importsand slowing would havebeen to compensatefor the lossin downof economicgrowth. Forthe firstoil shock, competitiveness. The actual responsewas governmentpolides basically treated it as inappropriate,with too muchreliance on extemal temporary. However,following the secondcil borrowingespecially in the early1980s, and little shock,and especiallythe adverseglobal situation effort in developingand having in place of the eady1980s, it was essentialto adopt a appropriate macroeconomic and incentive differentapproach. This requiredsome stimulus frameworksin orderto bring aboutthe required for the supplyside, export encouragementand supplyside response. The economy experienced a definitely not the sharp increasein extemal period of sustainedcontraction and when the borrowingthat took place. This inappropriate globalenvironment turned favorable later in the policystance was further compounded in the early 1980s,Jamaica was overy burdenedby a high 1980s by expansionarymonetary and fiscal debt burdenand by poor investmentchoices to polides. takeadvantage of the situation.
'3lhe analysisin this report does not expidtly take into considerationa number of otherevents that were kp,-ortant for theJamaican economy. These indude the iosses incurred due to HurricaneHugo in 1989and alsothe devauationof theU.S. dogarin 1985. A largepart of the debt wasitn a basketof currencies(ncn-U.S. denominations) and so theextemal debt in U.S.doars rose sharply at that timeand in domesticresource ternsrose even more
18 2 THECARIBBEAN EXPERIENCE WITH GROWTH AND EXTERNAL SHOCKS
DominicanRepublic shocks increased to an annual average of 2.6 percent of GDP. In both decades,the volatility Shocks was relativelyhigh at 3.1 and 3.8 percent of GDP, respectively. The impact of the first oil shock in In the 1970s, externalshocks were adverseand 1973-74 was largely offset by favorable price averaged1.0 percent of GDP. In the 1980s,the movementsin commodityexport prices,especially
Table2.& ExternalShocks and GDP Growth Ratesfor SelectedCaribbean Economlee (period averages) 1972-75 1976-80 1981-85 1986-91 as percentof GDP
Terms of the TradeEffect 2.47 1.74 *0.18 0.96 Jamaica *0.26 1.12 0.95 0.46 DominicanRepublic .1.05 3.36 5.70 .1.32 Guyana 0.74 .3.25 *0.02 3.06 Trinidadand Tobago
ExportVolume Effect 0.70 0.23 0.66 *0.52 Jamaica 0.50 0.07 0.22 .0.35 DominicanRepublic 1.34 0.34 1.64 -1.44 Guyana 2.50 0.47 1.23 .0.77 Trinidadand Tobago
Interest RateEffect 0.13 0.14 .0.22 40.13 Jamaica 0.00 0.12 *0.13 .0.05 DominicanRepublic *0.01 0.21 4.23 *0.18 Guyana *0.01 0.05 *0.04 40.07 Trinidadand Tobago
Additional Debt Service 0.24 0.39 3.82 4.09 Jamaica 40.17 0.37 1.99 2.25 DominicanRepub;ic 0.75 2.79 8.06 12.22 Guyana *0.07 .0.19 0.00 *0.48 Trinidadand Tobago
Total ExtemalShock 3.53 2.51 4.08 4.40 Jamaica 0.07 1.68 3.03 2.31 DominicanRepublic 1.03 6.70 15.17 9.26 Guyana 1.69 -2.91 1.18 1.74 Trinidadand Tobago
GDP Growth 1.35 .3.56 -0.10 3.55 Jamaica 8.47 4.86 1.62 1.60 DominicanRepublic 3.62 40.60 -3.86 40.52 Guyana 3.50 8.06 -5.14 *1.48 Trinidadand Tobago a. Poitive valuesindicate adverse shocks whie negate valuesIndicate favorable shodcs. Source:Estimates based on counties'tables, Annex IV.
19 COPINGWITH CHANGES IN THEEXrERNAL ENVIRONMENT
sugar. However,as commodityprices eased in the Summary mid to late 1980s, the Dominican Republic sufferedmore severelyfrom the secondoil shock. Unfavorableexternal shocks in the 1°70s were The adverseimpact on sugarexports was further offset by favorable price movements in the compoundedby the reduction in the U.S. sugar Dominican Republic's exports (largely sugar). quota. In the 1980s,the shocksvaried from the When the second oil shock occurred, the favorablefall in oil pricesin the mid-1980s, which authoritiesfound it expedient to avoid domestic coincidedwith improvedglobal marketconditions adjustment and instead increase external for the DominicanRepublic's prindpal commodity borrowing. As the growing extemalindebtedness exports,to the precipitousrise in oil pricesat the was not used to increase investment levels or end of the decadedue to the GulfWar. addresssocial issues,the DominicanRepublic did not position itself very well to take advantageof PerfomianceResponse the improving externalenvironment of the mid to late 1980s. During 19e, 86, per capita real The net effect of the first oil shock was relatively expendituredropped 12 percent,income decined mild and there was little changein policiesat that 10 percent, and real GDP contracteddose to 6 time. On the other hand,the secondbil shockwas percent, while inflation reached unusually high not accomp tied by any favorable trends on levels, the balance of payments experienced commodityprices for DominicanRepublic exports unprecedenteddeficits, and the external debt so that an active responsewas calledfor. Yet, the burdengrew systematically. govemmentdid not passon the oil price increase to consumersand insteadallowed fiscal balances Guyana to deteriorate. Laxfiscal polides in the late 1970s and early 1980s were accompaniedby a rapid Shocks increase in external debt. Externaldebt rose quicklyfrom around23 percentof GDP in the mid- Guyana'sunfavorable shocks were morevolatile In 1970s to 86 percent of GDP by 1988. As both decadesrelative to the other three countries. confidencein the economy sagged,savings rates Althoughthere are considerabledata difficultiesin beganto dedine from levelsof around20 percent Guyana, estimates suggest that there was an of GDP in the 1970s to 15 percent of GDP by averageadverse annual shock in the 1970s in the 1985. The authoritiessought to maintainnominal order of 4 percentof GDP while the corresponding exchangerate parity with the U.S. dollar with the figure for the 1980swas 12 percent. The shocks resultthat the REERdeteriorated. Uttle actionwas were primarily due to terms of trade effects,but taken until the economic situation reachedcrisis the export volume effectswere also significantin proportions. In the late 1980s,the government the 1970s and the first half of the 1980s. In initiated policy measuresto stabilizethe economy addition to the oil shocks,Guyana's narrow export (Annex4, Table 3). The adverseexternal shocks base - sugar, bauxite, and rice -made it requiredthat overalldemand be curtailedand that particularly vulnerable to volatile global price compensatoryaction be taken for restorationof movements. the loss in external competitivenessdue to the supply-sideimpact of oil price increases.Instead, PerformnanceResponse the overall consumption share stayed relatively constantat around 75 percent of GDP (Annex 4, The policy performancewas uneven but, for the Table4). most part, the authorities relied on external financing(Annex IV, Table 5). The impact of the first oil shockwas offset to some degreeby large price increasesfor its principalexports: sugarand
20 2 THECARIBBEAN EXPERIENCE WITH GROWTHAND EXTERNALSHOCKS
Figure2.2: ExtemalShocks and Growth Ratesfor SelectedCaribbean Economies (negativevalues indicate favorable shocks)
25 - IKOMPUUUO 20 15 ~ 4~a-@ 10
4,0 I 5%3 = 43 -1- q- 9- q- 9~~- 9- - 9- . 9-9" -9 9 - -15
20 j-
16 TX_"i ;006 0l
-15
i ~~20 _-e
'10' ______
-10
.151.^ /\.t
25 -
10~~~~~~~~~~~~~~~~~~2 COPING WITH CHANGESIN THEEXTERNAL ENVIRONMENT bauxite. However, in the mid. to late 1980s, 1986 when oil pricesweakened. In the 1970s,it Guyana began to suffer from a loss of had a favorableexternal shock that averaged0.9 competitivenessowing to the rapid appredationof percent of GDP per annum. However, In the the REERin the period up to 1986 caused by 1980s, as oil prices dedined, the shocks were expansionaryfiscal and monetarypolides. Fiscal mostly unfavorableand they averaged1.4 percent defidts reached over 30 percent of GDP. The of GDP. The volatility of the shocksin the 1970s authoritiessought to keep afloat poorlyperforming was larger (10 percent of GDP) comparedto the public enterprises. Moreover, with the rapid shocksin the 1980s (7.6 percent of GDP). (See increaseof external financing,the extemal debt Annex4, Table7). grew rapidlyfrom around55 percentof GDP in 1972 to over 500 percent of GDP In 1991. It appearsthat little of this debt accumulationwas PedrformanceResponse used for productiveinvestment or to improvethe country'shuman resources (Annex 4, Table6). Trinidad and Tobago used the oil windfall from both oil shocksto help increase investment to Summary dose to 30 percentof GDP. Partof thiswas in the nontraded goods sector leading to upward Guyana suffered from unusuallysevere extemal pressureon the REER.The countryfailed to take shocks. 1Thesituation was compoundedfurther by adequatemeasures to stabilize revenuesso that erratic ptIicy responseswhich led to a crisis when shocks tumed unfavorable in the 1980s situation in the early 1980s. A significantpart of demand collapsed, investment shares were cut the problemwas the excessivestate-domination of back to as low as 13 percent in 1988, and the economic activities,either directly through state unemploymentrate increasedsharply, especially in ownership,or indirectly through price, credit and the nontradedgoods sector (SeeAnnex IV, Table foreign exchangecontrols, and the financingof an 8). This reflected poor policy choices and overextendedand ineffident public sector. Even engendereda generallack of confidence. Policy though Guyanahad significant accessto foreign did not adjustrapidly after the secondoil bonanza borrowing, the incease in debt qulcidy reduced in the early 1980s. Therewas some accumulation any flexibility for policy makers. The result has of extemal debt in the 1980s when the shocks been a heavy debt burden which was not used became unfavorable. The REERappreciated so very effectively. Access to external financing that it proved extremely difficult to diversifythe facilitateddomestic demand stimulation, induding economy- a typical Dutch diseasesyndrome (see the demand for nontradedgoods, and led to an Box 2.2). In retrospect,it Is evidentthat it would overvaluationof the REERand to a stagnating have been more prudent to iron out some of the economyIn most of the 1980s. peaks and valleys of oil price fluctuations and introduce policies suitable for increasedprivate Trinidadand Tobago sector participationin the non-oil sectors of the economy. This could have led to a more stable Shocks level of investment, help moderate the sharp appreciationof the real exchangerate, and in tum Trinidadand Tobagois an oil exporter so that its diversifythe economyand position it for sustained fortuneswere quite differentfrom most of the rest growth. of the Caribbeancountries. The most significant favorable shocks were the first and second oil Summary shocksand again the Gulf war effect in the late 1980s. On the other hand, Trinidadand Tobago Trinidadand Tobagowas hit by a varietyof shocks had major unfavorableshocks in 1975and againin that, on average,were favorableIn the 1970s,but
22 2 THECARIBBEAN EXPERIENCE WITH GROWTH AND EXTERNAL SHOCKS wereunfavorable in the 1980s.The shockswere efforts at export promotion were not very characterizedby their high volatility. The policy successful. responseto the first externalshocks was to stimulateinvestment and raise expenditureto Bananas Improvesocial indicators. However,failure to devise an appropriatecushioning mechanism The impactof pricevolatility for bananasIn the meantthat investment levels were subject to large DominicanRepublic and Jamaica has been modest, swings. The REERwas allowedto appredate typicallyaround 0.1 percent of GDP. However,for significantly,thereby diminishing the chancesfor someof the smallerislands such as Dominica,St. diversifyingthe economy from its excessive Vincentand the Grenadinesand St. Luda, the relianceon oil and gas and achievinga stable imipact has been quite large (Annex 4, Table10). sustainablegrowth pattern. Dominica. In Dominica, banana exports ShocksDue to SpecificTrade Categories experiencedfavorable shocks of up to 6 percentof GDPIn 1973 andthe largestunfavorable shock of Themethodology used in the previoussection can 2.7 percentof GDPin 1975. Beginningin 1976, alsobe usedto analyzethe impactof sugarand the externalenvironment became more favorable bananashocks, particularly the Importance of these for Dominica. During most of the subsequent shocksfrom a macroeconomicperspective, and years,Dominica also managed to increaseits share second, guidelines can be suggested for of the globalmarket, especially in the 1980s,with macroeconomicpolicy responses. the exceptionof 1989 - the year of Hurricane Hugo. The favorableextemal environmentof the Sugar early 1980swas treatedas permanentand an expansionaryfiscal policy was followed during that DominicanRepublic. The largestfavorable sugar period. The bananasector lacked a consistent shockwas in 1975,estimated at 6 percentof GDP; policyand most of the windfallsfrom risingbanana there were also favorableshocks in 1980 and priceswere passecdon to the farmers. This 1981. In each of these years,the favorable expansionarypolicy resulted in largefiscal deficits movementwas dueto higherprice rises. Among of over8 percentof GDPby FY85.A structural unfavorablemovements, the mostsignificant were adjustmentprogram (SAP) was in place during in 1976at 8 percentand in 1982at 3 percentof 1987.91. Much of the good performanceduring GDP(Annex 4, Table9). Again,price fluctuations this period is attributed to the prudent were the principalunderlying cause. Effortsto macroeconomicpolcies followed by the offset these unfavorableshocks by export governmentunder the SAP. promotionmet with onlymodest success. St VincentAnd The Grenadines.In St. Vincent JamaicaSugar is not asimportant in Jamaicaas in and the Grenadines,the shocksranged from an the DominicanRepublic, but volatilityin export unfavorable4.9 percentof GDP in 1976 to a marketswas largein someyears. In 1974 and favorable3.8 percentof GDPin 1990. In general 1975,there were favorableswings of 1.7 percent the extemalenvironment was favorablefor the ard 2.4 percentof GDP,respectvely, while the periodfrom 1986to 1991when globaldemand mostnoticeable adverse swing was in 1976of 2.2 conditionsimproved steadily. The favorable percentof GDP. In the 1980s, the volatilityof extemal environment,coupled with prudent sugarexports became steadily less important. As economicpolicies, was instrumentalin increasing in the caseof the DominicanRepublic, most of the realGDP growth to an averageof 5 percentper volatilityis attributedto pricefluctuations. Also, yearand in raisingpublic savings to 4 to 5 percent of GDP during the 1980s.The country was able to
23 COPINGWITH CHANGESIN THEEXrERNAL ENVIRONMENT take advantageof this situationin the late 1980sby should strive to limit domestic consumptionand export promotion. improve competitivenessin order to prevent the deteriorationof both the fiscaland extemalcurrent St. Lucia. For St. Luda, data for the 1980ssuggest accounts. Evenmore importantly,these measures that externalshocks have been generallyfavorable shouldbe accompaniedby other measureson the and reached4.9 percent of GDP in 1986 although supply side to improve competitiveness and this was offset to some extent by an unfavorable enhance the regulatory framework for a rapid shockof 2 percent of GDP in 1987. The count.; expansionin private investment. Over time, this was able to increaseits share in bananaexports. would lead to economic diversification and In addition, the quality of bananaswas steadily position the economiesto take advantageof the improvedthrough quality-based price incentivesfor emergingopportunities discussed in Chapter1. farmers. A well ariculated banana-sectorplan, coupledwith sound economicmanagement and a Condusions favorableextemal environment,enabled St. Luda to sustainreal GDP growth of over 6 percent per Economicgrowth of about 3.54.0 percent per year and to generatepublic savingsof about 8 annumis possiblefor the CaribbeanRegion during percentof GDP sincethe mid-1980s. the rest of the decade in an increasingly competitiveworld where the externalenvironment Impact of Future Changes in the Extemal is likely to changerapidly. This requires sound Environment macroeconomicmanagement, adequate regulatory measuresin place,and the supportingphysical and It is not dear at this stagewhat the full impact will human infrastructure in order to faclitate a be of the new trading arrangementsdiscussed in competitiveprivate sector to develop and flourish. Chapters5 and 6. Someestimates suggest that for Empiricalanalyses of the sourcesof growthsuggest sugarthe price effect couldbe a downwardchange that low human capital stocks, and the poor of around10 percent in 1993,rising to 25 percent effidency of investment and labor limit the by 1998. In the caseof sugar,for the Dominican economicgrowth of the CaribbeanRegion. Also, Republic,variations of about 1 to 3 percent of cross-economyestimates highlight that excessive GDP could be expected,while for Jamaicathey government current expenditure has had a could be of the order of 0.2 percent to 1 percent negativeimpact on output growth. By redirecting of GDP. governmentconsumption expenditures to human and physical capital accumulation,it would be Forecastingthe impact on banana exports is possible to raise the level and effidency of perhaps even more difficult, but if prices are investment,and improve the efficency of labor. assumedto changeby about 25 percent,then the Moreover,by developingthe sodal and physical effect could be at least2 percent to 4 percent of infrastructurenecessary for private investmentto GDP, and possibly even larger in the OECS take place, the economy'scapacity to generate countries. While these calculationsshould be additionalvalue added would be increased. viewed as preliminary,they do suggestthat the impact of the "banana shock' will have serious Like the EastAsian countries, economic growth in macroeconomicimplications. the Caribbeancountries is strongly correlatedto investmentand savingsrates and, in particular,to From the above analysis,it seemsthat the impact privateinvestment. In severalof the Caribbean of the new trading arrangements will be unfavorableof the order of a few points of GDP. This Impact demand shock should be treated as permanent. In the short term, policy measures
24 2 THECARIBBEAN EXPERIENCE WITH GROWTH AND EXTERNALSHOCKS r~~~~~~~~~~~~~~~~~~.....
E~~~~~~~~~~~~~~~~~~~~~~~~~~~
',"._g~~~~~:::i~ " i~~~~~~~~'1 ...... E...... iis..~ , iZ:iu" i. E ~~~~~... ig!.: i0 UsS~~ ~ ~. ....-...... "...... lS ~~~~~~...... I. C _w" . . ..'AK 1~~~~~. M ,
f ou 2...... COPINGWITH CHANGES IN THEEXrERNAL ENVIRONMENT countres,foreign savings have been large in the risein globalinterest rates in the early1980s was past. The positiveexperience of both regions particularlyharmful to those countries that pointtoward the adoption,in all of the Caribbean borrowedfreely during the 1970s,when real countries,policies that encourage increased interestrates were dose to zeroor negative,only domesticsavings and investmentefforts and that to find that the variableinterest rates on these raisethe productivityof the factorsof production, loans led to onerous fiscal and balance of labor and capital. Thesepolides should be paymentsproblems in the 1980s. Moreover, these pursuedvigorously. They would help position the developmentshad two major negativeeffects. Caribbeancountries for more rapid growthand First, they delayedthe introductionof needed also help developtheir resilienceto withstand structuralchanges; and second, more recently, they externalshocks. set in motionan externaldebt spiralthat set the stagefor a precariousdebt situation in a numberof In Guyana,Jamaica, Haiti, and Trinidadand countries. Tobago,polides aimed at reversingthe brain-drain of nationalsto NorthAmerica and Europe would The only oil exporter among the Caribbean be benefidal.Indeed, recent growth in informatics countries,Trinidad and Tobago, enjoyed favorable could fadlitate repatriationof skilledexpatriate movementsin its balanceof paymentsdue to the workers in these and other countries and oil pricerises during the mid 1970sto early1980s. contributeto or accelerateeconomic growth. However,the failure to providean appropriate incentiveframework for its non-oilsectors reduced Estimatesalso suggestthat the OECS countries thebenefits of theoil pricewindfall. in the caseof could accelerateoutput growth by increasing the DominicanRepublic, Guyana, Haiti, Jamaica, investmentin humancapital. With changesin the andSuriname, expansionary demand management externalenvironment caused by the erosionof polides were followedand, as a result, their preferentialtra&ng arrangements and the creation economicperformnance was affected. On theother of an enlargedNAFTA, the OECS will need to hand, macroeconomic performance was furtherimprove the quantityand qualityof their significantlybetter in the countriesthat belong to capitaland labor. Thesame condusion applies to the OECSand in Belizethan in the rest of the the other Caribbeancountries. Moreover,the Caribbeanand in mostof LatinAmerica. other Caribbeancountries need to improvethe efficiencyof investmentand, in Guyana,Haiti, and The lessonfrom these experiencesis that the Trinidadand Tobago, the effidencyof labor. In all impactof changesin the extemalenvironment has countries,improving the efficiencyof capitaland to be rapidly addressed by Caribbean labor would requiredosing the existinggap in governments.Access to extemalfinancing should technicaland vocational education. not substitutefor necessarypolicy changes. For this reason, It Is important that Caribbean The major extemalshocks that the Caribbean governmentsbecome fully awareof polidesfor countriesexperienced over the last25 years relate moderatingthe impact of both favorableand primarilyto the adversemovements in theirterms unfavorableshocks. In broadterms, govemments of tradedue to the two oil shocksof the 1970sand shouldcontinue to focus on maintainingfiscal one in the late 1980s. On average,each shock balance,increasing public sectorsavings to 5.8 generatedan adversemovement in the balanceof percentof GDP, and remainingprudent when paymentequivalent to severalpoints of GDP. resortingto foreign borrowing,espedally with Although some of the Caribbeancountries variablerates. adjustedrapidly to theseextemal developments, the policyresponse in a numberof countrieswas In the short-ternmthe generalresponse to an to relyexcessively on externalfinancing. The sharp unfavorabledemand shock should be to curb
26 2 THECARIBBEAN EXPERIENCE WITH GROWTH AND EXTERNALSHOCKS consumptionand to maintainsavings levels, and to improvethe economy's competitveness in order to expandexports. This may best be achievedby not resortingto expansionaryfiscal and monetary polides.A contractionin demandwill leadto a fall in outputand increase unemployment if wages are sticky. Over the medium term, governments shouldstrive to maintainstable macroeconomic andregulatory frameworks that encourage savings andinvestment, and support measures to improve the quantityand quality of the overall human capitalstock.
27 CapitalRequirements and Sources of Finance
X.: -1; 7~~~. .
...... ~ ~ ~ ~ .',...... -...... ,,...... ,, . .... '"~.'...'..-...*...'.- . -
.... ceg~t*aeaigpaxnteitmtoafna .... t.....
Detle iningthe Need for nernalFdnan t wasrelatively low. aThe impliedICOR is vey high by the standardsof manydeveloping countries. In Faco Determiningthe Need for ueblrnfinance part thNsmay be dueto the relativelyhigh cost of provicinginfrastructure In smallisland economies A fundamentaldetemiinant of the need for but it alsoappears to stemfrom a large pubUc extemal finance is the relationshipbetween sectorpresence that is a st partaly sheided savingIs,investrentand goth whichis examined from the disdpine of marketforces. By way of in Chapter2 of thisreport. Thebroad picture may contrastto the Caribbeancountries, the ICOR ina be summarizedas fonbows.Iwnestment averaged numberof hi-tIperformingEast Asian countries about 20 percentof GDP for the Regionas a averagedf2.5over the1980s. whole throughoutthe 1980s,yet overa0bgromnh
29 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
Domesticsavings In the Caribbeanhave averaged Independentsubstitutas. Too low a rate of between16-17 percent of GDP throughoutthe nationalsavings may impair perceptions of country 1980s.Most of the savingscame from the private creditworthinessso ,hat foreigncreditors wil not sectorwith publicsector savings averaging only 1 be forthcomingor will only lend at muchhigher percentof GDPalthough those figures should be interestrates. Furtieermore,in the caseof project treated with caution becausethere are large specificlending many foreigncreditors will not variationsfrom countryto countryand there have lend at all unlessthere is an appropriatelevel of beensome important changes in recentyears that local counterpartfunding. Hence,there Is a areexamined in greaterdetail later In thischapter. symbiosisbetween national savings and foreign Nevertheless,it is dear that the externalcapital savingswhereby a nationalsavings effort makes it requirementsof Catibbeancountries can be botheasier and cheaper to borrowfrom abroad. reduced only by improvingthe efficiencyof Investmentand by increasingthe levelof savings- Over the past ten years,the aggregateextenal particuladypublic savings Thosetwo goalsare financingneeds of thefifteen CGCED countries (as mutuallysupportive because public savingscan indicatedby the balanceof paymentscurrent bestbe increasedby divestingthe publicsector of accountdefidt) has fluctuated considerably from a productionactivities that can be managedmore highof US$2.5billion In 1983to a low of US$0.6 effidentlyby the privatesector while enabling the billion In 1988. As may be expected,the three public sector to focus its efforts on the largesteconomies of the Region- the Dominican developmentof key Infrastructure,both physical Republic,Jamaica, and Trinidad and Tobago - have andhuman. accountedfor a largeportion of overallfinandng requirements.Whereas the DominicanRepublc The relationshipbetween Irvestmentand Its and Jamaicahave generallybeen in deficdt, sourcesof financewas set out very well in the however,the requirementsof Trinidadand Tobago World DevelopmentReport of 1988 which have fluctuatedvery widely from year to year containeda deardiagrammatic presentation of the becauseIts petroleumbased economy has been basicconcepts (see Figure 3.1 below). Sourcesof deeplyInfluenced by majorswings in international finance encompassnational savingsthat are petroleumprices. If Trinidadand Tobago is taken generated within the Catibbean countries out of the picture,the high and low financing themselvesand foreign savingsthat may be requirementsof the remaining14 countriesrange mobilizedby borrowing from abroad. or by arereduced to US$1.5billion in 1983and US$0.5 obtainingequity from abroad. To someextent, billion in 1988. On average,the financing foreignsavings may be considereda substitutefor requirementshave amounted to about8 percentof nationalsavings in the sensethat borrowingfrom GDP but there are large differenceswithin the abroadmay compensatefor an insuffidencyof group. In the caseof the smallerOECS countries, nationalsavings, but they are by no means for example,a currentaccount deficit exceeding
Figure3.1: DomestIcInvestment and Soure of finance
Public + Private . Public + Private + Foreign [mestment investment saving saving
Pubc Public Private - Private + Foreign nwestrnent saving saving imestment saving
PublicDefidt fPteSufpe CurrentAccount Deficit
30 3 CAPITALREQUIREMENTS AND SOURCESOF FINANCE
20 percent of GDP has not been uncommon, export performance. Nevertheless,in absolute which indicates that these economies are; dollar terms, it is the Dominican Republic and extremely dependent upon external sources of Jamaicathat receive most of the remittancesto capital. Caribbeancountries. In 1992, their share of the total amountedto over60 percent The high import dependencyof most Caribbean economiesis sometimesdted as an explanation Althougha large part of remittancesare used by for theit high externalfinandng requirements.The recipientsto finance consumption,there is also ratio of merchandiseimports to GDP Is in the evidencethat remittancesmay, in part, finance range of 25-40 percent for many Caribbean housing and assodatedinfrastructure as well as countries and, in the case of the smallerOECS smallbusiness ventures. Irrespectiveof the use to economies, it is as high as 60.70 percent. which they are put, however, the significanceof However,while this may appearto indicatea high remittancesfrom the perspectiveof the present import dependencyin comparisonwith the 10-20 analysisis that they boost the current account percent ratios that generally prevail in Western position of the balance of paymentsand reduce Europeand North America,the Caribbeanratios externalcapital requirements. Given the largeand are not especiallyhigh when relatedto other parts stil growing diasporaof Caribbeannationals and of the developingworld such as EastAsia (Korea former nationals overseas, it is likely that 27 percent,Thailand 33 percent,Hong Kong 115 remittanceswill continueto be a significantsource percentand Singapore175 percent). Thosesame of income for many Caribbeancountries in the East Asian economies have far lower external medium-termfuture. financing requirementsand some of them have been running balanceof paymentssurpluses for Multilateral and bilateral finandal flows to the many yearsas a result of maaoeconomicpolicies Caribbean countries have dedined substantially that foster savingsand strong export4edgrowtt. since the early 1980s. It can be seen from AmongstCaribbean countries, only The Bahamas StatisticalAppendix Table 1.21 that net lending (seeBox 3.1) has been able to avoid high extemal from multilateralsources amounted to only US$72 financingrequirements albeit with a much slower million in 1992 comparedwith US$546million in rate of growththan commonlyprevails in EastAsia. 1982. Net bilateral lending actually tumed negativein 1992 (US$44 million) comparedwith Another source of foreign exchangeincome that US$597million in 1982. This downwardtrend is has benefitedmany Caribbeancountries is private unlikely to be reversedand there may even be transferswhich indude remittancesfrom overseas further decines in the future for the following residentsas well as pensionsreceived from abroad reasons: by local residents.It is estimatedthat, as a resultof steadyemigration over a pefiod of thirty to forty * the dissolutionof the former Soviet Union and years, well over two-and-ahalfmiion people of the changesin EastEurope has led to major new Caribbean origin are now resident in North daims upon the resources of development Americaand Europe(see Box 3.7 for a discussion agendes. Recent moves towards peace in the of the CommonwealthCaribbean). Balanceof Middle East are also likely to result in new paymentsdata indicatesthat net remittancesfrom internationally financed programs of those overseasresidents have more than doubled reconstructionand development. Meanwhile, in dollar terms over the past ten yearsfrom about efforts to ameliorate deep-seatedpoverty in US$350million in 1982 to US$860million in 1992 Africa continue to absorb a large share of (seeTable 3.2). concessionaldevelopment finance;
On average,remittances are now equivalentto *in the _ase of some important Caribbean about 12 percent of foreign exchangeearnings countries, many development agencies find from exportsof goods andservices although, in the themselvesconstrained by country exposure cases of Grenada and Haiti, their relative limits and/or by perceptions of country importanceIs twice as great- reflectingtheir weak absorptivecapacity;
31 COPINGWITH CHANGESIN THEEXTERNAL ENVIRONMENT
Table3.1: Curent Account Balane of CaribbeancoauM. 190092 foercet ofCDA 1980 1981 1982 1983 1984 1985 1986 1987 19a8 1969 1990 1991 1992
Anlgu and Bwbuda .25.1 -343 .31.7 10.0 41.2 4123 55.s 28.2 25.8 .22.4 15.4 .10. -10.6 TheB ahaam 3.8 6.2 53 -29 .3.1 -33 .1.6 -7.7 .2 -co 44 -7.0 44 abados -2.9 412.2 s As8 1.5 45 03 4.1 1.2 1.6 -2S 0.9 4.4 Bela -s5 .5.3 -7.4 .72 61 461 41.2 as -3.8 -92 48 as 4.2 Doninic .50 3s.4 417.6 413.3 .21.7 .20.9 -7.0 -S7 .9 00 -24S 212 -13.6 Dominn Republc 10.2 -S8 .. 7 -. - 3A6 -7.0 42 8S -3.6 59 .3.7 .3.3 -. 7 GCred 417.8 -31.4 .32 31.S .19.8 .22.0 -24.6 1Z4 14.4 -19.3 .16.5 -11 412.9 Guyaa 4185 .343 .31.8 -33.5 .24.3 -29.8 -29.1 -33.6 -240 43.4 -349 .53.9 -2a9 haitI 44 -11.9 40 3 .7.7 &S .62 .7.1 .60 42 .5.7 -44 -2.7 ,tamc -S5 .1.S .123 12.2 .43.9 .1o *3.6 S -. 1 11.9 410.5 A3 0.8 StKiltsandNo*s 41.0 -9.2 411.3 29 5.3 -S.3 -2.9 -9.7 -21.2 *32.3 -29.6 -17.1 41.7 St. Luda -24.8 -2.9 .22.1 .7.0 -12.1 as .2.0 -5.1 5.7 417.0 -141 482 -4L9 St VincentadfltheGrCeadle .22.7 -7.8 .12.7 413.3 -7.5 .5.7 47 .22.9 -S.6 .12 12.7 .204 .2.1 Swname 4S *12.2 14.8 .16.3 4s .4 -2.2 .0.6 3.8 9.1 4t -S1 .t.0 TdnldadandTobap 7.7 .8 -7.6 12.7 47 l4A 413.0 .8 2.5 -1.4 86 40Q4 IS MEIKORAINIM 17EMS.- tndonesba 3.6 49 -5.8 -7.5 -2.2 .2 -5.1 -3.0 -1.8 -4A -3.1 -3.6 -3.0 Malaysa 41.3 10.0 13.S 7 .5.0 -2.1 40.6 7.8 5.0 0.4 Z3 49 2.9 Thaiad 469 -7.7 .3.1 -7.6 .54 44 02 4.0 -3.0 -3.7 48 .7.8 6.1 Hong Kong 46 -. S 3.6 *Z0 4.5 S.6 4.1 6.2 S.1 8.0 4.9 3.0 2.S KoMea a6 48 .3.6 .2.0 1.5 41. 43 7.5 & 2.4 .0.9 3.0 41.S Snapoe -13.3 108 44 -3.5 -2.0 Q0 1.9 .0.5 4.0 9.0 S5S 87 6.9 TaIwar Chkina -2.2 1.1 4.6 8.4 11.8 148 21.6 17.8 8.3 7.8 6.9 7.1 3.8 Oral avera8e 4.8 5.8 48 .3.7 Q0 1.S 3.8 5.0 3.7 3.2 0.3 0.6 .0.0
Sources tionaoGovemms BESO,and IBMO. 3 CAPITALREQUIREMENTS AND SOURCES OF FINANCE
* many prominent bilateral sources of Union has also addeda numberof hrge developmentfinance appear to be suffering daimantsto the list of IDA-eligiblecountries. from developmentassistancefatigue.* As a result there will be far fewer IDA Economicrecession In Europeand North resourcesall round;and Americahas tumed attention inwards; * many Caribbeancountries now have a * someimportant sources of financeare short relativelyhigh per capita income whidc of funds. IDA is a caseIn point. Successive makes it increasingly difficult for IDA replenishmentsbarely keep pacewith developmentagendes to accommodate inflationwhile the numberof daimantson additionallending within the frameworkof IDA resourcesis increasing. Since1980, their policy guidelines,particulasty if the some 30 countries have been "reverse lending is on concessional terms. graduated'from IBRDto IDA- manyof them in Africa.The recent dissolution of the Soviet
. S~~~~~~~~~~~~~~~~~~~~~~~~~~~.. ...
£ome~cnoe~ ~~ ~~~~~~~~~~0ta ~v et~~leO?la siae VtAaUS11990 per cptaIi 92
upnanhe1puse-weenerg6d onrthe bala``eof a .r .S~,~1*.tum~dtbcurrent.accountsurpu into -a deficit, th0eiisaeaL
only4~a~enoI the~8Os. CD?durbi'U,. U '~~.s*.~*. ..~dfidts~fi 5~a~elU*m priate,~~e.
The keytwas this prf~nmir~t ~etarypolicy.te.rvMi pbc e bon~cvtli~~ti~*tt.asb~ept lw~Mn# %~toxftya~paced poncntailn~ Itla-theto morethrtntlWthejf~j ~belv~s.p ~ BahamSW
'S~ ~ ~ ,t W~~~~~~~~~~~~~~~.
In hecTentIa~fli~yen~ accuntdellto so hs alostdoubed~ reatie tems ndIfio IO he ang 0(721;~r~i~the ~lrect~ati t W~ Jncra~I a tae expnsIo In te pulic IvesoentCCog'P io.pgadbaic~orasiutu* l .weage ~ ~ weiae.asfth h
swaesf p*bldy~ua.~ited.ebt cregnOnacetowi~i Pdedthse ~il1kinvstent cnsttue 33n COPINGWTH CHANGESIN THEEXTERNAL ENVIRONMENT
Table3.2: Net PrvateTrisfen (US$milfflon)
Combn 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992
Antsaand 9.0 9.8 11.2 12.0 11.9 12S 14.5 14,5 14.9 17.S 16.0 III 16.8 Bamuda Thesatwm 19.7 413.9 17.7 .10.3 .14.6 -14.6 14.0 -1.828.9 17.9 16 -7.1 4124 Barbados 23.8 27.1 20.4 20.7 20.7 18.8 23.9 263 34.2 3S.2 39.3 38.7 29.1 aene 16.S 18.S 10.9 11.2 12.5 19.0 11.3 15.2 12.9 16.4 tS.3 15.2 19.2 DofnhSca 6.3 S8 8.6 50 6.3 6.S 5.0 8.8 10.8 11.7 12.8 12.7 14.3 Dominan 183.1 1763 190.0 195.0 205.0 242.0 242.0 260.0 288. 300.5 3148 329.5 345.0
Cenada 9.6 10.4 11.0 10.8 11.7 103 9.8 14.9 15.6 17.9 21.6 23.7 26.S Guya .60 0.2 .9.1 -1.3 2.6 11.4 10.3 09 12.5 14.0 13.0 13.6 13.0 HaI t 52.0 64.8 49.7 42.5 45.0 48. 52.0 563 63.4 59.3 61.8 65.0 70.0 1amc 81.8 123.3 134.5 94.7 80.4 153.2 111.6 117.2 436.5 299.5 159.0 160.7 248.2 StKittsand 6.5 9.1 8.8 7.6 tQ4 8.3 9.1 11.4 107 9.3 8.0 16.1 12.3 NevW St. Luca 11.1 14.9 13.5 13.7 13.7 14.8 17.6 19.9 14.1 13.7 15.2 17.3 17.7 St Vh1centand 12.0 12.S 13.0 16.4 13.0 10.0 7.4 6.9 7.S 8.4 9.4 9.4 12.9 GrenaiOnesGnes Sudname 6.S 3.7 .2.6 .0 t7.4 .4.0 0.5 14.6 27.8 35.3 41.9 55.4 59.9 Trinidadand .43.7 .67.S .81.5 71.S .70.8 -5S.2 .303 .24 .23.3 419.4 -21.3 16.3 16.0 Tobago
TOTAL 34S88 394.9 360.7 338.5 340.4 481.1 469.7 5346 897.6 801.3 696.2 749.0 856.5 a. 1991-92are estimated Sourcr IMF. 3 CAPITALREQUIREMENTS AND SOURCES OF FINANCE
Thededine in multilateraland bilateral finance is Privatelending to public sectorentities in the particularlystriking when expressed In per capita Caribbeancountries has been volatilebut the terms.During 1980.82,net flawsto Caribbean trendshows an evensharper reversal than offidal countriesfrom multilateraland bilateral sources developmentassistance (see Statistical Appendix averagedUS$25 and US$34, respectively. Those Table1.21). In 1992,there was a negativeflow figuresfell to US$9and US$2In the 1990.92 of US$207million to the Caribbeancountries period. The espedallysharp decine in net from privatecreditors compared with a positive lendingfrom bilateral sources was offset, to some flow of US$214million in 1983.The 'debt aisis' extent,by an increasein offidalgrants which rose of the earlyeighties has evidently taken its toll in froman average of US$12per capita in the 1980. terms of lender confidence. Perceptionsof 82 period to US$24 per capita in 1990.92 countrycreditworthiness are difficultto measure accordingto balanceof paymentsdata. The data becausethey are not alwaysbased on objective on offidal grants presented in Statistical criteria. Nevertheless,the InstitutonalInvestor AppendixTable 1.21 show a much sharper joumalpublishes on a regutarbasis the resultsof increasebecause they indude debt-forgiveness a survey In which between 75 and 100 which,in 1991,figured prominently in several investmentbanks are asked to ratecountry credit countrydebt-workouts. However, not- on a scaleof 1 to 100and that surveyprovides withstandingthe importanceof debt-forgiveness, someinsight into marketperceptions. Not al it doesnot constitute-new money'nor doesit Caribbeancountries feature In the surveybut representa long-termtrend. Hence,balance of resultsfor six importantCaribbean countries are paymentsdata is more usefulfor purposesof shownin Table3.3 below. .,sessing the trendin overallfinandal flows. On that basis,total net flows from offidal sources The surveyreveals quite a wide rangeof both dedinedfrom US$70per capitain 1980-82to ratingand rankingfor the Caribbeancountries. US$31per capita in 1990-92. Fourof the sixcountries surveyed are ranked
Table3.3: Perceptions of SovereignDebtor Creditworthiness 1993Result 1985Result RetinR RUAn REtn Rank Uafbados 3S.2 52 30.9 60 Ttnidadand Tobago 29A S8 45.2 4S Jaaca 21.9 79 13.8 89 Oomir-,anRepublic 19.2 90 13.3 91 HahitI 8.0 125 7.9 102 Cmnada 7.5 128 83 99
H.lest tanked (Swltednd) 92.0 1 (U.S) 961 1 Lowest anked (Sudan) 5.7 133 (Ncara) 4.4 109
Source:Instuional Investor,September 1993 and September 1985 Is
35 COPINGWITH CHANGES IN THEEXrERNAL ENVIRONMENT
Table3.4: Direct ForeignInvestnent to CaribbeanCountris, 1980.92 (US$million) A_ 190 1981 1962 1963 1964 195 196 96 198 169 190 199 192 ATeigi and a=bda 19.6 22.3 2.5 11.7 4.4 156 25.0 352 59.4 46.5 418 44.S 244 4.1 344 2.8 40 49 -30.2 *13.2 10.8 367 25.0 7.3 0.0 7.4 Bados 2.2 7.2 41 2.3 .4 2.6 .0 4.6 10.6 54 9.9 21.0 17.2 sdze .03 67 4160 .24 .42 2.0 4.2 6.9 1Z9 19.0 17.2 12.8 16l DonVnlca 0.0 0A 0.2 0.2 2.3 3.0 2.7 9.7 6.9 61 7.2 10.7 11 DonilaRepubAc 62.7 79.7 *1.4 22.0 665 37.0 30.0 89.0 1061 110.0 132.6 145.0 179.0 G'enaa 0.0 0.0 1.9 2S 2.8 4t 45 t4.7 tS10 tQS 13.0 153 231 CAn *Z0 -12.0 o0 so 7.0. 14.0 42.0 45.0 "IAi 13.0 .3 Z. A4 45 4.9 11.0 130 7.0 4.0 -36.0 .5 _ hamaka 27.6 .11.5 .18 *tA7 *12.2 *9.0 46 3S 42.0 5.1 137.9 684 101. St Kuit d Ne*s 1.0 09 t.3 2.2 1.8 73 9O 1.11 40.8 48 214 23.9 St Luda 3Q9 362 26S 10.0 120 17.0 16.6 16.1 29.4 32.8 45.4 S7.7 74.0 StvlncentaVdthe 1.1 0.5 06 2.) 1.4 1.8 7.4 SO 9.1 10.6 7.7 1QO 93 G~n Suwtne 3.1 4S.0 22.7 10.1 27. -7.8 Q7 3.1 *807 -1714 A01 24.1 -32.9 Tdnkdad 143A 183.3 211.0 81.5 113.2 49.7 19.9 33.1 62.9 1469 109A 1441 1SS.1 and Tobago TOTAL 3064 399.6 270.5 1372 216. 100.S 1233 3068 2814 342.3 521.6 S91 6561 a 1980485Incudes oter captaL b. 1992 is prelimary.. c. 1980484incudesother capitaL - = not avaab Sowces: Nadonalgovemments and IBRD. 3 CAPITALREQUIREMENTS AND SOURCESOF FINANCE towardsthe bottomof the list. However,with Trinidadand Tobago is no longerthe singlemain the exceptionof Trinidadand Tobago,there recipient TheDominican Republic Jamaica and appearsto havebeen a generalimprovement in St. Ludahave become increasingly attractive for creditworthinessperceptions for Cafibbean the foreigninvestor (see Table 3A). In other countriesover the past severalyears Even words,foreign investment is beingspread more thoughthe ratingof Tfinidadand Tobagohas widely throughout the Caribbeancountries slippedcit still rankswith BarbadosIn the upper nowadays.Prospects for fostering DFI still further 50 percentof naeionswhich indicates that, while areexamnined later in thischapter. those two countriesmay have accessto the intemationalfinandal markets, It will not be on OECDdata suggeststhat foreigninvestors are the most favorableterms. Recentborrowing seekingportfolio investment opportunities in the experienceconfirms those indications. Caribbeanas well as opportunitiesfor direct investment in physical assets. Portfolio Trinidadand Tobagoborrowed US$100 million investmentcan be beneficial for the host fromthe Eurobondmarket in October1992 with countriesby lowering the cost of capital. a 5 yearbufet profileand 11.5 percent interest. However,the absorptivecapadty of many Theissue price was 99.0. In 1993,it successfully Caribbeancountries for this kind of investment launchedanother bond issuewith a similarterm capital is not large and there may be the profilebut at an interestrate of 9.5percent. The possibilitythat too greata capitalinflow may more advantageousterms of the 1993 issue have adverseconsequences if it causesthe reflects,in part a generalsoftening of interest exchangerate to appredateunduly. SomeLatin ratesbut alsoindicates a betteracceptance of Americancountries, notably Chile and Mexico, Trinidadand Tobago in themarket. haveexperienced difficulties of that kind and there is evidencethat Jamaicasuffered from Suppl;ers credits constitute a special sub- similarproblems in theearly 1 980s. categoryof privatelending. Being trade-driven,. it is not subjectto the samedegree of volatilityas Privatenon-guaranteed lending is more difficult private lending from financdalinstitutons, to keeptrack of becausethe database is quite especiallyin caseswhere the suppliers can secure weak. However,in the medium term, it is insurancefrom home country offidal export reasonableto supposethat therewould be a agencies. However, It can be seen from direct assodationbetween foreign investment StatisticalAppendix Table 1.21 that suppliers andprivate lending because investors commonly crecditssatisfy only a smallpart of the extemal furnisha combinationof both equityand loan capitalrequirements of the Caribbeancountries capital to local ventures. Furthermore, and they are unlikelyto becomesignificantly enterpriseswith foreignequity are likely to havea moreimportant more outwardlookingoverall financial strategy and doser links with overseas finandal Direct foreign investmenthas financed,on institutions. Balanceof paymentsdata lends average,about 20 percentof the extemalcapital supportto that view. Althoughprivate non- requirementsof the Caribbeancountries since guaranteedlending is difficult to identify 1980.More recently, It hasbecome of increasing separately,it is dear from Table3.5 that the importance,although it still doesnot compare overalltrend of foreignprivate finance other than with therole of foreigninvestment in someof the directInvestment has been strongly upward over high performingcountries of EastAsia suchas the lastten years(notwithstanding the single-year Singapore(see Box 3.2). Whereas,in the mid- reversalof 1992). 1980s,DFI to the Caribbeancountries amounted to US$100-200million per year,with muchof it CondudingOverview destinedfor the Trinidadianpetroleum and petrochemicalsectors, the Caribbeancountries Table3.5 providesan overviewof the diverse haveattracted US$500.600 rmilion in eachof the trendsin the sourcesof externalfinance to the pastthree years - equivalentto onehalf or more Caribbean.The steadydedine in financefrom of the countries!overall current account deficit. officialsources and the increasein financefrom
37 COPINGWITH CHANGES IN THEEXrERNAL ENVIRONMENT private sourcescan be readily seen. The The Management of Extemal finandng inaceases In private finance, induding Requirements remittances,have been suffidentto offset the decine that hastaken place in officialfinance Towardsa Strategyfor the CaribbeanCountries overthe pastdecade or so. Yet, the potential dearlyexists for privatefinance to increasemuch An overviewof pastfinancing trends and current further provided it meets with a friendly developmentssuggests that offidal sourcesof institutionaland regulatoryenvironment and financeto the Cafibbeancountries are likelyto providedthe policyframework is conduciveto becomeincreasingly supply-constrained. Byway economicgrowth and to the enhancementof of contrast,the internationalfinancial markets are countrycreditworthiness. expandingrapidly by mobilizingincreasingly large
...... Bo~ ...-. hePardim.32: o Sngapore
npa allucia a but with a populationof some3 million,has been remarkalyue'ssfurlInraising pecatancmes from a levelthat was far lowerthan any Caribbean y 1'ttat isto hd onlyby TheBahamas. Unlike The Bahamas, however, ecovioniIcgrowth it. Singjporeis beingsustainedat an annualrate of 7-8percent and it hasalready rasevig tand o leveloft:he ted Kingdomititsformer colonizer. T o seb i ravbaiedon .aneconomic policy of openness and it is no coincidencethat The Bahamas Is lsoart unuuAlSly open enomy by any standards. It has virtuallyno tanffs.. iest4.tionson trade. _hcrtly after independencein 1959, the Govemment of Singapore, acknowledgingthat It.lackedagricultural potential, natural resources and prior industrialexperience, mbarkedupoaprctivestrategytattract foreigninvestmentfthrough a carefullystructured program _f _scal and industrial_ncentives fo_us.ed _n particular, but not exdusively,at multinationalcorporations. It wasa strategythat active aimedat establing an aequateenvirionment for privateenterprise and forjtbeforeign Invesi In the' context r of a secure-andstable:political and macroeconomic framework. It resulted_Inmassive Inflows of lorelgn.capitaland in sustain-eddoubledigit growth over many years which enabledthe rovemmen.finan.celargepublic investets'ln heailthi,housing and education. Those Binvestmentsin humaninfrastructure provideda fea into the processof industrializationby hsisandproductivityote laborforce and'thereby furnishing the humanresources that enabledindustry to moveinto areasofingreasingly hgier technoogyas the years went by. Wnpogamofinesmetino mjo=nad humanand physical infrastructure, the governmenthas sometimessponsored state enterprises where It felt thatprivate initiatives were lacking or insufficent. However.the generalpolicy has been for stateenterprises, many of whichare joint ventures,to operate bna competitivemarket context at.d they are expect ed to do soprofitably. By 1i8Osforl wor 74'percent of manufaicturingoutput and84 percentof dutthere isno evidencethat this'comprorrisednational independence in any way.Quite the contra-.astrongSecoo gqavethe government both ir.fluence and stature in national ln iscm opment Planfor the Eighties,the government expressed satsfactionwithIts' development trategyandundertook to place no unnecessaryburdenc or restrictions onforeign'investors. thate,'canno tayIngreserve rior demarcateareas for local i sinesses,nor compelf _reigncompanies to combiewhti'tloal companiese'itreaffirmed its commitmentto permit foret co nies100.percent ownri of theircom antesin virtuall all fields.
38 3 CAPITALREQUIREMENTS .ND SOURCESOF FINANCE volumesof corporateand otherprivate resources debt capitalinflows and therebyavoid adding - bothinstitutional andindividuaL Thosemarkets further to an extemal debt that is already could accommodatea signiflcantporion of the excessivelyburdensome in the caseof many extemalfinandal requirementsof the Caribbean Caribbeancountries; and countries in the foreseeable future provided appropriate polides are In place to establish * to place greater emphasison raisingcapital countrycreditworthiness. in the intemationalfinandal marketsand to rely lessupon traditionalchannels of offidal So that Caribbean countries may manage this (bilateraland multilateral)finance. situation to its best advantage,the following strategyshould be followed The three elements of the strategy would be mutually supportive because higher levels of * to havea relativelylesser reliance on extemal public and private savingswould foster growth sources of finance by increasing public and would make the Caribbeancountries more savings(or, in the case of some countries, attractivefor internationalinvestors. The strategy redudngpublic d&ssaving)and by adoptinga Is also broadly consistent with recent policy policy frameworkthat fostershigher levels of initiatives that have been adopted by many privatesaving; Caribbeancountries in the fieldsof public sector reform andprivate sector development. * to placegreater emphasis on mobilizingnon.
TabM3.5: Ovewvewof btemal Finandngto CadibbeanCountries iUS$million) 1982 1983-86 1987-91 1992 Average Average
Fbtcing(net flows): Offidal -multilateral 546.4 275.7 105.6 72.2 -bilateral 597.0 274.1 81.4 -44.0 * commerdal 202.0 190.0 45.9 -207.2 * grantsa 205.5 228.1 383.3 364.9 Total 1550.9 967.7 524.4 185.9
Private- DR 270.5 144.3 409.2 656.1 - Remittancesb 360.7 386.7 736.5 856.5 - Other (Indudingprivate lending) -304.4 -74.1 230.4 269.7 Total 326.8 456.9 1376.1 1782.3
Grand Total 1877.7 1424.6 1900.5 19682
MEMORANDUMnlEM Currentaccount balance *2188.2 -1742.8 41294.9 *796.1
a. Frombalance of payments.Haiti estimatedfor 1991-1992. b. Currentaccount itenm
soue: StatisticalAppendix IMF.
39 COPINGWillI CHANGESIN THEEXTERNAL ENVIRONMENT
PublicSector Savin The sheersize of the publicsector has beena majorfocus of attentionin the effortto increase PUblcsector savings have fluctuated quite widely publicsavings. Stateowned enterpriseshave In mostCaribbean countries over the period from been restructuredand sold in a number of 1980. Leavingaside the persistentlyhigh fiscal Caribbeancountries - notably Trinidad and currentaccount defidts of Guyanaand Sufname, Tobago,Guyana, Jamaica and Belize. In the whichreflect exceptional situations of economic courseof 1993 alone, the Governmentof crisis, most Caribbean countries have Trinidad and Tobago divested itself of five experiencednegative public savings at onetime enterprises.That programof divestiturehas or anotherduring this period(see Table 3.6). resultedIn a numberof benefitsover and above OnlyBarbados was able to sustaina positiverate the primarygoal of improvingthe medium-term of publicsavings throughout the period - albeitat fiscaland balance of paymentssituation. In Its a modestlevel averaging 3.8 percent of GDP. mediumterm policy frameworkfor the period 1993-95,the govemmentlists amongstits other A strongpublic sectorsavings performance is divestitureobjectives: (i) improvingthe domestic particularlyimportant for theCaribbean countries dimate for investmentand private sector becausethe publicsector is relativelylarge and It development;(ii) wideningshare ownership in accountsfor a substantialpart of investmentin sodety,(iii) improvingefficiency in the provision most countries. In the past five years,public of servicesby enhancingcompetition; (iv) investmenthas amounted to some35 percentof deepening the capital markets; and (v) total investmentin the Caribbeancompared with encouragingforeign investment. Hence,as a about8 percentIn the U.S. 10-12percent In resultof divestiture,govemments have not only WesternEurope and 11-14 percent in a number cut badckon operationallosses, they havealso of EastAsian countries. Some economic theorists been able to redeployscarce public sector have suggsted that a higherlevel of public resources- both finandaland managerial- for savingsmay cause the privatesector to saveless the more efficientprovision of essentialpublic becauseindividuals may perceive that the servicesin the developmentof human and governmentIs makinggreater provision for their physicalinfrastructure. futureneeds but thereis lttle empiricalevidence to supportthat contention,especially where the Yet, the divestmentprocess still has a longway governmentImproves Its savingsperformance by to go. In the initialstages of privatization,there Increasingthe efficiencyof Its operationsand has been a tendencyto target relativelysmall reducingexpenditures rather than by raisingtax public enterprises,many of them in service revenues. sectorswhere public ownershipwas dearly anomalous. Other larger public enterprises, It is encouraging,therefore, to seethat a number particularlythose in the mineralsectors or with of Caribbeancountries have improved their largepayrols that would have to be cut backin public savingseffort considerablyin the last preparationfor privatization,have not yet been severalyears. A prominentexample Is Jamaica tadded.Some of theselarger public enterprises (seeBOx 3.3) where central government savings are able to cover their costs becausethey haveaveraged over 7 percentof GDPin the past operatewithin legallyprotected markets that fouryears compared with almost 4 percentin the yieldthem a rent. Evenin suchcases, however, previousthree years and negative savings in the the government'slonger term finandalposition six-yearperiod prior to that. Belizehas also may be strengthenedand publicsector savings ImprovedIts savingsperformance as have a may be increasedif privatizationleads to an numberof OECScountries - most notablySt. Lucia.
40 3 CAPITALREQUIREMENTS AND SOURCES OF FINANCE
Table3.6: Public SectorSavings in the CaribbeanCountries, 198092 (percentof GDP)
1980 1981 1962 1983 1904 198s 1966 1967 1S98 1989 1990 1991 1992
Antiguaand Barbuda 04 1.7 0.7 1.3 2.4 S.1 7.7 2.7 2.6 -2.1 46 3.6 -3.1 TheBahamas 3.1 2.6 0.8 4.3 0.2 12 2.2 2.0 0.6 4.4 0.4 4.7 1.7 Batbados 4.8 32 4.3 S.9 42 3.1 2.1 0.9 3.8 S.9 0.8 4.0 4.9 Beaizeb 3.9 2.1 -3.1 2.1 5.3 8o 6 12.1 10.4 12.3 12.4 9.2 Dominica 42.6 -3.8 -1.9 1.8 2.6 S.9 al 64 6s 3.6 2.8 3.3 1.3 DonrinicanRepublic 0.9 0.4 -1.3 41.3 *3.0 4.1 4.7 6.4 4.7 S.0 1.2 6,4 69 Grenada 40.3 40.7 2.1 2.1 3.9 3.9 1.6 .0.0 s.S -3.4 0.8 1.7 1.7 Guyana 2.2 -1.0 -21.4 -37.0 -30.0 .44 -32.3 -23.6 -19.0 2S.6 26.6 .20.8 41.8 Haitic 0.2 .0.9 0.6 1.2 0.6 1.0 0.1 .0.6 0.4 0.1 0.4 .0.1 -3.1 Jamaicaa .77 .4.6 .3.1 a.6 4.S -. 0 4.4 4.0 3.1 5.0 6.S 4 .6 St. KIts and Nevis . .6 0.2 .2.8 .3.7 1.3 1.2 4.0 6.8 4.9 5.7 3.4 3.2 6.8 St.Lucia 2.6 2.6 .0.0 2.1 3.3 4.7 6.3 62 12.2 9.8 10.1 10.8 113 St.Vncent ande .4 4.7-1 1.0 .0.9 S.0 8o 63 9.1 7.4 .9 a4 ao 7.6 Grenadines Suriname .0.1 -22 -3.8 12.2 43.9 467 -24.7 -24.S 49.7 13.1 -S.0 46.4 49.1 Trinidadand Tobago a 26.9 21.5 6.4 2.4 1.9 3.1 4.4 -12 -4.8 -3.3 .0.0 3.2 4.9
a. Central Gove_ment b. Conmo8datedNonfinancia PubilcSector. c.. 199142 are estimate.
Scuie: Nadonal wemnmtsand IBRD. COPING WITHCHANGES IN THEEXTERNAL ENVIRONMENT
Rex3S#Publicsovng In jnac
iCseorof "amaica,ha,sbeen a net saver,not onlyIn termsof generatinga I. i accnt st lusba -termsof a positiveoverall fiscal balance equivalent to pof?P.This rulted froma seriesof structuraladjustment programs first t1ndertaketiin the iy eightieswith support from the intemationalfinance institutions. In trospctit is a ttht the did not effectivelyaddress fundamental macroeconomic Imbalances.Efforts were renewed I themid-eighties with greatersuccess and they have been stntified a in recentyears. Managementof the public sectorfinances have *ctin,4itute ici point of thosenewed effortsand major initiatives have been undertaken in the m:.n areas'.-... Mareten-to uche overallsize of the publicsector and to divestthe govrnmntof activities p ete with the private'sector.A numberof loss-making puc ettis have`read" en reorgarizedand privatized induding Carib Steel, the * telephonecompany w:aridf ver~InVestmentsin. tourism. Furtherprivatizations are t ceulse s yet more.:
* ThesysteitK hasben refomedandsimplified. A 10 percentgeneral consumptionitax * wainrodced orelac a mscelan ofseparate-indirecttaxes. Incometax rateswere: n:luce4ar4at the sametime 1 a largenumber of specialtax exemptionswere elirninated. Importduties beingrZati zedas part of theCARICOM process. As a resultof these gand other measures, Ia* tidn hasben faciitatedand tax yieldshave increased Is;gniftcaniV j;frompercent offD in FY81/82to an;estimated26 percent in FY92193.
of Stepshave been taken to controlpuic expenditures,-particularlyin the recurrentbudget wher,oherthins.,moraongt derlyfocusedtargeti'ng of socialsecurity and welfare -ayinpoor hasthe In significantsavings. As a resultof tho'semeasures, expenditures3uwentof th consolidatedpublic sector were reducedfrom 29 percentof
expansionof productionand to a substantially tax hasbeen adopted. As far as directtaxes are higherlevel of taxablenet income. concerned,there has been a generaltendency to broadenthe tax base by eliminatingspecial income Revenueenhancement has been another important tax exemptionsfor individualsand companies focusof effortsto fncreasepublic savings. In that whileat thesame time reducing tax rates. This has context,the simplificationof the tax systemhas worked very well in countrieswith good tax gonehand in handwith highertax yields, thereby administrationbut, where tax administrationis enhandngoverall economic effidency. A number weaker(such as in Haiti),income tax reformhas of countries(arnaica, Trinidad and Tobago) have not resultedin higheryields. An exceptionto this replaceda multiplicityof ad hocindirect taxes with pattemis TheBahamas which eschews any income a singlevalue added tax. In othercountries, where tax for fear of compromisingits positionas an tax collectionis constrainedby administrative offshorefinancial center. Over and above tax capacity,an administrativelysimpler general sales poliies, there is a heightened awareness
42 3 CAPITALREQUIREMENTS AND SOURCESOF FINANCE throughoutthe Caribbeancountries of the benefits many countries and they still remain so in some of govemmentagendes pursuing cost recovery. cases. In Guyana,for example,transfers to cover the operating losses of public enterprisesand With respect to expenditures, all Caribbean welfare paymentsmade directly to individualsor govemmentshave sought to control them albeit indirectly through the subsidization of with varyingdegrees of success.Since dvil service consumption,amounted to almost 20 percent of wages and salariesconstitute by far the greater the governmentbudget In 1992. In commonvith part of recurrentexpenditures, they invariablybear manyother Caribbeancountries, the government's the brunt of effective cost containmentprograms. first priority is to eliminatetransfers to the public In Trinidad and Tobago, for example, enterprises through a combination of public comprehensiveadjustment measures, beginning in enterprise reform and divestiture. In parallel to 1988 induded a cut in nominal wages and a that effort, welfare programs and consumer discontinuation of automatic cost of living subsidiesare to be targetedmore explidtly to the adjustments. Without such radical measures,the poor so that limited fiscal resourcesmay be used virtual elimination of the Central Govemment to their best aSivantage.This is a strategythat has defidt by 1991 would not have been possible. alsobeen employed effectively In Jamaica. However, It is not easy to restrain dvil service salaries indefinitely, especiallywhen inflationary The combined result of these various measures, pressuresare manifest. In Jamaica,after many both to raise govemmentrevenue and to contain yearsof austerity,the govemmentagreed to 'one. govemmentexpenditure, is readilyseen from Table time backpay' equivalentto 2.7 percentof GDP In 3.6. In those countrieswhere reformshave been FY93/94 to offset the erosion of civil service pursuedconsistently, in some caseswith financial salariesthat has takenplace In realterms. support from the World Bank Group and from bilateralsources, there has been a notableincrease If governmentsare to control the public sector in public savings. The track recordindicates quite wage big effectively,wage and salaryrestraint may dearly that other countrieswhich currentlystill lag need to be linked to a comprehensivereview of behind in their public savingsperformance could public sector employment policies. In some improvetheir situationby adoptingsimilar reforms. countries,there is a perceptionthat the structureof the dvil service is no longer appropriate to It is instructiveto compare public savingsin the govemmentneeds. A recentpublic sector review Caribbeancountries with the experienceof other in Guyana,for example,conduded that 'there are countries,particularly some of the high performing distortions across ministries and departmentsin countriesof EastAsia. As a percentageof GDP, terms of staffing.' The review recommendedthat public savings in a number of East Asian the government should reevaluate the staffing economieswere as follows: levelsof variousprograms. However,an ad hoc review of selectedprograms may be insuffidentto Japan(1981-88) ...... 5.1 revealdeeper structural shortcomings. Indonesia(1981-88) ...... 7.7 Malaysia(1981.90) ...... 10.3 In other regions,such as Wes! Africa,govemments Singapore(1981-90) ...... 18.5 have benefited by undertakinga comprehensive Thailand(1980.87) ...... 12.9 audit and reform of the civil serviceorganization to determine how govemment business may be No Caribbeancountry has been able to matchthe dischargedwith greater cost-effectiveness.Some record of Malaysia, Singapore or Thailand Caribbean countries may similarly benefit from consistently over the course of the decade sucha comprehensiveaudit and reform. although,in more recent years, Jamaicaand St. Lucia have approachedit. The relative bevelsof Transfer payments are another important public savings in Jamaica and Japan were constituentof public expenditurethat has become comparableover the decadeof the eighties as a the focus of attentionIn recentyears. They have, whole but Japa.'. performancewas much more in the past, been a major item of expenditurein consistentfrom year to year, whereasthere were 43 COPINGWITH CHANGES IN THIEEXTERNAL ENVIRONMENT big swingsin the Jamaicancase from quite low sourceswhereas gross domesticsavings is a levelsIn the eadlyeighties to muchhigher levels nationalincome accounting concept which hasa laterIn thedecade. More important still, the public differentconceptual basis. Nevertheless,the data sectoris quitesmall In Japan (equivalent to only15 providesa guideto broad ordersof magnitude percentof GDP) whereasthe Jamaicanpublic exceptin thecases of Guyanaand Suriname where sector Is twice that size. In other words,the nationalaccounting data is lessreliable. Japanesepublic sector was able to squeezeits 5 percentsavings from a muchsmaller proportion of It wouldappear from Table3.7 thatprivate sector GDP. T1heCaribbean countries still havea long savingsin the Caribbeanaverage about 10.15 way to go before they can match that percentin mostcountries although there Is quitea performance. wide vadiationbetween countries. There is alsoa large variation from year to year. Broadly PrivateSector Saings speaking, there seems to have been an improvementin savingsperfornance during the Privatesector savings are not so easilyidentified late 1980swhen compared with the earty1980s. andquantified as publicsector savings. Deposits Butthe savings effort of the Caribbeancountries as In commercialbank savings accounts are a poor a wholefalls short of the levelsthat havebeen guidebecause they cover only savings that are held associatedwith sustainedhigh growth in other in a very spedficfinancial form. In Table3.7, an regionsof theworld. attempt has been made to reach a broader
Table3.7: PrivateDomestc Savings in SelectedCaribbean Countries, 1980-992 (percentof GOP)
1980 1981 1982 1983 1984 198S 1986 1987 1988 1989 1990 1991 1992
Ant,^ and5Buda 13.5 144 6.0 9.1 213 5.3 10.8 12.9 17.1 1Z3 145 182 14.1 TheDahanas 9.0 ao 12.8 15.3 12.6 13.0 13.4 9.0 . . Baibados 17.6 12.2 13.8 9.2 13S 167 13.7 14.1 15.0 1o 1S1 12.6 13.4 Beb 15.7 17 1S.3 16.0 1U4 10.2 11.2 13.9 9.6 10.8 11.5 10.5 12.0 Doinca 67 0.3 12.6 12.2 14.2 1.7 6.1 9.0 12.3 6.5 11.6 4 12.8 Don*kamRepubic 14.1 17.4 153 1S.6 1ss 10.7 13.1 12.5 16.3 16.0 1S5 10.3 85 Gema 86 11.4 45 86 82 7.6 12.8 17.6 14.4 20.5 19.4 18.5 18.6 :ti 10.3 8. 8o 59 7.6 6.7 4.9 7.1 t7 5.1 56 5S. Jamia 18.2 14.4 13.6 18.6 1.7 83 1.S 11.8 83 0.3 2.7 3.3 12.6 SL KkuadNed s 17.6 21.2 2.4 11.4 23.6 26.2 20.4 17.1 30.5 20.8 22.3 21.3 184 S* Luda 6.9 56 7. 9.7 4.3 7.8 13.3 8s 86 1.4 1.3 .1.7 1.9 S Vcmntand 17.2 26.6 14.7 12.2 15.4 14.5 12.6 0S 8.0 2.4 10.4 2.9 11.5 do Gonadinw TdntdadandTobago l1.5 12.3 15.2 10.7 15.6 14.3 9.9 15.7 1S3 18.5 21.2 9.8 1S2
a Caulaed m epssdomesic savlnp and pblic savis of thectral govement b Ciulated fromgmss domestic savings and publc savingsof theconsoldated nornlnandat publc sector. _ - not avail SowcesNatonal goemnt IBRD,an Tabe3.6.
definitionof privatesector savings by subtracting Thefactors that affectthe levelof privatesavings publicsavings (i.e, the currentaccount surplus of arewell known. A reasonabledegree of political the consolidated public sector or, where and economic stability are fundamentalpre- consolidateddata is not available,of the central requisites. Other factorsindude well-structured government)from grossdomestic savings. This financialinstitutions, a favorablepolicy framework dataneeds to be interpretedwith cautionbecause and a structureof interestrates that is at least public sector savingsare derived from fiscal
44 3 CAPiTALREQUIREMENTS AND SOURCESOF FINANCE positivein real terms. It is worth looking dosely at best, and It greatly complicates the task of each of thesefactors in the Caribbeancontext. macroeconomic management Caribbean countrieshave wisely avoidedsuch measuresand, Politicalstability is not a problem in the Caribbean instead,have preferred to compensatefor inflation countriesas a whole, althoughuncertainties with with flexibleinterest rate policies. Yet, even with a regard to the political successionin one or two policy of flexibility, the record showsthat interest countries may deter private savings. Economic ratesrespond only slowly to changesin the rate of stabilityhas been more elusivein many countries. inflation. Controllinginflation is, therefore,the key In that context, stability in the general level of to keepinginterest rates positive in real terms. prices is particularlyimportant for saversbecause inflationcan quickdyerode the realvalue of savings. Within the Caribbean countries, the OECS Fear of such an outcome may not only deter countrieshave had the most successin controlling savingsbut may also result in capital flight - to inflation and in maintaininginterest rates that are which the Caribbeanhas been prone in the past positivein real terms. At the very worst, interest (seeBox 3.4). In other parts of the worid, notably rateshave become only slightlynegative for short in a number of Latin Americancountries where periods. There is little doubt that this successis inflation is endemiS attemptshave been made to due to the discipline imposed by a shared protect the real value of savingsin an Inflationary monetary systemwhich limits the possibilitiesfor environmentby introducing complex systemsof moneycreation on the part of individualcountries. monetary correction. However, monetary correction offers saversonly partial protection,at However, the experience of other Caribbean
ox3434 S atssof Capita Flight: Themeurement of capitalflightanaid the analysisof its causesand consequences has been a major topic of economicreseardi in the last ten years.The LatinAmerican and Caribbean aexpereceavefeaturedpromi.n'.ently in that research. Messrs. Donald R. Lessardand John Wdllamson,In summinguip the sndingsof an internationalconference on capitalflight and Third Worlddebt, stressedthe importanceof sudden inflationary surges as causing capital flight, not :nly becauseIt rodesthe'-value of moneybut alsobecause it portendsa probabledevaluation. heotehw.a '8eneral ruil,he adrse effectsof fiscatcrises impact' most severely upon the.'.iplicobigatiions:to residentswhose assets are denominatedin local renadless everelyupon external sovereign obligations denominated in foreigncurrency .ereymovatingresidents to movextheircapital to a safeexternal haven. They document a slpesope'.on.whidi, in thefacie of fiscaldistress' (perhaps provoked by externalshocks), the sovereigngovernment seeks to shorup domesticconsumption by borrowingabroad early in the risswhen thiey'still face an'elasticsupply of foreignexchange resources, because the risks toeenoers appearles5 than to.domesticresidents at that stage. Theaccumulatioi of extemal obligationsmay strengthenthe perception of local privatesavers nd firwestorsthat their'daims are subordinate to the increasing foreign daims upon the sov7ereign.Moreover,if the proceeds of externalloans are not investedto generate returnsthat ca match te incremental'fiscal' and foreignexchange obligations of borrowing,the sovereign nnisteither borrow more to service.-thedebt or riskan escalatingbalance of paymentscrisis that provkes'a'run on its reservesas localcapital flees to saferjurisdictions.
1.Xid R.ttessad and John Wiamson. QplCal Fight and Thkd Woid Debt(Washington, D.C.: Insdtute for International .conovnIc1987)
45 COPINGWi-TH CHANGES IN T11HEEXrERNAL ENVIRONMENT countrieshas been morevaried as can be seen Caribbeancountries, financial sector institutions from Table3.8. In Guyana,Jamaica and Haiti, havebeen the subjectof recentstudy as part of recentsurges of inflationhave resulted in deeply ongoing efforts to strengthenprivate sector negativereal interest rates which signifya sharp development.The prindpal focus of thosestudies erosionin the realvalue of savings.In Haiti,the has been the effidencywith which they furnish governmentwas fearfulthat higherinterest rates credit to privateborrowers but that functionis wouldexacerbate Inflation and therefore sought to dosely related to the mobilizationof private keepthem down. Guyanaand Jamaica adopted a savings.A numberof commonthemes emerge moreflexible approach and interestrates rose as from the variouscountry studies and they are inflationtook off but the risewas nowherenear summafizedbelow. enoughto compensatefor the lossin the valueof money. Trinidadand Tobago followedyet a Commerdalbanks provide the principalavenue differentpattem. While the rate of inflationin for private financialsavings in the Caribbean Trinidadand Tobago has been much more stable - countries. Althoughthere has been a steady averagingabout I1 percentper annumduring the development of other non-bank finandal 1980s- the rate of intereston savingsaccounts institutionsin the recent past, they have not was kept low and consistentlynegative in real displacedcommercial banking as the primaryform terms. The yield on twelve-monthtime deposits of finandal intermediation. The strengthand averageda somewhathigher 7.7 percent, but was integrityof the bankingsector is, therefore,an still negativein real terms over the period as a importantfactor affecting the confidence of savers. whole. A bankingsystem that is opento competitionbest Savingis, by definition,for the future. Saversdo assuresefficiency. Thereis dear evidence,for not followthe consumer price index from month to example, that commercialbanks with broad monthor fromyear to yearin orderto determine multinationaloperational experience strengthen whetheror not theWare losing real value. A recent the bankingsector In thosecountries where they World Bankstudy of high performingEast Asian havebranches. They are able to drawupon a deep countriesattributed their success,in part to high pool of managementexpertise which, in turn,can levels of private finandal savingsthat were train localcounterpart managers. They have the predicatedupon a levelof interestrates that was additionalstrength imparted by the finandal generalypositive in realterms or only marginally resourcesof the parentcompany which may be negative(see Box 3.5). It would appearthat the drawnupon when appropriateeven if the local volatilityof inflationin manyCaribbean countries branchesoperate as separateprofit centers. has discouragedprivate savings, because it has Furthermore,they are subject to supervisionby the resultedin realinterest rates that are both negative parentcompany and thiscan be especiallyuseful and unpredictable.If privatesavings are to be in smallercountries where the nationalmonetary enhancedand, hence, the countries'dependence authoritiesthemselves have limited expertise and upon foreign savingsdiminished, govemrnment capacity for bankingsupervision. poicy must focus more urgently upon price stabilityand upon the stabilizationof interestrates at positivereal levels in an environmentwhere the Thepresence of foreignbanks in the commercial ratepositaeetitievel andfroh. bankingsector by no meansconstrains the growth of local banks. Caribbeancountries that can Financialkntenedlaries dearly play an important combinea stablemacroeconomic framework with rolein themobilization of privatesavings. In many an openand competitive banking sector that has
46 3 CAPITALREQUIREMENTS AND SOURCESOF FINANCE
Table3.8: InterestRates on Savings Deposits andConsumer Price Index (CPI) (Inperet) Intres onSaibn Real Cout Deposits AnnualC1 IrterestRate AntI and8aabxa (1986) 5.0 5 4.5 (1990) S5 7.0 1.4 Doentica (1986) 40 2.7 1.3 (1990) 40 42 4.2 Grenada (1986) 4.S 06 3.9 (1990) 45 2.7 1.8 St Luda (1986) S.5 2.2 3.2 (1992) 4.7 5.7 4.9 Domnin Apubc (1990) 8.0 S9.4 .32.2 (1992) 6.6 4.1 2.4 Guyan (1986) 11.5 7.9 3.3 (191) 19.9 106.0 -41.8 Haid (1986) 6.5 *1.8 (1992) 45 25.2 65 Jamaica (1986) 20.0 14.8 4.5 (1992) 23.0 73.3 -29.0 TdildadandTobago (1986) 2.6 7.7 47 (1990) 2.5 11.4 40 Amnal averagechange. Sxac: Centralba and IRD comlc Dountsyeport.
both local banksand foreignbanks are likelyto financialsector is dominatedby commercialbanks havea level of interestrates that is consistently whichhave a traditionallylmited rangeof lending positivetogether with a relativelybuoyant level of instruments. A broader and more diverse privatesavings The Bahamas,Belize and the Institutionalstructure needs to be developedin OECScountries are cases In point. order for the financialsector to cdschargeits intermediation function effectively. Many Fromtime to time in recentyears the commercial Caribbeancountries have been developing a more barndngsector has experiencedexcess lquidity diverserange of non-bankfinancial institutions (see whichhas been quite persistent in somecountries Box3.6), but the processneeds to go further. suchas Belize, Barbados and the Bahamas.Excess lquidity has promptedsome analysts to suggest The overall strengthof commercialCaribbean thatthe levelof privatedomestic savings is more countriesis sound except in countrieswhere thanadequate to financelocal investment needs. seniousmaaoeconomic imbalances persist. To However,that condusion does not seemplausible furthersecure the futureof the sector,supervision aslong as the Caribbean nations must seek foreign hasrecently been streamlined and strengthened in savingsto financetheir sizablecurrent account a numberof countriessuch as the OECS,where a defidts A more likely explanationIs that the
47 COPINGWITH CHANGESIN THEEXTERNAL ENVIRONMENT
: jE*~ tc MboizlngSgs for Invesifient and Growth
. HwtgKong. uoaNe 7 mIion peopl-.ea-pproximaelytbe populationof the DominicanRepublic - are crowdeditti a Uui4.. aboutthe sIz~ of Domlnlca.Entrep&t trade with Chinaconstituted the traditional seareeof ltco3nforbutthXiss ~zulpy cut off wheatbe border was closed in 1951at theoutset o~toremnw. Then ensueda radi rapidsctural ajustment of the economyand a worientaion ofprgduc~lonto anufacturedgoosdestined for rmote marketsin Europeand NorthAmerica.
Ilierole Otto 8oveatmenn In this tion not anly focusedon providinga stable,political, legal and fra k -Raoliha waschaacterizedby the governmentitself as 'positive non- o rdidcation hblth cae, andhousing. Thelatt wascrucial not caitaiis.o alsfor ensurng tbe ssoci stabilitythat made market-orientedreforms
UPingiHon nlony, Kongdid nothave access to noma chamelsof multinationaland bilateralfamce, so It had.~ entirely upon doutestlosaving, and direct foreign investmentas sourcesof fnance. Tne W h t asefrt bysustainig a consistentbudget surplus. From 1946to _-O~only adgetdeficits were r and thosewere the resultof severeexternal shocks. Furthermore, dI* :.uWkiseetobeeneptite smalleith publice pendinuresaveaging less than 12 percentof GDP in sincerin to about17 percentwith a sharpfocus on education,
R _. of Indu^t14alizs4on.Hong Kong was able to drawupon the resourcesof the ChWnese diasportsceirored Ibreeghout 5Southast both -a soure of investm financeand in tetms of maket g experienceof HongKong in that regardsuggests that the Caribbean cosntxiescould 4ea muchmore eftecive mobin mobilizing the resrces and skills of their own sizable eicand reiithtpolicies t guaantee the securityof investmentsand the
d consistentlyhigh, averagingmore than 30 percentof GDP .:. y n Imortatcontributory factor to this impressiveperformance has been an oneaIlwptI4~na1libea yst (Hngong has no CentramBank) so that interestrames on savings d:oafts uleadyreflec.twait fUg.same liberalpolicy environment also accountsin largepart for the *ran:fomatIonof Ht* Kon fromafinancial backwaer to worldclass fiacial center. By 1981.the fiauce, iusiSkanceand propertyservice sector accontedfor a greatersbare of GDP than manufacturingand this gave l_stodded d *4a gs romtourism3and business travwl.
48 3 CAPITALREQUIREMENTS ANDSOURCES OF FINANCE
B.W36 Jam a~Ffnu l SectorD;levelopment At the time of IndependeneIn 1962,the Jamaicanfinandal sector was dominatedby branch l sffein cmmrial banks although there also existed a long tradition of local eit-union; anbuildindogoeies Throughoutthe decade of the sixties, the govemment pursud a policyC locaizingbanko wnerhip but thiswas done by negotiationrather than by 1Wgoodand woi*tng relationships were maintained with the broaderinternational finandal cotrvuiVty. There-was a nlya gradualdevelopment and diversification of financialinstitutions uringthe.yea.rs wvhen successive govemments sought to give the public sectora strong eadershiprote In m'anagingthe:economy but, wheneconomic policy was reoriented towards thepriate setor,': muchmoe-:vigorous and spontaneous development of the finandalsector
n.Yunn his analysis-ofthe Jamaicanfinancial sector, underscores the particularly _orarad. ra. d dv.f'ances-':'made:bymerchant banks.' Whereas,in 1983,there were six mehant ans, ith '.-assetsof J$l. millon, their numbershad grownto 27 by 1988with as"etsof J$I miion. Induy andcommerce was thereby given access to a muchbroader timge of I Instrnts andthinaicialservices such as underwritingnew shareissues, _:;iceot corporatestructurinigand.arranging loan syndications.Other financialsector developnientsinuded a stro'g growthof life insurancecompanies which, as mobilizersof privates now onlyonsecondto commercial banks. By 1990,the Jamaicanfinandal ,m,.it,,. apart from Its centra,lbank, a developmentbank, a stock exchaege,12 cornme.ttalbanks, 13 trust companies,27 merchantbanks,.17 life insurancecompanies, 4 sexi~ra1ins ac_i,e,'Prai*s, 5:iu'ilding societies,1225 credit unions and a unit trust. Although nienialban1s~ stll account for alarge part of financialsector activity,they no longer doa nateatheyid before-a"nd It is 'in the nonbank institutionsthat vigorousnew innovations
I paY P> ThiJ.makmnf*onda $ecworFinam4ng Development In the CommwnwealhCaribbean (Maarmian
aimed at bringingthem into line with international new Banking Law has given the ECCB much norms. greater oversight and in Jamaica, where new legislationhas recently been enacted to indude By way of contrast, bank supervisionconstitutes explidt capital adequacy requirements for both the weakest link in the regulatoryframework for commerdalbanks and near banks. In Trinidadand finandal sector of the Dominican Republic Tobago, a new FinandalInstitutions Act became Supervisionfocuses mainly on compliancewith effective in August 1993 establishingminimum monetary regulationsand, in the past, on foreign capital and liquidity requirements and setting exchange controls but not on the monitoringof prudentialguidelines, thereby repairingthe gaps in prudentialratios. As a result, there was a serious much earlier legislationwhich dated from the erosion in the strength of many finandal sixties and seventies. In Belize too, the institutions during the late eighties which government Is engaging in a dialogue'with the culminated in the collapse of at least six finandal communityto reach a consensus for a commerdal'banks and several hundred informal more explidt formalizationof prudentialstandards sector banklike businessesin 1990. The public's
49 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT concen overthe weaknessof the finandalsector mat'would have served the Regionbetter in terms is a continungcause of disintermediation. of economic development and income enhancement. TheDominican Republic experience illustrates how especiallyvulnerable finandal institutions are to Attitudesare changing,however, and it would problems resulting from macroeconomic appear that economicpolicy reforms in the disequilibrium.Yet the DominicanRepublic is by CaribbeanRegion, induding fiscal consolidation as no meansalone In havingto grapplewith such well as reformsin the market and regulatory problems. Guyana,Suriname and Haiti are still frameworkhave been important contributory strugglingto stabilizetheir economies and there is factorsto the increasein directforeign investment. evidenceof commerdalbank distress in all three Those reformshave significantlyimproved the countries. Clearly,macroeconomic stability is a enablingenvironment for privateenterprise and prerequisitefor a healthyfinandal sector that can theyhave also served to levelthe playingfield so mobilizesavings effectively. thatthe foreigninvestor can enter the Caribbean marketon more of an equal footingwith local EncouragingNon-Debt Capital Flows entrepreneurs.Yet muchmore can be done to attractforeign investment. Directforeign investment should be a majorfocus of attention for all Caribbeangovemments The globalizationof the financialmarkets has becausethe existingburden of debt serviceis changedthe natureof foreigninvestment because already quite substantialfor many Caribbean equity capital is now more mobile and more countriesand thev mustgive preference to non- 'footloose'than in the past. Experienceindicates debtcapital inflows. An increasingtrend of re9to thatcountries which consistently pursue policies of the Regionhas already been noted. Thatincrease macroeconomicstability and opennessand which is consistentwith overallglobal trends. In 1993, provide a secure and predictableregulatory, the outflowof privateDfI from OECDeconomies monetaryand fiscal environment are most likely to to developingcountries continuedits strong attractforeign investment. Special incentives to upwardtrend and reached a recordlevel of US$56 foreigninvestment such as tax holidaysor tariff billion. Thatwas double the flow recordedin the drawbackschemes are unlikelyto work in the mid-1980sand it represented35 percentof all absence of a stable and predictable capitalinflows to developingcountries as opposed macroeconomicand businessenvironment and to 20 percentten yearsago. The extraordinary they mayprove to be unnecessarywhere stability increaseIn DfI reflects,in part a recessionin and predictabilityprevail. Frequentregulatory Europeand Japanthat has reducedthe private changesare likely to discourageforeign investment sectordemand there for irvestment finance. It also and should be avoided. The case by case reflectsthe low currentrate of Interestin many applicationof specificincentives and the lengthy industrializedcountries, particularly the U.S. delayof investmentapprovals are also likely to discourageforeign investment,especially where Amongstthe natural assetsof the Caribbean neighboring countries offer dose locational countrieswhich make the Regionattractive for substitutes. Deficient infrastructure in potential investorsare its benign ci mate, its telecommunicationsand airports also deters proximity to the large and dynamic North foreigninvestment Americanmarket its dosehistoric and commerdal ties to Europeand its well educatedlabor force Not all foreigninvestment need directlyfinance which has a level of skills that comparesvery new plant and equipmenthowever. Portfolio favorably with other developingcountries. investmentis also increasingin the Caribbean However,the prospectof North Americanand countriesstimulated, in part,by theprivatization of Europeaninvestment has sometimes been, viewed corporationsthat were formerly in the public as a threat ratherthan as an opponunityand sector.The telecommunications industry provides barriershave been erectedwhere the 'welcome a goodexample where transnational corporations
50 3 CAplUALREQUIREMENTS AND SOURCESOF FINANCE havepurchased substantial equity. Details of some unusualopportunities. Many of theseexpatriates recentprivatizations are presentedin Table3.9. have connectionswith financial institutions Typicallythe buyer may view a new acquired overseas.Many others have personal savings that companynot merelyas a stand-aloneoperation could be investedin their country of origin but as an integralpart of a regionalor globalized sometimes,although not necessarily,with a view to network. Hence,the initial Infusionof foreign returninghome upon retirement In all, they capitalfrom the saleof thosecompanies may lead constitutea potentiallymajor source of capitalthat to muchgreater infusions of Wpitalas the owning hasnot yet beentapped anywhere near to its full companyseeks to expandits operationsin the potential(see Box 3.7). future. IntemationalFinandal Markets A detailedanalysis of other foreign investment issuesof specificrelevance to Caribbeancountries Improvingaccess to internationalfinancial markets is containedin a separateIBRD report on polides is anothercomponent of thestrategy proposed for for private sector developmentin the Caribbean the CaribbeanRegion. A 1994 IBRD report on whichalso contains recommendations for a policy global economicprospects and the developing agendato fosterDFI. countriesnoted that since1990, private flows to developingcountries have increased by morethan In that context the sizable communityof 150percent to US$113billion which, in constant Caribbeannationals that are residentoverseas dollars,matches the level attainedin the early presentsthe countriesof the Regionwith some 1980sbefore the onsetof the debtcrisis. In 1992-
Table3.9: ForeignEquity in PrivatizedTelecommunications Firms in SelectedCaribbean Countries, 1993
Contmy DomesacFim TransnationalOwner lnewmt ecMty) Barbados BarbadosEUteral Cable& Wireless Telecommnimcatons (65%) Sarbados BarbadosTeephorw Cable& Wiress company (6MS) Adze Bebie BdshTelcom Telecommunicationm (2S%)0
Oomnan Republc CODETIEL GTE(100%) Guyana Teephoneand AtlanticTeleNetwork Tdeegaph (80%) Jamai Telom1muaton Cable& WIeless of Jamaica (59%) St,Klts and Nevls St Ktt and Novis Cable& Wireles Te_communicatIon (49%) Tdndadand Tobago T&TTelephon Cable& Wbreless (49%)
SowcesIFC, IBRD and international Telecommunications Unon
51 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
93,private flows exceeded offidal flows and there consistentwith broad global trends and the has k'een a strong shift in the compositionof prospectivesupply of privatefinance available to privateflows to non-banksources, including DFI by Caribbeancountries is amplyto satisfytheir needs transnationalcorporations, managed portfolio providedthat country creditworthiness is perceived irwestment,pension funds, and insurance company to be secure.To a largeextent, the samepolicy funds. In otherwords, the shiftsobserved in the measuresthat are neededto increasedomestic externalfinandng of Caribbeancountries are savingsand attractDfI investmentalso serve to
box 3.7: MobilzlngSavIngs from the Caribbean-Overseas ,Oer the past tirty yearsor so, here has been a steadyoutward migration irom many Caribbeancountries to North Americaand Europe. A disproportionatenumber of those emigrantswere highlytrained In technical,professional and managerialskills and that has ;promptedsome researchers to conclude that the flight of humancapital from the Caribbean may havebeen even more costly to the RegionJan the flightof financialcapital. Karl Bennett of the nivrsivtyof Watedoo,:anada, has estimated that upwardsof one half the graduatesfrom rtiaryeducational Institutions in the CommonwealthCaribbean were lost to emigrationIn the decae1976.86: ' estimatedthat there are at least one rillion emigrantsfrom the CommonwealthCaribbean: alonenow rident in North'Aineica, a significantnumber of whom are in the middle.and high. 'ncompegops. Many of'them retain their Caribbean nationalityand, since first generationr figrants predominate,nearly all of thlemretain dose farnity and socialties with their countriesof or,igin.Tey constitute a potentialfyimportant source of capital that could be mobilizA for Inestmentin -the Caribbean If the policyframework were condudve. SwveysInicate tht"potn Investorsfromn the overseasCaribbean community seek many of s andguaran aSany other foreign investor. In particular,they wil needto e thati they int In ie Caribbean,they can get theirmoney back out at anytime. not onlymeans an absence of administrativeImpediments to capitaltransfers, It also means, the assurancethat capitl rinvested in the Caritbean will not be erodedby inflationor by exchangerateisnreliits.;With thosebasic comforts in place,experience in otherregions aInicates that the local 1ioW'dge of expatriateinvestors enable them to consider a much roaderrangeof possible vtures, even at higherriskthan the averageforeign investor would
Oteoeprve measures to attract investmentfrorn the Caribbeancommunity overseas mightdinlude"thestabfishment of mutualfunds as a vehiclefor investingin new medium-and sirtal-scaeindustalventurs'.-Such fundswould need to be verywell managed but there should be no needto offerexpatriate capital speial tax breaks. Experienceshows that investorsfrom overseasrespond more to, a ta record of economicstability and a probusiness govemment tha to spal investmentincentives. The acqusition of prospective retirement properties mightalso-be encouraged byllowing non-residentseasier access to localmortgage finance.* Initiativesang thoselines hv iready been taken in some countriessuch as Janaicabut there Is ample scope for furtier action.
1. Benett K.CA8pitawr1tad itoiplkatlbns fMrCiAbbean Devopment (FinandngDevelopment in the CommonwenIth 52 Av ,,,,M can.sser. - . 52 3 CAPiTALREQUIREMENTS AND SOURCES OF FINANCE enhanceperceptions of countrycreditworthiness. sourcesof financewill diminishconsiderably and At the presentjuncture, the intemationalfinandal that the Caribbeancountries will demonstrate marketsare still cautiouswhen contemplating greaterresilience io ex'ernalshocks. additionalsovereign debt in the CaribbeanRegion. However, other countries in the Westem In continuingto fumish supportto Caribbean Hemisphere(such as Chile and Mexico) have countriesin the anticipatedremaining 3-5 year demonstratedthat they can overcome a debtcrisis transitionalperiod towards a private-sectordriven andreenter the internationalfinancial markets on economy,bilateral end multilateral donors can be good terms provided ihe macroeconomic reassuredby the record of most Caribbean frameworkIs stabilizedand policiesare adopted countrieswhich have madegood use of their thateffectively foster growth. resources,both domesticand foreignalike. The absorptiveefficiency of the Caribbeaneconomies Evenin caseswhere country creditworthiness has Is likelyto improveas regionaltrade arrangements dearly been established,govemments may stilH such as CARICOMmature, and It could be needassistance in gettingthe mostadvantageous enhancedmuch further if the provisionsof NAFTA termsfrom the internationalfinancial markets until were expandedto give the CaribbeanRegion suchtime asthey become known to investorsand greateraccess to the NorthAmerican market. In theirpresence in the marketbecomes familiar. In addition to increasingeffidency, those same thatcontext, the IBRDmay assist with an extended developmentsare alsolikely to reducethe overall cofinancingoperation (ECO) which can sometimes externalcapital requirements of the Regionby help a government get better terms by enhancingexport prospects. Some form of guaranteeingthe laterpayments of a loanmade to associationbetween the Caribbeancountries and the government.The ECO facility has not yetbeen NAFTAcould, therefore,impact very positively employedin the CaribbeanRegion but elsewhere upon Caribbeandevelopment prospects and It Is it hasbeen usedwith successboth to introduce recommendedthat the Caribbean countries governmentsto the internationalfinancial markets activelyseek an arrangement of thatkind. for the first time as well as to help govemments extendthe scopeand breadthof their accessto Gross Extemal Finandng Requirementsfrom dfferentfinancial instruments. Offcial Sources Capital requirementsin the shorttermwill be Tables1 through4 in AnnexII indicatethe gross drivenby programsand polides already in place. external financing requirementsfrom offidal It has already been noted that the policy sourcesin 1994.96for individualcountries for frameworkis changingand that the Caribbean whichestimates could be preparedat the time this countriesare now In a processof transitionfrom report was compiled. These estimatesare aneconomic structure where the publicsector was consistentwith macroeconomicprojections of a previouslyvery prominentto a newstructure that growthscenario based on the pursuitof sound Is drivenmuch more by marketforces. However, economicpolicies for each individualcountry. the transitionis not yetcomplete and the countries Donor priority shouldbe given to Infrastructure of the Caribbeanremain vulnerable to external investmentsin support of private sector and shocks. In particular,there are still many humanresource development. The total gross uncertaintieswith regardto the marketfor bananas disbursementrequirements of the countriesfor and for sugarthat could provedisruptive to the investmentpurposes and balanceof payments adjustmentprocess. There is alsothe perennial supportin Table1 throughTable 3 areestimated at threatof hurricanesthat have,in the past,upset about US$214million in 1994, about US$251 tourismand damaged infrastructure. Hence, while millionin 1995,and about US$143 million In 1996. the transitionIs stillin progressand to ensurethat Of the three-yeartotal of US$607million, It Is the processof transitionis successfulthe countrie-, estimatedthat about US$525 million (86 percent) of the Caribbeanwill continueto requirestrong would be requiredfor investmentpurposes and supportfrom the internationalcommunity over the US$82 million (14 percent) for balance of next 3-5 year period. Beyond that, it may be payments support. Disbursementfrom existing anticipatedthat the need for support from offidal commitments for investment projects in the
53 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT amount of US$356million (59 percent) are lower per capitaincomes or acuterestructuring envisaged.This leaves a financinggap of about problems. To better managethe changing US$251million (41 percent). Of this amount, situation,Caribbean countries need to reducetheir donorshave been identified for US$50million (8 extemal capital requirementsby increasing percent)of balanceof paymentssupport. This domesticsavings - both public and private. leavesa remainingfinandng gap of US$201minlion Improvementsin the regulatoryframework for (33 percent),for whichdonors have not yet been finandalintermediaries (induding aglowing savers identifiedand whichwould need to comefrom liberalaccess to foreignintermediaries) will help additionalcommitments. advancetoward this goal, as will continued adherenceto a policy of nonvinterferencewith In furnishingcontinued development assistance to marketinterest rate determination mechanisms. At Cadibbeancountries over the forthcoming3-5 year thesame time, they need to mobilizea greaterpart period, officialdonors should help govemments of their externalfinandng requirements from the focusmore shatply upon the formationof physical intemationalfinancial markets, giving particular and social infrastructure- the areasof highest emphasisto nonrdebtfinance. DFI and portfolio priority that remain for the public sector in investmentshould be encouragedby stableand economieswhere direct production is handledby liberalregulatory environment, but not by special the private sector. In that context the taxbreaks. Moreover, DFI would provide a larger govemmentsand the donors need to reacha payoffin theiropen environmentboth in volume commonunderstanding of programand project andin quality.Elimination or at leastreduction of prioritiesIn Infrastructure,education and health. At restrictionson foreignexchange transactions would the sametime, agreement dod be reachedon also encouragecapital flows, especally portfolio appropriatelevels of cost sharingand, from the investment. present perspective,it would appear that govemmentsshould aim to finance40 percentof Notwithstandingthe considerableprogress that has projectcost on averagefrom domesticresources - alreadybeen made in thatdirection, the Caribbean an objectivethat is consistentwith govemment countrieswill needcontinued strong support from objectivesof increasingpublic savingsIn the the donor communityfor the next three to five mediumterm. yearSto assistthem complete the transition.It is estimatedthat offidal assistance of US$607milion Condlusions will be neededin the upcomingperiod 1994.96. That assistanceshould focus on helping the Overthe pastten years,there has been a steady Caribbean countriesprovide for the humanand fal in the levelof offidal developmentassistance physicalinfrastructure needed to underpin a fumishedto Caribbeancountries. In part this dynamicmarket based economy with polidesand reflectsa perceptionon the part of the donor programsthat fosterdomestic savings and dearly communitythat the needsof Caribbeancountries establishcountry creditworthinessfor private are now less urgent than other countrieswith lendingand for prvateinvestment.
54 4
Trade Policy In The Caribbean Countries
OERVIEW'
.e ...... "O - , - m.-i,.e
' gE~~~~~~~~'
Currnt Trade Polidesfand Recent and foreign exchange licensing requirements. The Deveopmentsin the CarobbetnCountries JamaicaCommodity Tradeing Corporatson,which previously held a. legal monopoly in importation of Nontariff Baretlesto Imports 34 items (8 percent of total import value), now hany actsas an import agentfor bilateraltrade. In Most of the recent reforms asd weH as the spite of the progress,however, barriers remain a remainingproblems of nonetadffbarriers (NTBs) to problemin most countrdies(Table 4.1). imports are at the level of individual countries ratherthan at the regionallevel. Whle many NTBs Barbadoshas implemented some recentrefords in have been eliminated, a nurnber of countfies retain this area, inducring the elimination of most price some protective barers, especalry against the controls and removal of NTBs on the maJotity importationof agaicultural products. Theseinlude products previously covered. But 43 tariff not only tocensingrequirements and quantftaftve poishan remain covered by NTBs, inrnuding restricfons per se, but also pubfc sector import libcensng requirements,prohibitions, and quotas. monopo Fes. Barbadosalso continuesto impose NTBs against regional imports of 200 items, many of them In the CARICOM countries, progress has been agricultural. Belize removed 16 items from madein reducingNTBs against intraareional trade ficensingrequirements since 1986, but 26 remain. as well as againstextrargional imports. Jamaica The OECScountyes ad maaig n restricfons on and Trinidadand Tobagohave eliminatedvirtually importsof someitems from within iCARICOM(but all - and Guyanamost - of their extensfveimport outside the OECSs. Some such restrscreonsare
55 COPINGWITH CHANGESIN THEEXTERNAL ENVIRONMENT
Table4.1: Non-TariffBanlers to Trade
Exports 9 StateOwned StteaOwned EnteTrise Enterduse Licensing Monopoly Licensing Monopoly
OECS Antiguaand Baibuda Yes Yes No No Dominica Yes Yes No No Grenada Yes Yes No No St Klttsand Nevis Yes Yes No No St.Luda Yes Yes No No St.Vincent and the Grenadines Yes Yes No No
OTHERCARICOM Bafbados Yes Yes No No Belze Yes No Yes No Guyana Yes No No Yes amaica No No No No Trnidadand Tobago No Yes No No
OTHERS TheBahamas No No No No DonklnlcanRepubic Yes Yes No No Haiti Yes No Yes No Sudname Yes Yes Yes Yes
Sourcr Bankstaff.
allowed,though with safeguards,under Arnide 56 In the DominicanRepublir, although the numberof of the CARICOMtreaty. Theyalso restrictimports formal import prohibitions have diminishedsince of a much longer list of goods from extra-regional the early 1980s,they still apply to a number of sources. clothing, ceramic and electrical products. In addition, importation of many other agricultural Barbados,Belize, and the OECScountries still have and processedfood productsrequires a *certificate marketingboards with legal import monopoliesin of no objection,' issued only if the agency at least a few products,generally foods. In some responsibledecides that there is not suffident countries(Dominica, Grenada), these boards are in domestic supply. A state-ownedenterprise also charge of export promotion, with the rents from has a legal monopoly on the import of several the import monopoly used to cross-subsidize basicfood items. export-relatedactivities. In Suriname,NTBs have taken the form of both Haiti, prior to its 1986-87reforms, had extensive explidt licensing requirements or import licensing requirements,as well as, public sector prohibitions(40 commoditiesprohibited and 103 monopoliesin some crtical products. The reforms regulated),as well as controlledaccess to foreign reducedthe numberof controlledimport products exchangeat an overvaluedoffidal rate, and price from 111 to 7. Imports of rice, maize, millet, controls on many items. The govemment is beans, sugar, chicken parts and pork products cognizantof the need to liberalize the licensing remained under control, but rice imports were and price controlsystems. Reforms are ongoingin liberalizedin 1991. The reformsalso induded the the foreign exchangeallocation system, which are break-up of import monopolies by five public intended to lead to a unified market sectorfirms.
56 4 TRADEPOUCY IN THECARIBBEAN COUNTRIES determinedrate. The transitionalstage, however, prices are still being set at an estimated 174 involvesa multiplerate systemwith a legalparallel percentto 23 percentof worldprice levels.'5 market;a 'regulated'market, access to which is determinedby license;and a highlyovervalued rate Tarfs andOthr ImportCharges for bauxiteexports. The CARICOMCommon External Taiji. The The only major CARICOMNTB systemis the one CARICOMcountries have in prindple a common establishedby the Oils and FatsAgreement (OFA) tariff structuretoward imports from outsde the which essentiallysets up a system of managed Region, the CET. The basic structure is set trade in vegetable oils, copra and derivative accordingto two principles: (i) that imports that products.This was originallydesigned as a vehide compete with regional production should have to ensure that regional trade partners received higherrates than thosethat do not compete;and priorityin allocationof regionalsupplies in a period (ii) thatimported final consumergoods should have when therewas a worldwideshortage of oils and higher rates than inputs' and capital goods. fats. It has now evolvedinto a schemefor aiding Competingproducts are definedas those for wvhich CARICOMVsless developed' members (LDCs, regional production can satisfy 75 percent of which are the major surpluscountries In these regionaldemand. products), by forcing the other CARICOM countriesto purchasetheir excessproduction at Thereare, however,numerous exceptions to the prices significantlyabove world market levels. CETsbasic structure. First, the countriesof the Currently,the surpluscountries are Dominica,St. EastemCaribbean Common Market (ECCM)and Lucia,and St.Vincent and the Grenadines;and the Belize(the LDCs)are not requiredto abideby the deficit countriesBarbados, Jamaica, and Trinidad rate set in the CET for non-competingproducts; andTobago. The OFA operatesby establishinga they may imposelower rates. Second,there are floor price for copra (and indirectlyfor derivative exceptionsfor a variety of sensitive' products. products),then ass:gningeach importing country a One allows countries to apply lower.thanrET quota, which is supposedto be enforced by tariffs for certaingoods based on *cost of livng' imposingrestrictions on the import of competing concerns(Usts A and B). Thislist is different- and productsfrom extra-regionalsources. generallymore extensive- for the LDCs. Another allowshigher-than.CE rates on a list of products The systemhas aeated problemsfor users, in whose duties are traditionagyrelied on to raise particularfor the tourism industzy(a major soap public revenues(Ust C). Another suspendsCEr importer), and incentives to drcumvwentthe ratesfor certaingoods in certainLDCs, e.g, drugs restictions."4 It also makes downstream in all LDCsand som3 appliancesin Belze (UstD). processingindustries in the LDCsuncompetitive by Other exemptionprovisions set lower rates than raisingthe price of their rnajorinput, copra. This would otherise prevail,based on safety,cost of hashandicapped Dominica!s soap industry exports iving and social concerns,and on agricultural to the U.S. market Changingpatterns in the inputs; and a higher rate (40 percent) on Region have exacerbated the problems as agriculturalproducts. All of theseexceptions - as consumershave come to preferother oils. Thishas well as the reluctance of some CARICOM causedsuch anomalies as forcing Barbados - which nembersto abide by the rules- have in the past consumesno coconutoil products- to purdase created a .tauiff structure that was far from the rightnot to importthem. A 1985reform linked 'common'(even if nationalsuriarges are ignored) the price somewhatmore direcdyto world price and with numerousrates. As of 1989, the CEr levels,a step which mitigatedbut did not resolve induded 16 different rates rangingfrom 0 to 70 the costs imposed by the system,as the floor percent,with 96 percent of the tariff positions fallingin rate categoriesof 45 percentor less.
14Nash, J., AgkUkul ine hadie Caribbn Cn&nM . WoWd '5 CameConauIn%s, Iw Shu of Reginl OAband Fats So. Bk, IntemalOcsblon Paper.Repot No. DP071(1990. Lathn Repoetprepad for CARICOM&Port Devtopmet Pr*et Amea andCaribbean. RegIon (Mu" 1993).
57 COPINGWITH CHANGES IN THEEXrERNAL ENVIRONMENT
Table4.2: CARICOMCEL Rates 1992.98 Categodes Forthe Periid Fo hemPedod for thePedod Fortb Petod Fom 1/1/96 2/1/91.1/1/93 1/193-12/31/94 1/l/S.12/31/96 1/l/97.12/31/97
Non-omptinS linut Ftma)Y 0.10 or 0S -5Cs 0-S 0.5 intemlediate 0.10 p C) 0.5 0.-S O5 O.5 Capital 0 (0)O' 0.5 -S 0.5 0-S
Compet &xbuaylnputs 30 20 tS 10 10 CompetIngcwWooods 30 20 1S 10 10 Seectdexdw 30 20 iS tO 10
CompeingInierndat Ips 30 25 20 15 1S Noncorrpetl firal goods 30 25 2S/30 20/2? 20
Agmolnduwsty 45 30/35 2S/30 20/2? 20' Caments 45 30/3e 25J30 20/2? 20' 'eneral manufactr 45 303 25/30 20/2? 20'
LIstA Suppenddaes uDperededrates leed deed ListB Suspendedrate (LDC) SutspendedMt (LDC4 Delee Deld ListC Mnimumn"ae Mlinim rates MlNimmrates Mintimu rawte List -patI &II Susp.ded txe(aDC SuMndedrtes (LOCs) Deleted Deleled Safety 0 0 Debled Oeletd cost ofg 0.20 0.20 Deleed Deleed Sodal eoom andcalc al 0.20 0.20 Odeted Deled Arkcufe 40 40 40 40 Auftcuttr inpts 0 0 0 0
Ran not In paenthe eerto dae ap*t to moredevebped counks (MVCSl. Andu andSatUd. anWdOuym Sm Mdntybl. rA.,APperonRgAITied, tOECS Sec SSaDecemberl99
The CEThas undergone two major revisionsin the percentrate), agricultural Inputs (0 percent),goods 1990s. One, adoptedin February1991, brought on the list of revenueraisers,and non-compedng the rate structurefrom a rangeof 0.60(With a few goods in some LDCs(0 percent). By 1998, the ratesas high as70) percentto one of 0645percent averagerate (unweighted)of al tariff positionswill thoughstill with a numberof exceptions.This rate be around13 percent,compared to 20 percentin structurewas slow to be implementedin some of 1991. Somecountries are planningto moveto this the OECScountries. The most recent revision, goal fasterthan others,with Antiguaand Barbuda, adopted by CARICOM SecretariatIn October Guyana,Jamaica, St Luda,and St Vincentand the 1992, is an attempt to dramaticalysimplify and Grenadineson a 'fast tradck which wil finish further reduce the rate structur Its phasing4nthe newrates In 1997. Implementationbegan in 1993and Is scheduledto be phasedminover a 5'yearperiod (seeTable 4.2). OtherCa es i CARICOMCounwites Most countrieshave alreadyimplemnented the first scheduledchange. (The exceptions are Belizeand In technicalviolation of the CEr'agreements, most Antiguaand Barbuda.) The end result will be a CARICOMcountries have in the past imposed rangeof tariffs of 0 to 20 percent with the only other taxes on imports. These have induded exceptionsbeing agriculturalproducts (with a 40 stamp duties,customs dages, upUftrnentfactors
58 4 TRADEPOUCY IN THECARIBBEAN1 COUNTRiES
appOedto the valueof importsbefore calculation up to 20 percentwere imposed on productsas of consumptiontaxes (ostensibly to adjustthem to NTBswere removed. Thesewere reducedby a basecomparable with domesticallyproduced abouthalf in early1993, and are intendedto be goodsalso subject to the tax), referenceprices, eliminatedover time. andconsumption tax rateson Importshigher than the rateson similardomestically produced goods. NonCARICOMCountries Thesehave produced widely disparate rates of totalimport taxes in differentcountries which have Mostof the nonwCARICOMCaribbean islands are resultedin increasedprotection. In 1989,the virtuaUydutyfree zones. This indudes The unweightedaverage nominal Import tax - which Bahamas,the CaymanIslands, Netheriands Antilles would be 20 percentif the CEr were the only andVirgin Islands. In all of these,their dutyfree importtax - was35 percent for Belize,40 percent statushas been benefidalto their burgeoning forTrinidad and Tobago, 43 percentfor Barbados, touristindustries. 44 percentfor Grenada,50 percentfor Jamaica, and around15 percentfor mostOECS countries, In the 1986-87 reforms, Haiti significantly wheremany rates were lower than the CETrates. rationalizedits tariff structure. Quantitative In the eariy and mid-1980s,stamp dutiesand controlswere replacedby tariffsand tariffs on quantitativecontrols were imposedby some othergoods reduced, so thattariffs on mostgoods CARICOMcountries (Barbados, St. Luda, Trinidad fel in the rangeof 0 to 40 percent The only and Tobago) on intra-CARICOMimports, exceptionswere some agricultural products and contributingto a severecontraction in regional petroleum. Import taxesas a shareof total trade. govemmentrevenue fell from26&percent in FY83 to 19.5percent in FY87.Imports remained subject Protectivestamp duties and surcharges on regional to an upliftfactor of 30 percent(which increased Importshave now been removed in mostcountries the baseon whichthe purchasetax was levied), (Barbadosstill chargesthe stamptax), though ostensiblyto correctfor the overvaluedoffidal polides on consumptiontaxes are much less exchangerate. This,In effect,magnified the tariff unifomn.Some countries impose the consumption by 30percent tax or VATat the samerate for all importsand domnesticproduction (Antigua and Barbuda), some The DominicanRepublic greatly simplified and completelyexempt intra.regonalimports and reducedits tariff structurein 1990. Beforethe domesbcproduction (Dominica), and sometax reforms,the tariffregime was extremely complex theseat lower ratesthan exraegionalimports andnontransparent, with 140 different tax rates on (Barbados,for someproducts; Grenada). In imports,averaging 90 percent,in additionto a 20 Grenada,the VAT rates on importswere raised at percentforeign exchange commission. The 'New the timeof the 1991CEr reductons. The rates for EconomicProgramn replaced this with a structure nonrCARICOMimports are mostly30 percent of 7 ratesranging from 5 to 35 percent(with the (thoughsome are muchhigher), while those for exceptonof higherrates for someluxury goods CARICOMimports are 15 percent. anda 0 percentrate for "essentialimports), with an averageof 20 percent, and eliminated Surdiargesand stamp dutieson extra-regional numerousexemptions. However,these lower importscontinue to be widelyused, though there ratesdid not becomeimmediately effective. To has been someprogress and sor.meregression providesome time for thelocal industry to adjust, (Table4.3). Jamaicabegan to applysurcharges to the targetrates were to be multipiiedby 1.3 the imports of a numberof vegetableswhen It firstyear after the reformsbegan, 1.2 the second removedquantitative controls on imports The year,1.1 the third,and 1 thereafter.The foreign rateswere uriginally set quite high, but havebeen exchangecommission was reducedIn 2 stepsto reducedover time. Jamaicarecently decided to 10 percent. But othercharges on importswere expeditetheir removal. In Barbados,the ratehas raised.A surchargeranging from 15 to 80 percent. been adjustedup and down in responseto wasimposed on selectedimports. In addition,two perceivedfiscal pressures. InTrinidad and Tobago, changeswere made in the methodof calculating surchargesof 35.60percent and stamp duties of thevalue base on whichimport tariffs are charged.
59 4 TRADEPOLICY IN THECARIBBEAN COUNTRIES
Table4.3: Non.TarIffIpot Charges
StatnpDudas Suwda erentaC o o O
Rate Appicao Rate Appkato Rate APPIaf Type RPae Appkati
OECS Anelu aw sabia 3 Somne cc CSC L. Al Dontn Ne No None Al CSC I Al G ba 10 Al 1545 b o SLKIM anNWevl SLt.luda Noe one None Al CSC 3 Al St Vinet and theGrenine OTMRCARICOM bado 20 Al 20 Some 0-34 some Be1e 14 Al RRD twumygoods Guyan None None None None amPaI 35490 Agalulw None 15477 Autos Tudabdand Toba 20 Some 3S630 Somne None none OTtE TheBiwn Don*An Rqc FfInoods 2.3 ms weon Fnal ods latN 3 Seected do_m p Hi No I Ar None Yes' Al a Dlhreta e deffoencebetwe rae dozed cam%ht andralte dwed an dome cpot ond at smla puct bhAums no axwp_om c Surdweapplesolylensetemnptzmi au tiatax. d Au4 habapotomrcxto.y andhoewl con ulo_ wdt filmhluW andpuaes b paslbed htde e Excpt-phanclca I. Ebrdectang rite forlayou vAalutin Notes to abb.vaUonr CSC- Cutom senc dae RRD RevueR pcm du.
60 4 TRADEPOUCY IN THECARIBBEAN COUNTRIES
One was to use the parallelmarket rate insteadof the speific imported goodsto be exempted.That the overvaluedofficial rate, and the other was to is, most are defined broadly as inputs (capital use CIF instead of FOB valuationof each import goods, raw materials, or intermediates) for consignment. These steps helped to make the production of some specifiedproduct. The CDE system more uniform and transparent,but they lists about 78 suchproducts, while the OECSlist is alsohad increasedthe stated import tariffs actually about 10. The end-userswhose inputs are due for any given shipmentat any given nominal exempted indude virtually all manufacturing tariff rate. However, importswere discretionarily industriesin the Region, agriculture,mining and valuedat a fluctuatingexchange rate and not at the tourism. (For tourism, the CDEs are generally offidal, and later, market determined exchange grantedonly for building,extension, or renovation rate. In effect, the actual tariff paid was, in most of structures). Most countriesindude virtually all cases,lower than the offiidalmarket rate. the allowable exemptionsin their national tariff schedules(Barbados, Trinidad and Tobago),while There are proposals in Surname to make the somedo not (Jamaica). currently highly dispersed tariff structure more uniform, with a 20 percent rate applied to many Other exemptionsare given as part of national items. The exceptionswould be 'strategic goods 'fiscal incentive schemes. To be eligible for (lower rates) and luxury' goods (higher rates). incentives,firms must be approvedby an agency Without significantchanges in the NTBs,however, which generallyhas discretionto give approvalof it is not dear what the effect will be on the all, none,or part of the availableincentives. Once structureof protectionor anti-exportbias. approved,the firm may receivean exemptionfrom all import duties on capital goods and inputs, a Exemptions holiday from other businesstaxes and personal income taxeson dividends,special tax relief after The use of exemptionfrom tariffs and other taxes the holidayexpires, and in many countriesaccess is widespreadas a meansto promote industryand to govemment-owned factory space at agriculturein the Region. Some exemptionsare concessionalrental terms. In all CARICOM incorporatedinto the nationaltariff schemes,while countries, these incentives are, In prindple, others are granted as part of fiscal incentive availableto all producersof goods. The term of schemes.Some exemptions are alsogiven by type the tax holidayvaries in most countriesaccording of importers,rather than by type of product, e.g, to the localvalue added, and in some,according to all public sector imports are duty-free. the employmentcreated. However,*endave' firms Govemmentimports in Jamaicaare all subjectto a that export all their productiongenerally qualify for reduced rate of 5 percent. Policies vary from the maximumterm, regardlessof their value added. country to country, with some making these In the Dominican Republic partial income tax incentivesavailable only to exporters,and othersto holidays are available to exporters for periods all firms. The data on the magnitudeof these ranging from 8 to 20 years, depending on the incentivesis availablefor only a few countries,but location. CARICOM has a Harmonized Fiscal they are generally quite large. Disregarding Incentives to Industry (HFII), which has been exemptionsfor CARICOMimports and for Imports Incorporatedby most membersinto their national by exporters, the exemptions seem to range codes(Table 4.4). between 20 percent and 50 percent of potential revenuecollected. However, polides still differ, both because th6 'harmonized' polcy actually allows the LDCs to. The CARICOMtreaty indudes a list of 'conditional give moregenerous Incentives, and becausenot all duty exemptions (CDEs),which countries are countries abide by the policy (Table 4.5). For allowed to make at their discreton. (lhe OECS example,Belize's code authorizesa tax holidayof countrieshave a separatelist). Most of these are up to 25 years,while the maximumterm of holiday definedin terms of the industryor userthat will be in the HFII is 10 years for the more developed the beneficiaryof the exemption,rather than by countnes (Barbados, Guyana, Jamaica, and
61 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
Table4.4: Fiscaldbiceivesi UnderCARICOM llannoizatlon Scheme
Twpeofincentive Ou,attn
1. profit x holBday if 100%ofsalesareexporextraagaonally tO 10 15 * iftheobcveh addedexceds 5D% of totWsaie 9 10 15 ifft localvalue added is between2S%and 49% 7 8 12 fftlhe beat ve addedIs between 10% and 24% 5 6 10 If theindustayis ig caital lnteve: for LDCsniUal investmenet exceeds ECSZ5 miWon forMOCsECSSO mligon 10 10 15 2. Ta exmonspf for thedurallon of the abow saxholiday, ipu mnarry andspaie paris can be imported duty free; ag nmtelals and equipmentfor newfactodes can be Inpoted dutre 3. Eportallwane forextra exportsafer tax oliday expiration if expottprf exceed61% of total * taxrIbf of 50%for upto 5yean between41%and61%oftotal pfts * laxreliefo45%forup to yews * between21%and 41%of tot pfits . taxreDoefd3S%forupto S yam betweenI0%and 2% oftotalpriits . taxrdlefof 2S%forup to Syea 4. DivkIendpayme forthe duration of theabove tax hoday didends paid to sarhokds aretax exempt S.Loss carryfoward cancarry forward loss for up to S a afewthe tax holidayexpes 6 DepeclationaOowance afterthe tax holiday exqres, a deductionof up to 20%on an capital penie Inowrd
Sourceindustal Deveopnet Copoado% Pdce WateAouse. From rShe Cautbean Conwon Mase TradePoi and lRegioIntegratoninthe 1990' Woti Ban*Re No. 38C (190).
Trinidadand Tobago- MDCs)and 15 yearsfor ExportRegimes LDCs.And some countries give Incentives that are not coveredin theHFII. The HFIIis also nonhar- Incentivesused to promotenon-traditional exports monizedIn thatit prohibitsincentives in the MDCs indude import duty exemptionor drawback, for a list of 35 products(in orderto encourage domestictax concessionsand exportprocessing theirproduction in the LWCs),further reducing the zones. Duty exemptionor drawbacksystems uniformity of incentives. Fnally,even among availableto all exporters(even those that only countrieswhere the incentivecodes are uniform, export part of their production)are the most the way in which they are implementedis not. flexibleand efficient tool for givingexporters free- The LDCs, for example, apparentlygrant trade status. Unfortunately,they are also incentivesmore freely than the MDCsand often administrativelydemanding. Consistent with the extendthe terms after the ofiginalterm expires. expefiencein otherparts of the developingwoid, Barbados'sincentives, unlike those of most no Caribbeancountry has managed to implement countries,do not indudeexemption from stamp a well-functioning,widely used system,though duties.Barbados has informally stopped approving severalhave tried. JamaicaIn 1990 replacedits incentivesfor nonexporters,and Jamaicahas exportrebate scheme with a drawbacksystem, but formallydone the same. The approvalprocess this provedto be so cumbersomethat it wasonly itselfalso differs, with thelengfty and cumbersome usedby a few exporters.It is nowre-designing the processbeing a majorheadache In some countries. schemeand will try to have an improved, Somecountries (Dominica) are redudng the useof computedzedsystem in placein 1994. blanketexernptions for public sector bodies.
62 I * w In I, ''II i III~~~~~~~~~~~~~~~~~~.~~O ill'II I~~~~~~~~~~~~~~~~~~~~~~~~~l
o ; g11[ t ji.~JI. j* j I. 'itt If xt
I~~~~~~~C -4 0~~ CA~~I'I'H COPINGWITlH CHANGES IN THEEXTERNAL ENVIRONMENT
The CARICOMcountries have relied to a large MostCARICOM countries provide sorr- incentives extent on fiscal incentives as the primary to serviceexports, but theseare generally covered mechanismfor promotingnon-traditional exports. by legislationdifferent from that coveringother Several, however, have established Export industries.Polides differ significantlyfrom one ProcessingZones (EPZs). The Kingston Free Zone countryto another.Most provide duty exemptions hasbeen in existencesince the early 1 980s. It has for imports of construction materials and hada mixedrecord, with exportsand employment machineryand durableequipment for original exceedingexpectations, but financialperformance construction,expansion, or renovationof tourism too poorto allowIt to repayits governmentdebt. facilities.But evenwhere this is the generalrule, Belizehas also had somelimited successwith theremay be exceptions;until recently,hotels in EPZs,primarily private. But in the CARICOM Barbadoswere prohibited from importingfurniture context, where fiscal incentive schemescan thatwould compete with localproduction. Some provideall the policy advantagesof EPZs,their countriesalso exempt current inputs such as food, mainadvantages come from the infrastructureand toiletries,and towels. But mostdo not. These expeditedcustoms dearance arrangements, which expensesmay not be trivial. A roughestimate of not all exportfirms find essential.In Jamaica,for the costof importcharges on foodsand beverages example,several firms operatethe sametype of usedby hotelsin Barbadoswas almost8 percent businessas those in theEPZ (garment export under of revenue.16 In othercountries, there is an explidt the 807 program). The industriesin EPZshave policyof usingNTBs to forcehotels to buy from been mostly garment and electronics local producers(Barbados, St. Lucia).Countries manufacturers.In the JamaicaEPZ, 78 percentof alsodiffer greatly in how tourismis defined. The employmentis with2 largegarnent firms. incentivesin Barbadosare available only to hotels; in Dominica,some are availableto hotels,bars In contrastto Jamaica'sexperience, Trinidad and and restaurants.Several countries have recently Tobagohas had a freezone since 1988, but so far revisedtheir policiesor are planningto do so. hasnot beenable to attracta singlefirm to invest Dominicahas exempted tourism services from the there. One reasonfor thisis thatthe traderegime incometax and loweredthe occupancytax from offersduty and tax exemptionsto investors(not 10 to 5 percent.St. Lucia has plans to expandthe only exporters)outside the zone comparableto availabilityof fiscalincentives to watersports,car thoseinside. Firmsin the zone would not be rentals,and tour operators. exempt from exchangecontrol or customs regulations.Thus, in contrastto othercountries, In Antiguaand Barbuda,Barbados, Jamaica, and the zone offersfew additionaladvantages over Montserrat,special incentive regimes are in effect thoseavailable outside the zone,and the general for intemationalservice companies. Further businessenvironment and high anti-exportbias changesare plannedin Barbadosto provide puts it at a disadvantagein attractingexport- endavemanufacturers some of the benefitsnow orientedfirms. availableto these service companiesand to exempt all such companiesfrom exchange The DominicanRepublic has relied much more c,ntrols. extensively- and successfully- on EPZsas the primarydevice to promoteexports. It has 27 1 )urism in Surinameis implicitly taxed by a zones in operation,vwth exports somewhat requirement that exchange earnings be concentratedin garmentsand electronics, but to a surrenderedat a rate far belowthe auctionrate. much smallerdegree than those in CARICOM Other exportersare alsotaxed by requiringthat countries. The explosiveexport growth was they surrenderpart (but not all) of theirproceeds encouragedby the devaluationsof 1985and later. at a regulatedoffidal rate, and export licenses are Employmentin the zonesstood at 27,000in 1984, requiredfor mostproducts. but inaeasedto almost150,000 by the end of 1992. Butthere is stillno effectiveduty drawback systemfor exporters,and all foreign currency conversiontransactions - indcudingexports - are R. Hoocd,Batados Tax and TariffIssues. Draft report (August subjectto a 2 percentCentral Bank commission. 28,1992, mimeo (World Bank WUC2).
64 4 TRADEPOUCY IN THECARIBBEAN COUNTRIES
TraditionalExports Belizeimposes a 5 percenttax on extra.CARICOM exportsof wild-caughtshrimp, though the main In contrast to the incentivesgiven to non- effectof thisis to divertthe shrimpexports into the traditionalexports, traditional exports have been regionalmarket. The more bindingtax is the taxed explicitlyor implidtly in most Caribbean requirementto sell 5 percentof the lobstercatch countries.Implicit taxes have taken the form of and 10 percentof the otherseafood catch in the legal monopolieson expon marketingchannels localmarket at pricesfar below export parity. (withproducers paid pfices below export parity) or quantitativecontrols on private exports. For Quantitativeexport controls are still in placefor bananasand sugar in CARICOMcountries, severalprimary products in Belize,while in Guyana taxationis seen as a meansof capturingthe rice exportsare controlledto supplythe domestic benefitsof the U.S.and ECpreferential markets, marketand taxed at 3 percent(15 percentfor rice whichwere not intendedto go onlyto producers. soldin theEU preferential markets). Other primary For other products,taxes are revenue-raising exportsare alsocontrolled and taxed in Guyana. devices.Export controls, on the otherhand, were There is a general1.5 percent tax on nonw generallyintended to aid domesticprocessing manufacturedexports, with somebeing taxed at industriesor consumersby assuringlow-priced higherad valorem rates or usingspecific duties. suppliesfor thedomestic market. Trinidadand Tobagos main export petroleumis one importanttype of ^hidden'export tax is the taxedat the level of production. In additionto foreignexchange surrender requirement imposed whatever royalties are negotiated by the on exporters.When the officialexchange rate at government,a levy of US$1per barrelis charged, whichthe exportersmust surrender the exchange equivalentto about5-7 percent of grossrevenue. is belowthe marketrate, surrender requirements This is then used to subsidize domestic act as a tax at a rate equalto the diffetence consumptionof petroleumproducts by about20 betweenthe two exchangerates. In the past,this percent.These policies were revised in 1992,but has been a serious problem for traditional theimpact of thereforms Is not yetdear. exportersin Guyana,Haiti, and the Dominican Republic.Since reforms in the exchangemarket In Jamaica,bauxite producton is taxedon a sliding. haveunified the exchangerates in thosecountries, scale,with rateslinked to the intemationalprice of this is no longeran effectivetax. Thesurrender aluminum.In the mid.1980s,the rate scalewas requirementin Jamaicahas been eliminated. reviseadownward. The bauxite sector in Suriname is currentlytaxed impditly by requiringsurrender Therehave been a numberof reformsin these of exportearnings at an exchangerate aboutone- poicies in recentyears. In both Jamaicaand tenth that of the auctionrate. The govemment Belize,the bananasectors were privatizedin the plansto convertthis to an explicittax when the 1980s, with goodresults. The Dominican Republic exchangerate is unified. has recently elimirated taxes on agricultural exportsequivalent to about30 percentof the fob ExchangeSystems and Rates price.Taxes on arrowrootand ginger exports from St.Vincent and the Grenadineshave been lifted. All of the Caribbeancountries have long had in In Grenada,the tax on cocoa, nutmeg,and placeexchange control regimes, though those of bananaswas repealedin 1986. In Jamaica, Barbadosand the OECShave historicallybeen govemment marketing monopolies and all administeredliberally and have not representedan licensingrequirements have been eliminatedfor independentbarrier to trade. Theother countries exports,except for sugar(to preferentialmarkets), have used controlsat various times, and In pimento,fats and oils (whose markets are lnked to conjunctionwith other measures,to restrict the Oilsand Fats Agreement), and petroleum. Still, imports or tax exports,with the result that traditionalexports remain subject to significant exchangerates have sometimes gotten far out of taxationin mostcountries. Antigua and Barbuda line. As ?ndicatedin Table4.6, in 1982 all the collectsan exporttax of EC$0.100.50per pound countriesin the Regionhad fixed exchangerates, on seafoodand EC$0.40per pound on cotton. surrenderrequirements for exportproceeds (one
65 LI~~~~~I (
or~~ ~ ~ ~~~~ *
...... i
f ~ ~~~k. ... .t U. *.0'. 4 TRADEPOUCY IN THECARIBBEAN COUNIES
REALEXCHANGE fATES FORCECS
140
120 Adoo wu
100 1 o*m
s o arena" St. ICJtt ud NOWe so8,
140 , kM
20
0L
- - - - -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. .
re IV.1b.- REALEXCHANGE RATE FOR OTHER CARICOM
180
140 120 .*-- Bulab
so 40 TIlgralYib:TobagoU
2 0 ______Ye
REAL EXCHANGERATE FOR NON.CARZCOMTa
3S0
260s OJ z TheaBJ_ma
00 .. ,iame * D*n.
~~- _ _- - Yw 67 COPINGWITH CHANGESIN THEEXTERNAL ENVIRONMENT
exception),and capital account non-convertibility have been redudngtrade barrers in recent yeas (two exceptions). Most also imposed current the equilibrium REERshould have depredated.1 account restrictionsand three relied on multiple The extent of depredationnecessary is determnined exchangerates. As in other parts of the world, by a number of things, induding the degree of there has been a movement away from fixed substitutabilityand complementarityamong types exchangerates; five countries now have floating of goods in the economy. To illustrate this, rates. Fewercountries now have currentaccount supposethat import substitutesand nontradeables restric4ons, but not much has changed with are virtuallyperfect substitutes in either production respectto capital accountrestrictions or surrender or consumption. Then a trade policy reforrn that requirements. Jamaicaand Antigua and Barbuda reducesthe price of the import substitutesby 20 are the only countnesin the Region that do not percent(by, say, a 20 percenttaniff reduction) must force exportersto surrenderexport proceeds. also cause a fall of 20 percent in the price of nontradeables,and a fall of 20 percent in the The real effective exchange rate (REER)in all relative price of both of these relative to Caribbean countries appreciated in the early exportables.If the real exchangerate is definedas 1980s. In some countries (Jamaica,Dominican the purchasing power of exports in terms of Republic),this was recognizedand correctedearP; nontradeakles.the real exchangerate increasesby in the decade with significant nomninaland .eal the full 20 percent. Conversely,if nontradeables devaluations(Figures 4.1a, b and c). In some are perfectsubstitutes with exportables,the price., others, the appredationwas allowed to continue of these will move together, implying that the until crises forced more dramatic devaluations reduction in the price of import substituteswiIl between 1985 and 1987. This was the pattern of h,vL !ttle effect on the realexchange rate. Guyana, Haiti, and Trinidad and Tobago. The other CARICOM countries followed a similar The factors which affect the degree to which pattern, though both the appreciation and changesin the price of import substituteschange subsequent corrections were much milder. the real exchangerate can be summarizedin a Suriname's REERappreciated significantly and 'shift parameter,'W 19. This parameterhas been continuouslythroughout the 1980sand 1990s. By estimatedbetween 0.7 and 0.9 for Mauritius, a 1992,the level of the REERindex in most countries small island economysimilar in many respectsto was about the same as in 1980. The major the CaribbeanIslands," and 0.9 (in the long run) exceptionsare Surname,where the exchangerate for Barbados2l. A valueof 0.7 for W would imply has become increasingly misaligned, Guyana, that a reducton in protection from 100 percentto Jamaica,and the DominicanRepublic, which now 50 percent should be accompaniedby a real have substanti2llf more depredated rates than devaluationof around 25 percent A value of before, and Barbadosand The Bahamas,whose W-0.9 would imply the devaluation should be rates have been appreciating since 1990, and which consequentlynow have rates 13.15percent moreappredated than in 1980. AM Mussa, Mw *Macoxnoki Poky and Tfade Uberaization: Some Guidelines,' World Bank Obsene 2 Increasing an economys openness reduces (No.104:77 1987. (depredates)the equilibriumlevel of the REER,as do adversetermns of trade shocks,and reductions "saada L ed,and K. dements,Trhe Incidence of Protection: in exogenousflows of foreignexchange, such as Theoy ad Measuremet TheFee TradeEndeavor In Latn externalassistance"' As an exampleof the order Amra (London: Maanillan, 1986) for the Trade Polky of magnitudeof this effect,consider the effectof ResearchCentre. trade reforms. Sincemost Caribbeancountries aHacheute D., J. NashR. Hood,R. LopezM. Schiffand M. Haddad, MauIs 7ToAid the 21st Cent, Trade Expansion ProgramCountry Report No. 11, 1993 (Washington,D.C: 17 S. Edwards,'Exchange Rate MisalignmentIn Deveoping UNDP/WordBank, 1993). Countries,World Bank Research Observer. 4 (No. 1):3-22(1989) and A. Harberger,'Trade PoCcy and the Real ExchangeRate 2' MaxwelStamp, EXpoM Compettveness and MarketingStud In (Washington.D.C: EconondcDevelopment Institute of the Barbados,report preparedfor the Governmentof Babados WorldBank, 1988). (anuary1991).
68 4 TRADEPOUCY IN THECARIBBEAN COUNIRIES
Table4.7: TradeProtection in EastAsia in the 1980s
AvewageNominal Tadlfl Impat Item.Subject to Impost EffectivePwtection Rate In Manmfactuing (unweighted) Restcl (percent) (pent) (percent) Philippines 24 (IM) 3 (IM) 32 (192) Korea 10 (1992) <5 (1992) 28 (1988) Indonesia 20 (1991) 10 (1991) 52 (1992) Malaysia <10 (1990) <5 (1990) 23 (1988) Thailand 44 (1988) <5 (1991) 51' (1988) a. TheEPR for Thailandexcludes agroocesst anduss valueadded In woddpdcs aswelgt Usingthe mono stanad veighingof valueadded at domesticprices yields an EPRof 61 In 1986 Souce: Thomasand Wanr Government ckyand dtictiVftyGrowth is East Askb an Excepon TheWodd Bank, 1993.
about 30 percent. Sincethe currentreal exchange Argentina,which has peggedits rate as a nominal ratesin the Regionare, with the exceptionsnoted anchor in its stabilizationprogram. Controls on above,more appreciatedthan in 1980, and since exchangeuse have alsobeen liberalized. Sevenof there has been some reduction in protection of these countries (Bolivia, Guatemala, Mexico, import substitutesin the interim,there is at leasta Paraguay,Uruguay, and Venezuela) have no presumptionthat rates are currently out of line exchangerestrictions on currentaccount, and four with long-run equilibrium levels. Without real (Bolivia,Ecuador, Guatemala, and Uruguay)have devaluations,this problem will become more noneon capitalaccount. severeif thereare further tradereforms, if external transfers fall, or if termsof trademove adversely Ukewise,the booming,export-oriented economies (e.g, becauseof the 'bananashock'). of East Asia have either had very open trade -egimesfor a long time, or have been moving Comparison with Countries Outside the strongly in that direction. Hong Kong and CaribbeanRegion Singapore fall in the first category, having maintaineda policy of essentiallyfree trade for Many of the other Western I lemispherecountries decades. Koreaand Taiwan(China), on the other havecarried out strongeconomic reform programs hand, have been liberalizingtheir trade polides in in tbe 1980s,with tradepolicy reformsusually the the 1980s. Korea now has an averagetariff of cornerstoneof such programs. Most of these about 10 percent, with an average effective induded the up-front elimination of NTBs to protection rate in manufacturingof 28 percent. imports, with the result that in almost al these Taiwan'saverage tariff on non-agriculturalproducts countries, NTBs are gone or cover a negligible is about 9 percent, while its average tariff for amount of domesticproduttion (Table4.8). With agricultural imports is 22 percent. (It also a few exceptions, the range of tariffs (the maintainsquantitative controls on some, mostly differencebetween the highest and lowest rate) agriculturalproducts). has been reduced to no more than 15 or 20 percent. Peihapsmost relevantfor the Caribbeancountries is the experienceof the more recent EastAsian Exchangepolicy has been used in all these success stories of Indonesia, Malaysia, and countriesas an integralpart of the reformprogram. Thailand. Thailandhas the highest tariffs among All countries devalued strongiy during the trade this group(44 percent),but its effectiveprotection reforms. And, despitesome appreciationof real rates(averaging 51 percent in manufacturing)are exchangerates in the 1990sas a result of strong still low, compared to some in the Caribbean. capital inflows, the level of real rates in 1992 was Indonesia'saverage tariff is 20 percent, with an still substantiallymore depredated than its 1980 average effective protection rate of 52 percent. level. All countries in Table 4.8 currently have Malaysia is dose to free-trade status, with an floating exchange rates, with the exception of average tariff of less than 10 percent, and an 69 COPINGWITH CHANGES IN THE EXrERNAL ENVIRONMENT
Table 4.8: Some Indkaftrs of Trade Rexm Beforeand After Reform ___. Cmnby Averg Unweigtd Tal RanBe Covae of QRson Impt RetEftve (p m Vear,postrefotm LegaT&ffRateS (percentof taiffmnesunls otherwsenoted)' EfxhweRat. year) (Pere) 1992 (1980-100) PreReform, Post.Refnm poe4te.fonm Post.Refom preMom PostRefiom 1992 Aqentna(1987,1991) 42(p) 15 1S.115(p) 522 62(ofdmestlc A few 77.2S
somvl(1985, 1991) 8 _ 5.10 nLL Mima 65.41 Bail(1987,1992) S1 21 0.105 0-5 39 MinImal 77.20 Chlle(194 1991) 35 11 3O I n 0 56.36 Caliua (19841992) t 61 12 0-220 520 99 1 S7.60 ComaRmam(19 1992) S3(p) 1(p) 0.1400(p) 5.2 L o s7 ECuadDr(1989,1992) 37(p) 18 0.338(p) 2-25' 100 0 47.54 Guatmal(196 1992) S0(p) 1S(p) S90 520 6(ofdomestic dh 71.95
Haondum(19BS1992) 41(p) 1S(Wp) S-90 5.20 NA 0 72.28 Mealc(196S 1990) 24(w) 13(w) 0-100 O.) 92(ofdomet 20(Idomestlc 9069
Paaa (198 1991) n. 16 n.. 3.86 n.A few 5802 Poeu(19681l92) n.t 17 0-120 523 100 V 283.12 Upay(1 B7 1992) 32 18 10.55 12.24 0 0 74.04 Venezueh(1989,1991) 37 19 0-135 0.50 40 IV 51.83 pu incingtasdnWges w -pwucioelg~ted averageWIff, a hmpoW av tal ^hE whentdf f coveraeIt sm4 domec prodtctionceage naybe sgdfan aE-adfrab hua specfictaulf of 40 pe-et onaumoI b.Guatemala has 5bf antQRs fbr heand safeeasons;pm efom ftheycoverd 29 pen:ent of domestcmanufectuing psducdonL c SomeQRs do exdstfor heal and safetye d OnagiLctu psoduconly. a Anoher8percent of taf termare resttd becauseof health aons;prefo,n thenunber was S pemcent. Sower. An A.ndS.Rpatpiana rradePokyReforminLatinAmedcaandtheCabbeannthel9s PoiResearchWogPaperno.1104(Febt1993); WoaldBanic vaiou epor staffemtes andANDREX; REER fim P.
70 4 TRADEPOLICY IN THECARIBEAN COUNIRIES
averageeffective protection rate of 23 percent.AU Trinidadand Tobago,some firms and finandal of thesecountries have followed macroeconomic institutionsare branchinginto othercountfies both polidesthat ensurethat their realexchange rates insideand outside the Region.Regional stocks can remainat realisticlevels. be crosslistedin the stockexchange of several MDCs. In the smalleconomies, however, firms Oneeffect of thesepolicies has been an inflowof andfinandal institutions remain tiny and caterto DFI in these countries,with a concomitant thelocal market. Finandal institutions are not even diffusionof technology.The companies that have ableto acquirea diversifiedportfoGo of securities, set up businessin EastAsia have been oriented sincetheir investmentopportunities are confined predominantlytoward export markets, not heavily largelyto local assets. The EasternCaribbean protecteddomestic markets, as in othercountries. Central Bank has extensiveplans to improve Becausethey rely on outsourcingof component capital mobility at least within this subregion, partsfor theirproducts, which is fadlitatedby an indudingpromotion of a secondarymarket for open trade regime,these firms are attractedto treasurybills, an inter-bankmoney market,a countrieswith simple and unrestrictiveimport foreigncurrency market for spotand forward sales, polides. Oncelocated in an economy,they have an EastemCaribbean Enterprise Fund, and Eastem proven to be good conduitsfor transferof CaribbeanHome Mortgage Bank, but thesehave productivetechnology from first-tier exporters so farnot been operationalized. (Japan)to secondtier exporters(Hong Kong, Korea,Singapore, and Taiwan,China) and more The regulatorybarriers to capitalflows are many, recentlyto the dynamiceconomies of China, somedirecd 2y linkedto the finandalsystem, and Indonesia,Malaysia, and Thailand. some not. Obvious barriers indude the regulationsprohibiting nationals from accessing off- ComplementryPolides Flble FactorMarkets shore credit and restrictingforeign investors' issuanceof equity In the local market. Less Thebenefits of greatercapital and labor mobility obviousperhaps are the effectsof the 'Alien vithin the Regionhave been recognized,though LandholdingActs," which generallyrestrict the concreteactions have been slow to materialize. ownershipof realestate (and sometimes securities) TheGrand Anse Dedaration in 1989called for the by non-nationals. These have the effect of implementationof a schemeto allow the free Impedingthe saleof equityand the use of real movementof capital startingwith cross4;tingof propertyas collateral,and have been Identified as securiteson the nationalstock exdianges, as well ^the single largestbarrier to expansionof the as technicalwork on a regionalequity venture capital marketsand integrationof the OECS capitalfund. It alsocalled for arrangements for the financialsystems.' Foreignexchange regulations free movementof skilledand professionallabor, andtransaction taxes make it cosdyor impossible and of contractlabor on a seasonalor project to hedgecurrency risks, creating another obstade basis." TheWest Indian Commission, in the 1992 to capitalflows Insideand outsidethe Region. report,Time for Action,'reiterated some of these Thesebarriers all workagainst integration of capital recommendations.Nonetheless, capital seems to marketsin general,but seem to pose spedal be in someways more mobile between individual problemsfor equitycapital flows. Perhapspartially Caribbeancountries and the outsideworld than as a consequence,finance in the Regionseems to amongthe CARICOM countries themselves. There be tilted heavilytoward debt - particularlyfrom is somedifference in thisregard between the larger domesticcommercial banks - andagainst publidy economiesand the smaller. In Jamaicaand held stock. In the OECS,debt comprises76 percentof total finance(exdcuding DFI), with 75 Beral, RJ, 'CARICOM:&tern* VubmaWRional percent of thisfrom commercialbanks. Equity Econom Itegaon paperprepare Intofo Economk Igatlon Jnthe WestnHemisphee: Pwosec for Latin Amedia, Kelto8 n Orgadation of Easten Cariben Sttesa OEa Cowutrxs. Instite for nterntioalShtis Univ.Of NotreDame, Ap 17-18, MPe InvstmentDgoxc Sty, RegionalFnancal Isss final 1993(First Draft April1993). draft eport(Washington, D.C: July1993).
71 COPINGWITH CHANGESIN THEEXCERNAL ENVIRONMENT
Table4.9: Effectve Ratesof Protecton from The C ET
Typeof Pdrouctf 1990CEr 1991CET 199719"SCU TypeOf inpt
Cmumesgood/acodtpingl unten_& VA- 10% 46S 180 65 20% 240 1OS 40 30% 16S 80 32 Cesuniwgo iaeompen g iruA VA- I10% 600 450 155 20% 300 22S 80 30% 200 150 SS ContpetingIqawcompedng it ut (boh Intermedates) VA= 10% 15 30 15 20% 15 30 15 30% 15 30 1S Coaing iqtut (ltede)/ab p iqa VA= 10% 150 300 lOS 20% 75 150 55 30% S0 100 38 MEMORANDUMffEMSt TheTajiff stiuctures of theCET regimes (therate used In caultions ae shownin parntheses): Cownsuegoods alcompeting) 40/60(60) (45) (20) Compefti insug (nteinediates) 10/13(15) (30) 15(15) Cornpednginputs (prinary andcapital) 10115(15) (20) 10(10) N'ncomptnnputs (0) 0-10(0) 05(5)
ThesMituoe of theCET, espeialy pdorto l991, wasnoe conpef-than indicatedhem Thesefgustmare beleved to resonamyrpresent he
Source: Bankst calutions.
Table4.10: Nominaland EffectiveRates of Protection
NP EiP
8183 8446 8789 9092 93 8113 8446 8749 9092 93
Barbados 5&0 54.7 490 68.3 n.a 222.7 210.3 1880 263.0 na, Guyana 113.3 1S4.7 118.3 32.0 16.0 340.0 4640 35S47 90 4&0 jamaka 8S.3 56.0 48.0 4. 4?.0 255.7 168.3 1440 147.0 141.0 T*rddadand& tobgo 77.0 87.0 817 71.7 S.2 25.7 243.7 211.3 200.3 162 a. Caculationof the NRPis basedon averagetadff and suchdweIe with a rougha4ustment for theeffects of nonlarff bantesand the blacknmt b Calculationof theERP Is based on an assumptionthat domestically prduced Importsushti havean aveagevalue addedof 30 perten Source:Gonzaes, A.P, 1993,op dt, note 10
72 4 TRADEPOLICY N THECARBEAN COUNnS
comprises24 percent of finance, with only 36 of goods with high local value added and against percent of this in the form of publidy held shares.24 Intermediateinput production. But the reduction in protectionof the most heavilyfavored sectors- Impactof Recentand Planned Reforms those using non-competing inputs - will be significant. And the spreadbetween the most and This section evaluatesthe effects of trade policy leastprotected sectorswill fall dramaticalty,in the reform programs In the Region, using several examplesin the table from a spreadof 420 percent criteria. The first two sectionsestimate the effects to 140 percent. Both theory and experienceof on the incentiveframework, the first looking at the other countries indicates that this kind of direct indicator of the CET structure and the rationalizationshould encouragea more efficient second at indirect indicators of how much useof the Region'sproductive resources. protection of import-sbstituting producion has beenreduced. A subsequentsection considers the Tariffsand OtherRefonns in CARICOMMDCs fiscal effectsof changesin the tariff structureand exemptions. One study25 examinedthe levelso' jiominal (NRP) and effective (ERP)protection in four CARICOM Rationalizationof the Common Eernal Tariff countriesin the 1980sand early 1990s.The results are displayed in Table 4.10. Given the The CET is not the only way in which import- assumptionsnecessary to make the calculations, substitutingproduction is protectedat the expense the numbers should not be consideredprecise. of exports,but its structuredoes play a major role However,the basic story they tell is corroborated in determiningthe Incentivestructure in CARICOM by the course of the reforms in these countries. countries. The revisionsin the CET adopted in Guyanabegan the decadewith the greatestanti- 1991 went a long way in making the rates of trade bias, but its dramatic reforms in the mid- effecive protecion for import-substituting 1980s and more recently have now reduced activities lower and more uniform. However, protectionto by far the lowestof these4 countries. pr'Jtection remained quite high and dispersed Jamaicaand Trinidad and Tobago also reduced (Table 4.9). Effective rates of protection are protectionsubstantially, the former mostly early in significantlyhigh. They compareunfavorably with the decade,with little recent progress,and the the lower rateswhich characterizethe EastAsian latter mostlylater. Barbadosbegan with the least economies. Due to the escalatedstructure of the protectionistregime, but now has the most. schedule,the most highly protected sectorswere those with the lowest relianceon local Inputs,as The reformsof 1990in the DominicanRepublic are measuredby valueadded. And the Incentivesfor expectedto significantlyreduce the averagerate intermediate input production in CARICOM and the dispersion of tariff-based effective remainedfar below those to producefinal goods. protection. Whereasthe averageERP in 1989was estimatedto be almost100 percent,this will fall to When fully implementedby 1997 or 1998, the 34 percent when the reformsare complete. The recentlyadopted revisionswill make even greater dispersionacross the 55 sectorswill fall from 100 progressIn reducingthe distortionaryeffects of the percent to 23 percent. The country would thus CET(Table 4.9). Of course,there will still be some have one of the lowest ratesof protectionand anti- bias,not only in favor of Importsubstitutes relative trade bias in the Caribbeanif the tariff structure to export production, but also againstproduction were the only barrier to imports.
Gonzales,AP TradeLIbeaalation, Growtk and Empome 24 Downing et at Captal Marks and Prvate Sector in C4ARCOM,paper presented at conerence on Trade Develpment in the OECS,US Agency fbr International UberafizationGrowth and Employmentin the CanibbeanBasin Development(1991, dted in OECS,1993). (Washington,D.C: September8.9,1993).
73 COPINGWITH CHANGESIN THEEXTERNAL ENVIRONMENT
Table4.11: Performanceof TradePolicy-Related Economic Variables (change from baselevel in 1981.83)In CaribbeanCounties
REER BMP MCDP CWM NFCMfNFM CMWON NFCM,$ON 84.86 8749 90-92 84486 87-89 90-92 84-86 87.89 90-92 8486 87.89 90-92 84.86 87-89 90-92 84<86 87.8990-92 8486 87-89 90-92
CARICOM: S.5 -13.2 -20.8 na. nM n.a. -5.3 *7.3 -2.8 -3.2 1.2 na. .3.1 -0.0 nM .0.9 1.4 na. 0.6 0.3 na. 5.6 b6.9 -11.2 a a. nMa. -9.5 -11.0 -12.9 -3.3 1.0 na. -0.7 3.6 na. -7.2 -2.2 n.a 1.6 2A n. AntiguaandSa,bda 1.4 7.8 .S na. na n.a. 16.7 8.2 a. -S.3 9.9 na. 0.2 13. na. n.a. n.a. na. n. na. nM Domlnica 12.3 -3.7 -7.2 na. na na -7.2 4.3 11.7 -5.2 .1.8 4.2 .5.3 0.4 t.4 n na. nL na. nM n-a. GCenade 9.6 46.3 -13.9 na na. nMa. -17.8 -17.2 .17.9 2.1 0.6 n. 2.4 3.0 ma. -5.8 .3.3 na. -2.0 0.6 nM St KClts&Nevs 2.1 .10.4 -16.4 na na. na. -14.4 411.7 -1.9 43 -2.1 na. 4.2 .0.3 na -1. 9.5 n.a. .08 8.2 na. St Luda 3.0 -7.3 *11.6 na. na n-a. -28.0 -20.2 t15.2 45 .2.3 nMa 4.2 1.0 na. n na. na. na na. n St Vncwn and the Greadines 3.9 4.3 -10.1 na. na n.a. -63 -5.3 nM nMa n n.a. nLe nM na. nL na. nMa. nae na n.a. OTHERS .3 .20.7 .32.8 nM rta . re 4,8 4.8 113 1.3 5.7 na. 0.8 5.8 nL 4.6 40.6 na. 4.2 0.S na Batbados 10.2 49 4.1 n a. na. -. 6 -21.4 10.3 2.3 8.2 3.3 2.8 7.3 3.4 .2.8 .3.5 .4.6 4.0 -t.4 -2.1 Bele 9.5 4.9 t11.4 35.0 12.0 4.0 18.9 16.7 14.0 9.4 4.5 -5.3 2.6 4.3 na. 7.4 4.3 4.1t 2.5 3.7 na Guyana 16.3 44.4 -94.1 574.0 124.0 119.0 -20.2 1.S 12.8 nM na. na. a. a. nML nML ML n-a. na nL ML Jamaka .44.8 -43.0 -60.9 42.0 46.0 .43.0 11.6 4.6 10.7 1.2 4.9 3.4 0.8 3.1 4.9 1.5 3.5 3.3 0.7 3.0 3A Tdnklad&Tobago 17.8 -18.8 .19.3 14.0 16.0 13.0 -5.6 -S.6 .7.6 naL na. na. na. nMa a. na na na. na. na. nma.
NON1CARICOMK 4.7 7.3 17.3 154.0 139.0 222.0 4.5 10.6 411.3 2.9 3.8 147 2.9 3.8 21.3 2.1 6.2 7.7 2.6 7.4 10.1 TheBahamas 5.7 1.9 1.8 -20.0 -180 -18.0 41.S 42 na. na. na. na. a. a na n.a na. MLa nM na. nM DominiRepubic .30.9 -S44 .38.2 14.0 .3S.0 41.0 11.7 18.2 tl.S 42 12.8 9.3 4A7 14.3 10.7 6.8 17.5 8.6 6.6 178 9.2 al8 146 -. 4 .20.1 54.0 136.0 236.0 .7.1 -9.3 -7.9 1.6 5.2 2.0 1.1 .68 6.5 -2.6 -S. -33 413 -Z9 -2.0 Sudneme 186 51.9 76.2 3680 333.0 71Z0 -21.2 -30.9 -29.9 nM nma. nM na. e MLa n naL nML na. na. n MED!N: CABICOM 9.5 .73 .11.6 na ne nMa -7.2 -S.6 .7.6 0S 2.6 .0.4 0.3 3.7 3.4 1.S 3.5 1.1 40.8 3.0 0.7 OECS 3.5 -7.3 -10.9 na. na. na. 10.8 S. -13.6 4.3 -1.8 42 .0.2 0.4 1.4 .3.7 3.1 na 1.4 4.4 na. OTHERS 10.2 -18.8 -19.3 n. nMa na. .63 1.5 10.7 2.3 AS 14 2.6 3.1 42 1.S 3.5 1.1 0.7 3.0 0.7 NONBCQM 10.2 t1.8 .9.2 34.0 69.0 109.0 4.3 69 -7.9 2.9 3.8 5.7 2.9 3.8 8-6 2.1 6.2 1.7 2.7 7. 3.6
Notes:na.=not applicable or not rdeevant;REER=Real effectv excwngerate (decrae indicatesdepcation); BMPdc maket rateprernunt definedas the ratio of the paralelmarket to officWiexhnge ate, mrh 1, in pecen Con-Totalwoumption; NFCM ood consumptio Imports;NFM-Nonifood ino AWtotal h;ots CM=Consumptoninport AUfigues areIn pecentge pointchange, except REER IsIn percentage dmge; figumsin 1990-92are based on themost recent year data avalabbe
Souwce BESM.IMF, and Internatonal Cufency Analysis tnc. data.
74 COPINGW1TH CHGES IN THEEXTERNAL ENVIRONENT
Table4.12: Change in tariff Equivalentof Import Restrictionsin CaribbeanCountries (percentagechange relative to baseperiod of 1981-83)
CONSUMERIMPORT NON-FOODCONSUMER IMPORT NON-FUELIMPORT
19846 1987-49 1990-92 1984-86 198749 1990-92 1984-46 1987-89 1990-92
CARICOM Antiguaard Barbuda 48.1 -47.1 na. -31.5 -73.2 n.a. -24.3 -39.5 na Dominica 21.3 -22.7 *35.8 22.6 -32.4 -49.0 13.0 .29.0 4S.8 StKittsandNevis 9.7 .22.3 fLa. 9.4 .29.4 na 64 -31.0 na. OTHERS Batbados 15.0 .0.1 -12.8 10.2 -4.3 -18.1 15.9 17.8 -S.1 Bela -13.9 -14.0 2as .12.5-32.4 na. 14.2 a82 40.4 Jamaica -30.1 -73.e .93.8 -30.6 97.4 4125.8 -30.1 .65.4 886 NON.CARICOM DominicanRepublic *30.8 .81.1 -71.3 -32.8 867 -77.2 -30.8 .81.1 .71.3 Haiti 14.2 17.C 2&0 I 14.9 30.0 -.S1. 418I 3.9 417.8
-Source:Staff calcutations.
Table4.13: Changein Incentivesfor ImportableProduction Relative to 1981.83 (percentagechange) CONSUMERIMPORT NON-FOODCONSUMER IMPORT NON-FUELIMPORT 1198486 1987.89 1990.92 198486 198789 1990-92 198486 198789 1990-92
CARICOM Antiguaand Barbuda .9.4 * 39.3 n-a * 32.8 * 65.4 na. -25.7 .31.7 na. Dombinca 8a8 418.9 28.6 10.1 -26 .41.8 0.6 .25.3 .386 St KittsandNevis 7.7 *11.9 na. 7.3 419.0 na. 4.4 -20.6 na. OTHERS Barbados 4.9 0.7 .8.7 0.0 -3.4 14.0 5.7 186 4.1 BeLke -23.4 -9.2 39.9 -21.9 .27.6 na. 4.8 -3.3 11.1 Jamaica 14.7 *30.8 -32.9 14.2 -54.4 .64.9 14.7 -22.3 .27.7 NON-CARICOM DomInicanRepublic 0.1 *26.7 -33.1 -1.9 *32.3 .39.0 0.1 -26.7 -33.1 Haiti 0.3 22.4 -7.9 0.4 35.3 -31.4 3.6 9.3 2.3
Source:Staff calculations.
75 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
Effectsof Reforms:Performance of Trade-related The next 5 variablesare differentmeasures of Variables import penetrationin the domesticmarket. In generalit wouldbe expectedthat as trade barriers The ultimatetest of an econornicpolicy change is arereduced, imports would increase as a fraction its effecton realeconomic activity. Thissection of GDP.27 Column(3), the import-GDPratio, is a examinesthe behaviorof a numberof economic commonlyused measure of opennessbased on variablesthat would be expectedto changewith this idea.This measure has one serious flaw when tradepolicy changes. The movementsin these it is usedfor countriesthat begina liberalization variablesare reportedin Table4.11 with each programby relaxingrestraints on importedcapital column showing the change relative to the goods,inputs, and selected consumer goods that variable'saverage value in the baseperiod, 1981- do not competewith domesticproduction. Since 83. Thefirst variable,can be considereda direct productionof import substitutestends to be policyvariable in the short run. In the medium intensivein importedinputs, the stepmay increase tern, however,the sustainableequilibrium level of importswhile increasing protection." the REERis determinedby (amongother things) trade policy;the more open the regime(ceteris Oneway to minimizethis problem is to lookat the paribus), the more depredatedthe equilibrium most heavilyprotected sub-sectors of imports. REER. The level of the REERindex is not Becauseof the typical escalatedstructure of meaningfulbut its direction of movementis. protection,these tend to be consumptiongoods, Taken as given the pre-adjustmentlevel was and espedally non-food consumptiongoods. substantiallyovervalued, depredation is eithera Columns(4) through (7) are measuresof the policyof greateropenness per se or an indirect relativecomposition of importsand consumption. indicatorof sucha policyshift. Increasingshares of consumerimports (or non- food consumption)would indicate reduced Thesecond variable in Table4.11 is the changeIn protection.This measure is not a perfectmeasure the black-marketpremnium (BMP), where BMP is of protection:some protected import substitutes definedas the ratio (in percent)of the parallelto are not consumergoods and some consumer the official rate, minusone. The BMP is an goodsdo not competewith domesticproduction indicatorof severaltrade-policy-related variables and so are not protected. But in prindple,this (amongother things),induding restrictiveness of shouldbe a betterindicator of protectionthan are foreignexchange licensing and mis-alignmentof total imports. Unfortunately,data on these the REER.Since the OECScountries and Barbados variablesare not availablefor a number of havenot usedexchange rationing as a policytool, countries,especially in the 1990s. there has rarely been any significantparallel market. For the other countries,the BMP movementshave, as expected,more or less mirroredmovements in the REER,increasing in the premumf Haitiis alsosuspect since the rate in September early1980s as REERsappredated, then dedining "I; has been effectivelyunified. The premiummay reflect duringthe periodsof devaluationand trade policy demandfor foreign exchange for flightcapitaL reform. The decineswere dramaticIn Jamaica after 1983, the Dooniican Republic after 1984, 2? How much they would Increase,however, would be and Guyanaafter 1986. The exceptionsto this are determinedby the extntd designof the liberalizationand by the degree(and speed)by whichdomestic producmeescol Trinidad and Tobago, wh.-re the BMP increased increaseeffidency to competewith the imports. evenduring the periodof REERdepredation in the late 1980sthrough 1991 (until 1992, when it was In the longrun, steps that increaseprotection wil generagly virtual:veiiminated), and Haiti, where the BMP has reduce the total valueof importssince the value of the final contiuc,~lyicreasd depitecontiuin8real consumergoods Imports displaced by the inaeased continut,isiy increased despite continuing real productionwill exceedt valueof the incesed Importsdomesticof devaluations. By 1992, the BMP remained inputsand capital goods. Thisneed not hold in the shortrun, significant only in Surname (813 percent), Haiti however,If capitalgood importsare zlumpyand thereis no (290 percent)and Guyana(37 percent).26 stringentbalance of paymentsconstraint Evenin the longrun, it maynot be trueof observedimports since the marginaimports displacedmay be thosein the blackmarket Thisis alsonot true 26 Smal premiaof 3 to 14 percentIn othercountries, Incduding of negativevalue added production. the OECSand Barbados,may be statisticalanomaDes. The high
76 4 TRADEPOUCY IN THECARiBBEAN COUNTRIES
Whilethe resultstend to be mixed,some pattems food,fuel, and inputs used in domesticproduction emerge.Flrst, the indicatorsall showthat Jamaica of finalgoods. In interpretingthe results,it should andthe DominicanRepublic significantly increased be kept In mind that a decreaseindicates a opennessin the 1980s,though it appearsthat most reductionin protection.It shouldalso be noted of thischange occurred in the earlyor mid-1980s. that a reductionin protectionaccording to this Thevariable M/GDP shows a strongimprovement measureneed not comeabout through any formal in Guyanaalso, especally in the 1990s,though the changein the traderegime per se. It could,for other variablesare not availableto corroborate example,be the resultof moreliberal issuance of this.Belize shows an improvementin all variables importlicenses, rather than abolitionof licensing in the early1980s, but decreasingopenness in the requirements.In Jamaicaand the Dominican mid 1980s or early 1990s. Most, but not all, Republic,protection fell very significantlyin the indicatorsfor Haitishow that openness dedined in eadyand mid-1 980s. In theformer, it continuedto the early1980s and hasstayed more or lessthe dedine,while in the latter,it increasedslightly in samesince then. In mostof the OECScountries, the 1990s,but still remainedfar belowits 1981-83 mostavailable indicators show that opennessin level. In Dominica,St. Kitts and Nevis, and the mid-and late 1980s wasless than in the first Barbados,protection increased early in thedecade. yearsof the decade,but there is no dear trend It thendedined continuously in Dominicathrough The exceptionsto this are Antiguaand Barbuda 1990-92and decinedin St. Kittsand Nevis until and Grenada,where some indicatorsshowed 1987-89,when the dataseries end. In Barbados increasedopenness. protectionapparently dedined, at leastin 1990. It is in prindple possibleto derivea numerical Table4.13 displays estimates of thechanges in the estimateof changesin the tariff equivalentof all ratio of domesticto border prices.3 What these restrictionson imports. The resultsof these numbersindicate is how the incentiveto produce calculations,using three differentdefinitions of imports,are reportedin Table4.12. Sincethe import-substituteshas changed, taking into account focushere is on measuringchanges in protection, the effects of both "protection' and the real the three measuresof importsare thosewhich exchangerate on domesticprices. The table Illustratesthat the real devaluationsin most exdudeimports that are not producedlocally, or at *lsrtsta h eldvlain nms leastare not heavilyprotected in mostc countnieshave not completelyoffset the reductions In tariffequivalent protection rates, but havedone so partially.Thus, for mostof the eightcountries 2t Thiscan be doneby usingthe demand (uncton as foilows:Let for whichdata is available,incentives for producing the demankfor inportsbe M = a + bY + c(PmE(1 + t)j; whereM protected imports did dedine somewhat in the is imports fin quantity,not value,terms). Y i Income,P4 i impon pricein dolrs, Eis the realexchange rate, and (1 + t) is the*trf middleand later periods. The exceptionsare equivalentof import restrictions,that is a measureof the Belize,Barbados in the middle period and, by increaseIn donestic pries that wouldbe neededto reduce somemeasures, Haiti.. importdemand to thesame degree as theImport restrctions. If allvariables are in naturallgarithms, then the aboveequation canbe differentiatedand refarranged to show %A(1 + t)=(%QM- FiscalEffect b%DY c4%hP5, + %ME]Jc)where %is thepercentage change in a varble, andb and c arethe 0 importelstidties withrespect to Sinceimport tax revenuesare an important source incomeand priceand DE Is defined so a depreciationis poltive of financefor Caribbeangovernments, there is Data is avaible for imports,income, import prices,and the exchangerate; and the elasticitiescan be estimated(or assumed concernregarding the fiscal effect of the CET on thebasis of previousesftimates for otherdeveloping countries) reforms. However,not withstandingthe ladcof so the changein (1 + t) can be estimated.Essentiaii, It is the residualchange in importsthat cannot be explained by changesin income or the major variablesthat affect domestic prices 30 Thisis derivedby addingthe percentagechanges in the real (internationalprice and exchange rate fluctuations).Coefficients exchangerate and that of the estimated(1 +t). This,In effect, of b = 1.25and c = -1 are usedhere, which are consistentwith measureshow much relativeincentives for production of the rangeof valuesfor theseparameters estimated by Pritchett importableproduction has changed, factoring in exchangerate (PritchettL. ImpontDemand Elastkces in LDCs:Estimates and and commercialpoDcr.. Since(I+t) was itself estimatedas a Detewminants,mimeo, World Bank Trade Polcy Division, residuai,the numbersin the table should not be consiered November1987) for a broadsample of developingcountries). independentof the numbersin the previoustable.
77 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
data for firm estimates,the generalcondusion generatemuch revenueand may actually be comingfrom projections of the likelyeffects of the moneylosers. Hence,modestly raising the low reformsis that,when countriesraise lower rates, ratesmay largely offset -or morethan offset- any abolisha significantfraction of exemptionsand reductionin revenuefrom lowering rates on these lowerhigh rates, the fiscalimpact is likelyto raise goods. or only modestlyreduce revenues (Table 4.14). One reasonis that for mostof the countries,the Table4.14 indicatesrevenue figures for certain dispersionin tariffrates is high;a largenumber of CARICOM countries with the phased items are zero-rated(Jamaica has 25 percent, implementationof the revisedCET. For Dominica, Dominicahas 16 percent),while a few itemscany importtaxes generate 37 percentof government high tariff rates. Thesehigh tariff itemsdo not revenuewith theCET contributing 16 percent. The
Table4.14: Simulationof Impacton Revenueof theNew CET (1993.1998) (percentagechange in parentheses)
1993 1994 1995 1996 1997 1998
scenario1 20.1 20.1 (0.0) 18.4 (M.) 18.4 (I.5 5.5 (.22.9) 13.9 (.30.8) Scao i 20.1 49.2 (144.8) 38.9 (93.5) 38.7 (92.5) 29.8 (483) 28,8 (43.3) scenarioIli 20.1 52.0 (158.8) 40.0 (99.0) 40.0 (99.0) 31.4 (56,2) 30.8 (53.2) ST.LUCIA Scenatol 123.0 123.0 (0O) 109.5 (.11.0) 109.5 (.11.0) 97.0 (.21.1) 96.3 (.21.7) Sc.wioZl 123.0 125.0 (1-6) 112o (4.9) 112.0 (S-9) 102.0 (.17.1) 101.0 (-179) ScenarioIII 123.0 128.0 (4.1) 113.0 (.8.) 114.0 (.7.3) 104.0 (.5.5) 101.0 (.17.9) GRENADA scenadoi 14.5 14.5 (0.0) 13.6 (.62) 13.6 (.62) 12.8 (1-17) 11.6 (120.0) Scenario 20.5 20.5 (0.0) 19.6 (4.4) 19.6 (4.4) 1"8 (4.3) 17.6 (-14.1) JAMAICA Scenario! 405.3 403.3 (0.0) 389.1 (40) 3S9.1 (4.0) 383.7 (-53) 3S3.7 (-S.3) sceari"oIf 417.4 434.1 (4.0) 433.4 (3.8) 450.8 (&O) 471.1 (12.9) ¼ ScenarioIII 625.43 650.4 (4.0) 658.4 (5.3) 686.9 (9.8) 719.2 (15.0) W BARBADOS 79.0 ¼ ¼ ¼ 3 ¼ 57.0 (-27.8) GUYANA scenarioI (82.0) % (71.0) (48.0) (48.0) ScenarioIt Y (91.0) I j (81.0) (S9.0) 195%0)
GeneralNotes: Al tradedata from counties. Projectedgtowth rates of importsestimated by Bankstaff in countrydepartments. For al countres,Scenario 1 refer to theImplementatIon of tOenew CEr,with all otherpolicies and eoonomic variables (hiduding impont value) constant Percentagechange figures are relativeto 1993. DOMiNICA. Scenarios11 and fil useprojected import growth rates from a modelof theeffects of thebanana shod. ScenaroIl l a 'pessimsticeand IlI an boptimistiCscenar. Thervenue figuresare calcuated by accountingfor removalof exemptionsand importvolume growth Thefigures are all In ECS milion. ST.LUCiA SoenariosIt and il use projectedimport growth rates from a modelof theeffects of the bananasho Scenario11 s a pesrlmistieand It an *oplimisticscenado. Infommation on valueof exemptins wasinsufficient to esfimateeffects of theirremovaL The figures are all In ECSmmlo GRENADAScenario 11 refers to revenuecalcubtons by ad4ustingfor removalof someexemptions. AU figures are In ECSmillion. JAMAiCA ScenarioIt usesprjected growthrates for Imports,but assumesno changeIn exemions. Scenaro [i1assumes Import growthand the eliminationof Spcent and 10 percnt exemptions.AU figures are JS mrllon. BAR&ADOS:Estimate of revenueshoWn for 1998is net effectof emiOnatingexemptions except for exporters(gain of BDS23milion) and adoptingtriff rangeof 5 to 20 percent(loss of BD645mIion). Estimateis basedon 1991figures, and assunresno impot growth. Estimateof revenuegain flom exemptionelimination is upwairdybiased, as it i basedon existing(1991) tadff stucture. Source:Hoodc R. (Louis egerWntemationa4 Inc.), 'Bartdos Tax and Tarifflssues,'mimeo.Worid Banik LA3C2 (August 28,1992). GUYANA Reeu figuresnot available;figurs repotedare for percentagechange. Both scenados include removal of exenptions. ScenarioIt assumes importelastidty of 41.
78 COPINGWITH CHANGESIN THEEXTERNAL ENVIRONMENT revenue simulations are done under three arrangementsare being erodedand will eventually scenarios:scenario I estimatesthe impact of CET disappearbecause of the rapidlychanging external revisions only; II and IlIl take into account the environment. This means introducing the effectson import growth of the bananashock (II is necessary policy changes to transform their a pessimisticscenario), along with eliminationof economies by making them more open and certainexemptions. The analysisindicates there is efficient. This Implies moving forcefully in a gain of 43 percent to 53 percent by the last addressing the Issues of nontariff barriers, period,compared to 1993. exchangeregime and rates,tariff and otherimport charges, exemptions and fiscal incentives, In SL Lucia,57 percent of governmentrevenue is traditional exports, factor markets, incentive generated by import taxes, of which the CEr structures, and prices commodities discussed contributes38 percent. The revenue simulations below. are done again underthe samethree scenariosas Dominica. There is a modestloss of revenuesof Nontariff Barriers about 17 percent even with no changes in exemptions (about which little inforrnation is Top priority should be placed on removing the available).This translatesinto a loss of only about remaining non-tariff-basedrestrictions on both 4 percent of total revenue. Similarlyfor Grenada, importsand exports. Whateverthe goalsof trade the analysis done under very conservative policy, they can be more efficiently met through assumptionsindicates small revenue losses. the use of explidt taxes on trade, with the advantagesthat taxesare less discretionary,rnake For Jamaica,the resultsindicate very smalllosses, the effects of policy easier to judge, and provide even assumingno import growth. Adjustingfor governmentincome, meaningthat revenuegoals import volume growth and removal of certain can be metwith lower rateson a broaderbase. At exemptions,there is a revenuegain of between 12 any rate, it appears that NTBs will have to be to 14 percentof 1992CET revenue. For Barbados, removedin the short term by all GATTmembers the revenue reduction is greater than for other underthe termsof the recentlyconduded Uruguay countries,though even here it is only slightlyover a Round. thesemay be convertedto tariffs and then quarterof CETrevenues, even assumingno import 'bound.' growth. For Guyana,where a very largefraction of importsare exempt,removal of exemptionswould There are a numberof options for carryingout the swampthe effect of the tanff reforms,resulting in removalof NTBs on imports.3 ' One is to simply largegains. eliminateall requirementsthat importersobtain a license,with no further action. In this case, the The analysisIs handicappedby lack of detailed domesticprice (relativeto theirworld prices)of the information regardingthe exemption regimesfor productswhose NTBsare removedwill be set by these countries. Exemption polides vary from the existingtariff rates. Sincein many cases,these country to country, with exemptionssometimes products attract rather high tariff rates, no extra availableto all firmns(under various constitutional protectionor phaseminperiod is needed,and this is acts) and sometimesonly to exporters(both intra- the preferredoption. regionaland Inter-regional).Whereas exemptions granted to extra-regionalexporters should be Anotherpossibility is 'tariffication'of the NTBs,that encouraged,this distinctioncould not be made in Is, imposingadditional surchargeson imports of the revenueprojections above. It should also be the products whose NTBs are removed. These noted that only Scenario I used the same surchargescan then be phasedout, leaving only assumptionsfor eachcountry. For others,country the normal tariffs. This process is intended to specificassumptions have been used(see notesto providesome adjustment period for the competing Table4.14).
Condusion: An Agendafor the Future Takacs,W., Atenatdve wansWionalMeasures to Liberalize Quanitative Trade Restcons. Impikations for Developing Counrd&s UNOP/IWodd Bank Tade 6cpansionProgram The benefits that the Caribbean countries have Occaona PaperNo.3(1989). enjoyed from their access to preferential market
79 COPINGWITH CHANGES IN TllE EXERNALENVIRONMENT
domesticproduction. An alternativestrategy for a ExchangeRegimes and Rates gradualphase-out of NTBsis to expandthe volume of importlicenses granted according to somepre- While most Caribbeancountries have made announcedschedule until the quantityof Imports progressin trade policy reforms,the recordon exceedsthe licensedvolume. In the interim,the liberalizingthe exchangeregimes has beenmore licensescan be auctioned,transferring the rents mixed.Almost all maintainsurrender requirements fromthe license redpients to thegovemment. Ths for exportersand restrictionson capital flows. mechanismis administrativelymore complex than Somealso still restrictforeign exchange for current tariffication. But it also avoidsthe technically accounttransactions, though here there has been difficultand politicaly contentious issue of deciding more progress. Perhapsmost significantly,five whatis theappropriate level for the surcharges. countriesswitched in the 1980sfrom fixed to floatingrate systems.This has helped them avoid In countrieswhere NTBscannot be immediately the gross currency misalignments that eliminatedand protectionprovided only by the characterizedtheir exchangeregimes in the past. standardtariff there is probablyno uniquelycorrect Forthe few countriesthat stillhave them, multiple way to carryout thisprocess gradually. The best exchangerate systemsshould be reformedon a mechanismin a countrywill dependon, interalia, priority basis, with the rates unified at an administrativecapacity and political feasibility. But appropriatelevel. what is importantis that the mechanismbe automatic- that is, not subjectto changeonce it For countrieson a fixedrate systems,the priority begins- andthat it not requiremore than a few shouldbe to ensurethat real ratesare at a level yearsto completethe process. that maintainsinternal and extemal balance. Four factorsargue that in mostof thesecountries in the Oneimpottant type of NTBis the legalmonopoly Region,this requiresa realdeprecation. One is for certain imports granted to a state-owned the real appreciationof the currenciesin the enterpfises(SOE). This arrangement is In effectin 1980s,which has still not been fully corrected. the CARICOMLDCs and in Barbados.Preferably, AnotherIs the uncompetitiveposition of domestic. the SOEshould be pdvatizedimmediately, at the industryat currentexchange rates, even with the same time that its legal monopolystatus is relativelyhigh levels of protectonafforded by the revoked.If not, a minimalfirst stepin the reforn existingtrade regimes. The third is the tradepolicy processshould be the eliminatiunof its legal reformsthat the Regionhas undertaken, which will monopolystatus. If quantitativerestrictions remain introduceeven more competitionfor domestic in effectfor the productsit imports,it shouldhave industries,and requiresa significantchange in to bid for the licensesin competitionwith private relativeprices of exportables,importables, and traders. As protection becomestariff-based, nontradeables. The fourth is the adverse privatetraders should be ableto importwhatever movementof the terns of tradeand extemalaid quantitiesthey wish. In eithercase, the private flows in the 1980s. And if a 'bananashock or sectorshould be encouragedto take over the squeeze"produces another deterioration, or if marketingchannels for theseproducts. This will capitalflows are reducedfurther, this will require require strict controls both on govemment aneven stronger real devaluation. transfersto the SOEand on governmentloan guaranteesto avoid giving the SOEan unfair In principle,a realdepreciation can be adcievedby advantagein the market.When the privatesector eitheran adjustmentof the nominalrate or by has developedsufficiently, the SOE can be fiscaland monetarymeasures. Particularly in the privatizedor dosed,or its role limitedto other contextof the Caribbeancountries, where much of functions.In thosecases where funding for export the loss of competitivenesshas been due to promotionactivities comes from an SOE,this unrealisticwage increases in the publicsector, reat shouldbe coveredby user chargesor direct depreciationwill alsorequire wage restraint. In budgetarytransfers. practice,the restrictivepolicies that are necessary
80 4 TRADEPOUCY IN THECARIBBEAN COUNlRIES
haveproven to be difficultto consistentlyfollow, In a revenue-neutralway by raisinglow ratesand and slowto bring aboutthe necessarydegree of loweringhigh rates. Phasing out the ower duges wil adjustment.And the experienceof manycountries needto be donein conjunctonwith revenue4rising has shown that an over-appreciatedcurrency or, expenditurereducrngmeasures, to avoidadverse creates expectationsof nominal devaluation, nacroeconomiceffects. But it wivlbe importantto leadingto capitalflight until the correctionis made. ensurethat any newtaxes or increasesin existing Mostsuccessful trade policy reform programs have taxesdo not disaiminateagainst trade; the rates indudeda significantnominal devaluat;on. shouldbe the samefor importsas for domesticall producedgoods of thesame kind Forthose countries in the Regionwhich are on fixed exchangerate systems,but whichrequire real rate It is dearthat the recently adopted revised CARICOM adjustment,some choices must be made.Given the CE1is a greatimprovement over the previous version. advantagesof stability and confidence that a fixedrate Not onlyis theformal rate sdedule lower and mnore havehad for some countries, they will almost certainly unifornfbut manyof the ¶ists! of exceptionsare wantto maintainthat system. Whether they should phasedout. Severalissues should stfl be addressed maintaintheir current rates of parityis a different,and First,given the rapidreforms being undertaken by morecdifficlt, issue. Adjustmnent without a nominal othercountries and the potentialbenefits to the depredationis likelyto be difficultfor the reasons Region,the implementation period is overlylong. The dited above. But on the other hand,nominal targetdate should be advancedby the individual iepredationcould generate expectations of future countries,pefhaps to 1995. Second,it is not dear devaluationsand wage inflationthat wouldfuly offset why the goodson list C (the traditionalrevenue- theeffect Andthe case against a pafity adjustment of raisers)should continue to carryhigher import duties the EC dollaris probablystronger than it is for ratherthan exdse taxes that would apply to imports neighboringislands' currendes, since each OECS anddomestic production. For someof these,the countryis affectedsomewhat differently by a given distinctionis academic,since they are not producedin extemalshodc, and thus requiresa differentreal CARICOh but for others (notably alcoholic devaluation.Neither path to realdevaluation can beverages)an importduty is protectivewhile an succeedwithout supportrve macroeconomc poides, excisetax is not Thrd,while manycountries are increasesin productivtythrough hurnan resource reluctantto lower tariffson agriculturalproducts development,and wage restraint Given these pre- whoseexports are subsidized by OECDcountries and conditions,the appropriatechoice wil hingeto a whichare produced locally (an understandable, even greatewtent on considerationof poitcal economy, if noteffident policy position), the CET maintains high andespedally orn the natureof rigiditiesin the labor rateson all agriculturalimports and a zerorate on all market agriculturalinputs. Sincethe list of cropsthat are subsidizedand that could be efficientlyproduced in Tauffnd OdherImport Chages CARICOMmust be fairly smal, this seemslike overldLIt wouldbe muchpreferable to usea more Giventhe significantreforms to the formaltariff selctivelist to providea marginof protectionto a struture in recentyears, the greatestpriority with few crops,and to treatagricultural inputs like other respectto furter reformsin thisarea should be given inputs.And finally, the dedsionthat recently set the to thesurcharges, stamp taxes, and differental rates of minimurntariff rate (applied to non.competinginputs) consumptiontax andVAT on imports. Theseare at 0 insteadof the previous5 percentshould be moreimportant for manyproducts (especially inputs) reconsideredThis lower rate increaseseffective than are the CEU rates. They carry all the protectionfor inefficient producers - t pedallythose disadvantagesof tariffs, plus others, such as redudng whosedomestic value added is low. It alsoreduces the transparencyof protection and making it difficult revenueand makes other tariff reforms more difficult to carry out other reforms,such as eliminating exemptions.One positivestep that could be taken Otherconcerns relate to thetransition. First the two- immediatelyis the unification of rates,so that imports yearlag for Belizeimplementation will put greater anddomestic production of likeitems pay the same pressureon the rules of origin to prevent VATand consumption tax rates. This codd be done transshipmentproblems. Care shouldbe taker;
81 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
however,that theserules not be ovedyrestrictve. Othertypes of fiscalincenthies have serious costs as Second,apparently there is somepressure to impose well One majorcost, of course,is the fiscalcost to a lower duty rate on unmilledriac, to protecta thegovernment One estimate in Belizewas that the CARICOMmiller. ibis wouldbe unfortunateInitself tax holidaysfor existingbeneficidnes reduced andas a precedent,since local processing operations revenuesby 25-50percent In addition,tax holidays, based on importedinputs are generallyquite especiallywhen combinedwith subsidizedfactory ineffidentand obviouslyhave few or no badcward space,attract industries that plan to realizequick linkswith the local economy. profits and are willing to make little upfront investmentThus, they can 3/4aaldoften have in the Over the longerterm, CARICOMand the other Canbbeancountties - dosed with minimal countdesin the Regionshould seriously consider provocation.These tools also favor new investment furtherreduction and unification of their tadffrate overspending on renovationand maintenance, which structures,with an eventualtarget of a uniformrate is anespedally bad policy in an environmentwhere around5 percent,which is dose to the current theiatter is badly needed, as in Guyana.They reduce averagetariff in OECDcountries. This should be competitionand create baniet, to entry,since small donenot onlyto furtherreduce the anti-exportbias firmsand firms wishing to entermarkets whe e other inherentIn the new CEr, but as an essential firmsalready operate are less likely to be approvedfor preparatorystep for joning and competing incentives.And finally, foreign businessmen often say successfullyin an expandedWestem Hemisphere (andempirical research confirms) that the holidays do FreeTrade Area. notaffect their deUsions as to whereto locate,or are. muchless important than other factors. 3 2 &xemptionsand Fl Incentives Forall thesereasons, the useof holidaysshould be Thewidespread but discretionaryuse of exemptions, phasedout in favorof a strategyof providinga as currentiypracdced, has a numberof deleterious businessenvironment fiiendly to all firms,with low effects.Exemptions granted to producersof goods butequal tax rates. If specialtax treatment is needed wvhichare themselvesheavily protected serve to to attractexport-oriented firms, it shouldbe givenin furtherincrease this protectionand the anti-export the form of permanentlypreferential (but non-zero) bias.At thesame time, they eliminate the protecdon rates,rather than a temporaryholiday. Existing that the CEr could providefor developmentof contractsshould be honored, while making dear that relativelyeffident capital goods or intermediate theholidays will not be extended and perhaps offering industries.Perhaps most importantly, they erode the firmsthe option of switchingnow to a ratelower than revenuebase, making it moredifficult to carryout that to whichthey will be subjectafter the holiday other reforms. In 1992 the conditionalduty expires. exemptionof theCEf was shortened, but is stilllong. Furtherexemptions are stiff granted on a discretionary CARICOMcould be used as a forumfor negotiations basisin manyCaribbean countries as part of thefiscal on coordinationof nationalpolicies on exemptions incentiveregimes. High priority should be givento and fiscal incentives. The current harmonized phasing-outal of thesein favorof duty exemption frameworkhas not beenvery effectivein practice. givento exporterson a nonrdisaetionarybasis. As One guidingprindple of negotiationson a revised the experienceof Barbadosindicates, however, this frameworkshould be thatexemptions and incentives shouldbe doneas part of a package,and preferably to activitiesthati receiveprotection from import in coordinatonwith other CARICOMcountries, competitionshould be phasedout for existing Exemptionsthere were cut by half, while the very high benefidariesand not grantedfor newones. At the stampduty was not reduced, leading to a predpitous sametime, exempt status for exportersgiven under risein productioncosts, protests from local industries, fiscalincentive schernes should be madeautomatk, andsome relocations to other islands. Had the stamp with transparentcriteria. But this mechanismfor dutybeen simultaneously cut theimpact would have beenminimized, since the CET rates on inputs are not 32 CARICOMSecretariat, Carbbean Development to the Year high. Eliminatingexemptions will alsobecome less 2000: Challenges,Prospects, and Polides, (1988). Ahmed,Et and painfulas the ratesfall furitherduring the phasein of N Stem,*Tamaon for Developing Countries,' Handbook of thenew CET. DevelopmentEconomics (Amsterdam: North Holland, 1989).
82 4 TRADEPOLICY IN THECARIBBrAN COUNTRIES givingexporters free-trade status should be seenas worldpnrces (long or shortrun), and is straightforward onlya way-stationon the roadto a wellfunctioning to calculate. dutysuspension and drawback system, which would requireno ex antecertification or approval.When Appropdaletaxes for common property and suchsystems are in place,there will be no further environmentallysensitive resources must be basedon needfor exemptions under fiscal incentive schemes. technicalstudies of the resourceand are much more complexto calculate. Someof thesestudies - Anotherpinciple should be thatexporters into the especiallyfishedes - needto be carniedout on a regionalmarket should not be treatedthe sameas regionalbasis, making this issue a goodcandidate for exportersinto the world market The rationalefor involvementof the regional institutions. Such studies grantingexporters duty-free status is thatthey must havebeen on-going for someyears now, but so far competein worldmarkets with otherprodurers that withoutbeating fruit in the form of coordinated havethis status,and whoseproducts receive no taxationpolides. At anyrate, the bestway to meet protection. This rationaleis undercutwhen the the et.. ironmentaland economnicgoals for polides marketinto which the exporterssell is itself a regardingthese resources is by a direct tax on protectedmarket Thisis dearlythe casefor intra- productionor on allsales (induding domestic), rather regionalexporters, whose product prices are raised by thanby export controls or taxes,which reduce foreign theCEr to virtuallythe same levels as in theirnational exchangeeamings an-d government revenue. Thus, markets.The unified nature of theCARICOM market onedirection for reformshould be to transformthe meansthat intra-regionalexports are essentially lattertypes of policies(and especialy the controls) importsubstitutes, and should be treated as such. The into theformek. The second direction should be to argumentis sometimesmade that regionalexports -beginto basethe ratesfor the productionor sales ser.e as good trainingfor future extra-regional taxes on somewellconsidered aiteria that are exports. However,there are few examplesof designedto meetthe policy goals. companiesthat haveactually begun exporting to CARICOMmarkets and later graduatedto world FactorMarkets markets.33 At most,regional exporters should have part,but notall, of thebenefits available to exporters Greaterintegration in the capitaland labor markets to worldmarkets. wouldnot onlyhelp to developa betterregional identity,but would producesignificant economic TraditionalExports advantagesaswell Bothcapital and labor mobility would help to minimize.and spreadthe costsof Inthose countries where traditional exports are taxed extemalshocks, such as the phase-outof the or restricted,these polides shouldbe carefully preferentialtreatment of bananaexpors Other considered.lthre is a good rationalefor taxing benefitsof capitalmobility would indude more exportsthat receivepreferential access to protected efficientallocation of savings,reduction of capital markets,in orderto capturethese rents for societyat flightfrom the Region,and reductionof costsof large.Likewise, some taxes on exportablesthat are finandalintermediation through greater competition common property resources(%.g, wild-caught andeconomies of scale.Encouraging greater mobilty seafood) or whose production has serious will requirea numberof regulatoryreforms. In the environmentalconsequences (eg, logsfrom natural capitalmarkets, these should indude elmination of forests)may be justifiedon groundsof equatingthe legal restrictionsthat prevent nationalsfrom sodaland private costs of production.In bothcases, borrowingoffshore and non-nationalsfrom buying the ratesof taxationshould be basedon some andselling equity shares domestically. The reforms reasonablecriteria. In the case of preferential mustalso address regulations outside the financial markets,the rate should reflect the difference markets,induding the foreignexdcange regulations betweenthe preferentialprice and some measure of that preventhedging of capitaltransactions, and restrictionson ownershipof real propertyand WorElBank TheCaribbean common Market Trade secuitiesby non-nationals.Eventually, most of these Policiesand Regional Integration in the 1990s,Report No. 8381- barriersshould be removedfor all capitalflows, CRG(1990). whetherinside or outsidethe Region.Bls if thisis
83 COPINGWITH CHANGESIN THEEXTERNAL ENVIRONMENT politcallydifficult a goodfirst step for the CARICOM Alternatively, the OFA could be abolished countrieswould be at leastto giveequal treatment to immedately,perhaps with directsafety-net payments investors from other CARICOM members -i :d to thoseadversely affected substituted In any case, domesticinvestors In this,the CARICOMsecretariat the transiffoncould be fadlitated by assistancefor could take the lead in coordinating regional producersin diversifng into othercrops; into other negotiations. 'The CARICOM EnterpriseRegime higher-valueduses for cwconuts;or into offfarmwork. appearsto be a promisingstart in this direcfion, Trinidad and Tobago, for example, is actively thoughimplementation has been slow. exploringthe potentialfor a wet-processingfadlity for coconuts. DifferentWalTreatment for LDCsin CARICOM Phasingout the OFAwould not be traumaticfor any Whateverthe originalstrength of the argumentsfor of the countriesinvolved. The only countrieswich allowingthe LDCsto use tariff and fiscalincentive would be adverselyaffected as a whole are the structures different from those of the rest of 'surplus"countries of St. Luda, St Vincentand the CARICOM, the case for continuing with this Grenaamnes,and DoCrinica.By far the biggesteffect arrangementseems weak. Many of thesecountries would be in St Luda,which has an exportallocation are more developed and arguably have more of around3.8 millionfiters, compared to 0.9 and 03 attractiveinvestment environments than at leastsome millon tor the others. But even in St. Luda, only of the MDCs. Unifyingtheir tariff structurewith the around2Z300 farmers sold copra for oil processingin restof CARICOM- whichwould meanmainly raising 1991,and of those,about 38 percentsold quantities their lowestrate from 0 to 5 percentand eliminating valuedat aboutEC$700 (US$350) or less(based on a the right to 'derogate tariffs - would reduce price of EC$035per lb. as per CasseConsultants). protectionfor local producersmodestly, but would Thus,the numbersof aftectedfarmers, as wel as the avoid any transshipmentproblems that might arise volumeof compensationthat might be used as a from this non.uriforrrity,and would provide some safetynet would be smalL Assumingthat the phase- additionalrevenue. This,in turn, could be used to out of the OFA is accompaniedby a general reduce other tax ratesto create a more attractive liberalizationof tradein oil products,coconut farners investnent environmentand offset any adverse anl copraproducers in the 'defidi" countrieswould effectsof higher tariffs on consumers. Similarly,it alsobe adverselyaffected. But manyof thesedo not couldimprove the investment dimate in the Rlegionif dependon coconutsas their major crop, and only a unified incentivestructure replacedthe current havest on a casualbasis. As part of the phase-out siructureof differentialincentives between the LDCs process,safety-net payments of limited duration, andMDCs combinedwith assistanceIn diversifyingsources of income(other crops, other usesof coconuts,or off. Oilsand Fats Agreenent farm work; should ensure that there is minimal hardship.The budgetfor this would be smallerthan Theproblems inherent in theOils andFats Agreement the transfers implidt in the existing OFA (OFA) have been recognizedat least since 1985, arrangements. when an effort was made to changeits pridng mechanismrthough not its basicstructwe. Againin 1992,the 29th CommonMarket Conference on Oils and Fats recommendedreforms in the priang to make the floor pricesmore competitive. However, given the continuingproblems engendered by the OFA,and its fundamentalincompatibility with market mechanisms,it is moreappropriate to considerhow to phaseit out ratherthan how to instituteminor reforms.One relativelysimple phase-out mediarism would be to lower the floor price and the allocation quantitesby somefixed fracton of their inital levels each year unbl they are no longer binding, then resdnd ScheduleIX of the Treatyof Chaguaramas.
84 5 Prospectssor CaribbeanExports in Major OECD Markets
55 XX .. p.. M ..
, .t. ~ gn am...... ex..
Frornthe perspediveof the Cantbbeanountriese Althoughthere have been extensiveFriscussions there aretwo develooments that oDudhave major about the potentialeffects of NAFrTAand the nmplicationsfor tir fud trade and groowt UruguayRound, relatively little empincalwork has prospecs.The irst is the 1993 UruguayRound attemptedto assessmagnitudes. This chapter agreemenSwhich t wiD iberalzetWais andnontadff generatesand analyzessuch information for the heasuresonba.most4avorednation(MFN)basis. Tois CGCEDcountries. Seculartrends in Cabbean is generalyviewed as a positiveoutcoar e for the exports are exavined to determinehow the Ctereare t lopedunantsdpated detheiental effects UruguayRound and NAFTA could affect the level codd oscurt.4 Tite secondt potenh3ly adverse) andcompositionofaCabbean trade. This chapter relopmentrelates to NAizA, whtchadwif move also identifiesthe types of products- labor tradebarrers bilaterally between Canada, Mexico and intensivemanufactures, natural resourcebased the U.S SinceNAFrA will Improvethe competitive products,products of highlypolluting industries, positionof its membersvis.ais othercounties it etc. - that playeda centralrole In changingthe coulddisplaceCanibbean exports. The net effects of recent structure of Caribbean exports, and NAFrAwi dependon theextent to whichCaibbean determines how the Region's comparative exportsto NorthAmerica compete with thosefrorn advantagehas evolved. Projections are then made Canada,Mexico and the US, andthe importance of of the possibleCaribbean expon gains and losses tradebarriers fadng these shipments." dueto NAFTAand the UruguayRound.
3434MFN reduction taiff bafnie a hae ant negadw MajorTrends in CaribbeanExports effecs on Cadbbean export who benefit fom tadff preferences,such as the CaribbeanBasin InWtiative (CBI) dutites In Any assessmentof Uruguay Round or NAFTAmust dte UnitedStates, or Lo6 Comendonand GeneralizedSystem identifythe major markets for Caribbean exports since of Preberence(GSP) hi EwopeMFN tiff reduedomswW erode it is therethat analyses of tradeaeation or diversion these nmrgns of prefence and cause sonme Caribbean esports to be displaced. shoudfows Table5.1 prwides information on the
3 Implementationof the Uruguay Round wil reducethe potential tradediverting effects of NAFTA. The Roundvw lowerMFN arg volumeof othercountris' exports under the higherpr- tanff hi Canada,Meidco and the U.S. and, asa rut bwerth UnuguayRound tariff thanthey would under bwer post-Uruguay mau,sof peence thatNAFrA can provide menber counties. RoundInport duties. In otherwods, NAFrA smeberswould be ableto displacea
85 COPINGWMIT CHANGES IN THEEXITERNAL ENVIRONMENT directionof exportsby showingthe value and Share of counties' total exports,down from 6.4 percent In Caribbeanshipments to differentdestinations, i.e, all 1980and 7.3percent in 1970 OECDcountnes, countries In Europe,North America, and severalother country groups. These figures Carbbean countnesare highly dependenton the dearlyindicate the keyiortmance of OECDmarkets OECD(pnrnarily North America and Europe) for their for Caribbeanexports, yet two different pattems exportsand have reasonto be concernedabout emergeregarding the destinationof this trade. First, generalchanges in termsof accessto thesemarkets. countrieslike The Bahamas,Haiti and the Dominican Therewould, of course,be even greaterconcern if Republicare pnmaiilyoiented towardNorth Amenica there was reason to believe that NAFFAor the andwill be direcdyaffected by both NAFTAand the Uruguay Round resulted in their exports being UruguayRound. Others lke Dominrca,Grenada, St. caiminated against or receivingless favorable Luda and Surinarnerely more heavilyon European treatmentthan other goods. An evaluationof this marketsfor their exports and may be shielded Issue first calls for identificationof the spedfic somewhatfrom NAFTAstrade displacement effects?6 productsexported by the Canbbeanand, after ths, an Theselatter Caribbeancountries will be concemed attemptcan be madeto detenninehow marketentry with how theUnrg * Roundaffects market access in conditonsfor thesekey items will change. the EWand EuropeanEree Trade Area (EFTA). Since they now receive important European tariff lhe Compoion of CaribbeanCountis' Expors preferencesunder the LomeConvention or GSP,as do most Cazibbeancountries (Guyana and Suriname Table 5.2 provides an initial assessmentof what are exduded),and in the US underthe CBI, their Caribbeancountries export to theOECD. In total the competitiveposition could worsen If thereIs a major currentvalue of manufacturesexports are morethan erosionof thesepreferences. two and one half times greater than the second largestproduct grup (foodstuffs- whichaccrunt for About 14 percentof Caribbeanmerchandise exports 21 percentof the region'sexports). However,these go to developingcounties, pnmarilythose in the overallshares are biasedby largercountries like the Amenicas.However, considerable vanation edsts in DominicanRepublic and Jamaica, which have rapidly the shareof thisexchange as it rangesfrom lessthan shifted toward manufactures. Several smaler 5 percentof The Bahanas'and Haiti'sexports to over countfies,Ike Belizeand Dorfifica, are still dearly 30 percentfor Barbadosand Domifica. Longertermn rebanton food exports. Sugarand bananasare their trendsindicte the relativeImportance of this trade, mainexport products although exports of winterfruits particularlywithin the Caiibbea, is dediningwhile and vegetables(products that could be affectedby the importanceof the OECDis fising. For example, Mexicoin NAFTA)have been inceasing rapidly. the intra.tradeof the CARICOMaountfies (those in Table 5.1 less the DominicanRepublic, Haiti, and Agulculturalraw mateiials fuels, and ores and Suiname)now accountsfor only 4 percentof these nonfenousmetals nonrally do not face important OECDtrade barmers with the resultthat they are lkely to be lrgely unaffectedby either NAFTAor the 36The Eu isby ar themo mpomntEurpean d f Uruguay Rouncd Table 5.2 showsthese itemns Caribbeanaepos. TheEU receixs 8S percentof a Cadbbean accountfor aboutonefifth of totalCatibbean exports shipmentsto Europe,as opposed to about 13 percentfor EFTA. (crudeand refined petroleum accounts for morethan Within the EU the Unied Kingdomreceives 46 percent of an half the valueof theseshipments) are in sectorsthat Cvibean xors ko&iv by FranoewIth 14 percent and shouldnot be 'sensitive'to extenal tradebarfer Germanywith 12 peroentSecond Tabe V.1 deaflyunderss the zmportanceof North Ameian maroetsfor Hail. Jmaica and changesaltugh crudematenals constitute about the DominicanRepublc. Thesecounties have developeda onethirdof Guyana'sexports (argely baLaite ore). major aeport base lnvolvng the assemblyof industrW componetsproduced In dweUnited Stabs. Thesecomponents ameimported by the Caubbeancounteies asseJrie and r Table53 providesan indication of the most important exportdto the United Statesunder reduced tadffs These productsthe Caribbeanexpors to the OECDand assemblyoperations account for about 40 percentof Haid, howthis 'basket! of goodshas been changing. One JUaaicaand the Domian Republ ossexporo s (about item- nonfur dothingnow acoountsfor almostone USS1.1blillion - see Erox3.1). but tinstrade Is not Inclded In these countries'export statis as repord to the United quarterof al exportsfrom the region and has had one Nations. of the highestgrowth rates over the Lastdecade
86 5 PROSPECTSFOR CARIBBEAN EXPORTS IN MAJOR OECD MARKETS
Sincedothing is hidy protectedin OECDmaikets manufacturesexports rose from 17.5 percent in 1980 (byboth tariffs and nontanff baniers ike the Muttifiber (US$295million) to 48 percentin 1992 (US$2.2 Arrangement- MFA, textile quotas, anti-dumping and billon). Exportsof manufacturesfrom The Bahamas comtervailingduties, etc), NAFrAand the Uruguay alsogrew more than four-fold over this 12 year perod Roundcould have a majorInfiluence on marketaccess andapproached threequarters of a bilion dottarsIn conditionsfor these goods. Spedfically, the abilityof 1992 Althoughstarting from a muchsmaller trade outsidersto competein NAFTAmarkets for dothing base,the rate of growthof Antiguaand Barbuda, will be reducedsince these restrictionswili be Grenada,St Vincentand the Grenadines,and St. removedfrom North American intra-trade, but wil still Ludawas even higher than that of the Dominican be appliedto importsfrom othersources. A key Repubticas it rangedbetween 32 and50 percent per questionis howlarge an Increasein NorthAmerican yea-. However,exports from Barbados,Dominica, intra4radeir dothingshould be expectedas a result Guyanaand Haiti ran counter to thistrend and were of NAFrA.Other products in Table5.3 that also face actuallylower in 1992than they were in 1980. relative;yhigh trade barriers- and havea high potentialfor NAFrA displacment- indude:sugar DynamicProducts in CanabbeanExports andhoney; ferrous metals; and alcoholic beverages. Table5.4 provides an indication of dynamicproducts Table5.3 shows relative changes in Caribbeanexports whichmight provide useful insights roncerning future at theindustuy evel as wel asseveral broad dasses of trendsin Caribbeanexports by listingthose threedigit goods.These tabulations deafly indicate the najor SITCproducts that met two conditions: they recorded Msifin relatve importanxethat has occurredfrom at least US$1 million in 1992 expors to North foods and raw materialsto manufactures.An Americaand the EU; and they registered the highest importantunderlying factor is the trendin nonfur recenttrade growth rates. All of these dynamc dothingexports whose share rose by 20 percentage productsare manufactureswhich almostdoubled pointsover the 198092period, while the shareof over 1986-92,and within this groupdothing was electricpower madinery, leather manufactures, and particularlyImportant In valueterms. However,the sdentificinstruments rose by oneto two points.In 'dynanism'in Caribbeanexports appears to now pan,the export expansion for these goods was due to extendbeyond dothing into a diversifiedgroup of Cadibbeanassembly operations for components manufacturesthat range from electric power producedoverseas which are then reexported back machinetyand office madcinery to organicdcemicals. to thecountry of originunder reduced tariffs (see Box Duringthe recent 1986.92 period, exports of sdentiflc 5.1).The table also documents the secular dedine in instrumentrrose more than 16 fold (to US$127 the importanceof foodexports with theseproducts million)and offshore assembly operations seems to acountingfor about 22 percentof total1992 trade - haveprovided a majorcatalyst for increasedexncui6 down13 points from thercorresponding 1970 share oi thesegoods. Themajor reason for this reduction was the 18.7 to 6.5 percetage point fall In the shareof sugarin Analysisof theunderlying factors responsible foi Fe Caribbeanexports. Bananasremained virually majorstructural dchnges in Caribbeanexports can unchangedwith theirshare fluctuating between 3.2 provideuseful insights into future trade trends. Table and4.2 percent 5.5compiles statistics on Caribbean exports which fall into severalbroad types of goodsthat have different AlthoughTable 53 Indicatesan ImpressivegeneraL manufacturingand production characteristics. Other expansionof Caribbeanmanufactures exports dassesof exportsindude goods whose production occurredover the last decade,data for individual normallytakes place near sourcesof natural countriesshows that partidpation in this expansion resources,items that generally require relatively high wasuneven (see BOX 5.2). Over 19801992, OECD researchand development expenditure inputs (hgh imports of manufacturesfrom the Dominican tedmologyproducts), and products that are normally Republicgrew at an annualrate of 18 percentas manufacturedunder conditionsthat are highty opposedto 8.5percent for the Caribbean region. As polutingto the environment a result,the DominicanRepublc's share of Caribbean
87 COPINGWITH CHANGES.N THEEXTERNAL ENVIRONMENT
~~~~X M1- Xheassemy 01 comonientsProduced In induWscoutres constitutesa large and tapdly rwing a o elophgcounties' erpots. Thisassembly activity Is encouaged by tas whkh pivide fot duty ree nty af dometalff producedcomponents assemnbled abroad. Thus.If US.cloth was exported to amaicaand taiored into cishing 1theinished goods gopld be reexpe to"he US undertariffs which applid onlyto the vaie added componentoJ*f thm0aag prcss Theseoffhore aembly provkions (OAP) plus the attraction of Iowe abor: sts rovidean icentve for theestabhishmnent of some processing Industries in the CAiibbean countries.
| E.t.ADofUtp. ! ... t0 _ .. fg. S
N' ."
Mhu)budr theand soow lnn dynamime r Ator re la
~~~~~~~~SW~~~~~W _
~~~~~~~N~~~~NS NN N e- N,...\~~~~~~~~~~~~~~~~~~~~.
assemblyCoaribbean texr ports toaurred in~ l4abor g . hoodstharesuiedf re(ativ lovrcapitalinus)a(40 intesive1rxrnauaturds o sTeeapastothe ht aodCS)ivleQPjvcslgwt ibbeanrnfxpoitaed itsabaoHlow wae Cotst. Tworeaoinwythiaco shoulidb note reThs i hsconthu auain.Rt ard A'as rRcted,an wdefac mege odof ossthe labo ha aot tonginflednoce onh(hc afutunte foribleas thand e. intenUsiveA Imords exorteal wernethsi e requi) 190 .veo 99,item i .isprducWltogroupthe.wf unoskille laor~ intoensi.e inputs andtheeien anUS$1 annulob raerof abouat15perentand inecpreaed Uachcve n19 th atstgotrtsrcoddithe
at an rate annual of about~~~~~~~~~~~~~S....1S pecn nN.xesd aheedtefset rwhrt.reoddI h
"r sharetrade In totalmore than six4old. ArWysis table.~~~~\N ~ ~ of unerfy'ngthe CSbbean tade data.ho\vs th
increase in of he laborimporLvxe ntensive Tale 5.5 alsoshows a tis (to 23.8.prcen in th
MchaOver819808tomaucofacotureofeboih the 1992,thas recentvaloreent items aosdlongeritermsin an thislogrtr cmaid product groupdythnamhismbynaimao grew toardktresativelunsfdlledtowardeaielof labor smeother Intensivemoralexpaor inputs,iThensivempodcslabor andintensiveprdcs(e these items(i.e.ly chntegesgrundp.inT manufacturelaiv ahbesecangexprsproductio geeal oithems roured appearsin labors toi sgoodsbthatrequirednrelativauatrsnttlCaibaiti The t o eearelyowra ernost capadvantage fitalIeputs)a havep. strongchafluence nenally inCalvedantrade. responsiblegoroths exporteds were thosel reonfngdt Ines8 auatrdpout.Teeapast heCrbenepotdislwwg otavnae 5 PROSPECTSFOR CARIBBEAN EXPORTS IN MAJOROECD MARKETS the chemical elements group where Caribbean than those assessedon similar goods from other exportstotaled US$1.2billion in 1992. Aluminum countries.!Giventhat the UruguayRound wili lower oxide (alumina)alone accountedfor over three- tradebaniers on a MFN basis,It posesa dilemmnafor quartersof a billion dollarsof (his total with the theCaribbean since MFN taiff cutswill erodema4ins balancealmost entirely consistingof organicadds of preferenceand worsen the region'scompetitive odginatingin The Bahamas. positionvis-avis other suppliers. Trade losseswil occur as some preferencereceiving goods are In 1992 the Caribbeanexported US$1.9 billion (25 displaced(diverted) by exports from other (.on. percentof total trade)of goodswhose production Is preferencereceiving) countnes. normallyhighly pouting. Aluminumoxide, which is also a capitalintensive manufacture, was the single TaliffBanriers Facing Caribbean Exporters mnostimportant item in this group acoountingfor about 40 percentof its exports Alumina,plus two As an illustrationof theimportance of tarffs In OECD otheritems, organic chenmcals and refinedpetroleum markets,Table 5.6 summarizesthe currentprofile of products,account for approximately90 percentof all U.S.import dutiesfadng Caribbeancountries. Ihe cdrty indust,y' exports. Although the relative U.S.was selected for thiscomparison since it Is by far importanceof theseitems dedined from their 1972 the largestOECD market for Caribbeanexporters and 1982levels, the Caribbeanstill has one of the Thesedata attest to the extent that the US. grants highestshares of environmentallydirtyl goodsin total preferencesto the Caribbean,and the adverseexport exportsobseived in regionaltrade pattems. With consequences,hat might occur from preference environmentalissues being a major point of erosion For compansor the table contraststhe contention within NAFTrAsafeguards shoutd be Caribbeancountries' situation with that of two more ccnsideredto ensurethat ernironmentalcosts are industriaizedexporters, namely, RepubUc of Korea snifted back to poluting finis (Internaizecr) so andTaiwan (China). poluting industriesface the proper incentivesin dedcdingwhether to relocatefrom Mexico to the Thetables key points relate to the highconcentration Caribbean. of most Caribbeancountries' exports in a relatively smallnumber of tariff lines,and the extentto which heUmguay Round: Impliaionsfor the Caibbean trade preferencesare granted these Items. For example,Antigua and Barbudaonly exported 67 tariff A problemwhich has complicatedmultilateral trade lineproducts to the U.S.(the U.S.customs schedute negotiationslike GAiTs Uruguay Round is that distinguishesbetween 8,753 individual tariff fines), and OECD countries have incorporated important 16 of these productsfaced a zero MFN tariff. departuresfromn the MFN prindple in their trade However,on 39 line items Antigua and Baibuda regimes. Recentlythese departureshave taken the receiveda zeropreference rate with the reWltthat 55 form of regionalpreferences, such as the Canada- (82percent) of all exportsenter the U.S.free of duty. United StatesFTA or EU and EFTApreferences for In other words, Antigua and Barbuda could EastemEurope. 3 Caribbeanexporters also receive expenencetrade gains on 18percent of their neitem importanttrade preferences under OECD countries' General System of Preferences(GSP) schemes throughpreferences under the EULome Conventionu 3 ConcemngGSP or C81preferences, some agnculufal an the CBI, or the Canada/CARICOMTrade and manufc productsGe are exemptedfrom te GSP,and EconomicCooperation Agreement (CARIBCAN). As Caribbeanexports of thesegoods encounter MFN tariffsIn a rest, mnanyCaribbean exports face lower tariffs EuoPeand apa The CBIalso has imnportant product and countryexdusions; no preferencesare extendedto footwear, textiesand clothing, whie Guyana and Surname are exclded AlmostSO percent of worldtade in nanufacuresoccurs under fromthe sdwn SecondcGSP treatment may be widran preferences.Euopean trade accounts for almost two thirdsof fromspedfic products once predetermined ceilings are reached thistotal with theEU and EFTA anangements beng of paricular Third,developing countries may have GSP preferences withdrawn ImportanceAside from the intratrade of countriesIn thesetwo if theyfail *competitive need tests, i.e., they are judged able to goups,whkh is all duty free, a protocolalows for dutyfree trade competesuccessfulgy with othersuppliers without preferences. in manufacturesbetween the EU and EFTA.The European Asa U.N.designated least developed' country, Hati may receive arrangementscover a valueof trademore than seventimes evenmore favorable tariff treatment than that givencountries peaterthan that of NAFTAintrarade. eigiblefor theGSP in Europeor Japan.
89 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
exports(all of which are textle and dothing products) exportsand the highMFN tariffs on thesegoods). andlosses on othergoods. Caribbeanpreference margins are typically in the2 to 4 percentagepoint range and reacha highof 4% Thedata for the rest of theCaribbean reveals a sirmilar points for Dominica.Although the marginsvary, situation.Preferences result in at 'east 58percent of everyCaribbean country faces average U.S. tariffs eachCaribbean cc try's tariff line level exports belowthose paid by otherexporters. Analysis of the enteringthe US. free of dutyanc, in thecase of The underlyingtariff line data showsthat, for some Bahamasno taiiffsare paid on 92 percentof all individualproducts, the preferentialmargins are 20 products.A similarsituation exists in Europewhere percentagepoints or more. However,a keypoint is the GSPand LomeConvention grants preferential thatCaribbean manufactures exports to the U.S.still treatmentto manyCaribbean exports. Table 5.6 also facerelatively high average tanffs due to theexdusion showshow markedly U.S. tariff protecdon against the of footwear,textiles and dothing from the CBI - Table Caribbeandiffers from thatagainst the Republicof 5.7shows the averageiuty on thesegoods may be Koreaor Taiwan(China). Only about 20 percentof doseto 20 percenLGiven their high share in many thesetwo countries'exports have U.S. duty-free Caribbeancountnes' total exports,gains from MFN access,not dueto preferences,but becauseof a zero tariffreductons for these products have the potential MFNrate. tooffset export losses from the erosion of preferences on othergoods. Table5.7 extends the previousanalysis by examring the averagepreference margins current U.S. and El; Caribbean countries also receive important tariffs provide Caribbean countries over other preferences(due to the LomeConvention or GSP) exporers - toth in total and for major grtups of in the EU, but the situationdiffers somewhat from products. Te focus is on these two marketsgiven that in.the U.S. First,the average apppliedEU tariff theircveral importancein all Caribbeanexports to is generallylower as are the average preference the OECD- see Table 5.1). The table showsthe margins.40 In two cases (Guyana and The averagenominal duty on Canbbeanexports and their Bahamas), EU preferences for EFTAand Lome average preference margin - a negative figure Conventioncountries result in loweraverage tariffs for indicates the number of percentage points the competitors.Another important difference between Caribbeanduty was belowthat fadngother countries. the EU and the U.S.is that the fonner'spreferences For example,Antigua and Barbuda'sexports face a generallyextend to textilesand dothing (a few of U.S.tariff of one half of one percent - a rate that is these products from the DominicanRepublic are one percentagepoint belowthe averageduty facing exduded)wVth the result that the average EU tariff other exporters of the same products. Simnilar fadngCaribbean manufactures is negligible, but in the statisticsfor Taiwan (Cina) and the Republicof Korea US. it isrelatively high are again induded to allowa comparisonwith the Caribbean.39 TheTrade Effects of UmguayRound T.-iff Cuts
In the U.S, average tariffsfadng the Caribbeanrange 'The previous analysis indicated that in the EU, from one-tenthof a percentfor TheBahamas to over UruguayRound tariff cuts could Ihave some adverse 12 percent for St. Luda (the latter rate is due to consequences for Caribbean exports due to dothingwhich accounts for over 70 percentof total preferenceerosiorn but in the U.S.. it was not dear whetherthe resultswould be positiveor negativedue TMTe dutes shown are the wuweighted average oftadffs applied to therelatively tigh MFN tariffson textilesand to the Caribbe countrisexports and the differentl isbased on the unweightedaverage tariff pai by competitors. Theduty facing'odte exportersis the unweightedaverage of the MFN, GSP,CBq, Least Devebped, or FTAtariff applied to alnother ' Tariffcomparisons between the EUand U.S.are complicated exportersof the samegoods. The Caribbean situation is markedly by differencesin valuationprocedures. The UnitedStates appls differnt fInm that of the Asian NlCs Taiwan(China) pays an itstariffs to thefree.onboard (fo.b.) valueof importswhile the EtU avage EUtariff of 7.3 percenton the goodsit exports- a rate usesa costinsurancefreight(c.i.f.) valuation base for assessingits that is 4 percentagepoints higher than that facingall other importduties. As such,a giventariff (say10 percent) will havea expofts of the sameitems. UnitedStates tariffs fadng Korea greaterprotective effect in Europe(since it is also appliedto andTaiwan average 6.8 and 7.1 percent respectively,which is transportand insurancecharges) than it would in the United 0.7 pointshigher than the duty fadngother exporters. States.
90 5 PROSPECrSFOR CARIBBEAN EXPORTS IN MAJOR OECD MARKETS
9.ox2: TheCaribbean's ExpandingManufactures Trade: Who Partidpated,Who Did Not?
WileI atCaribbeanexports of manufactuwsto the OECDmore than doubled Over the 19861992period, different trends are evident in someof the indivldualcountry's statistics. As Indicatedbelow, the rapidgowth was argelyconfined to six countries:Antigua and BarbudaiIhe Bahamas,Dominican Repubk, Grenada,St Wucia,and St Vincentand the Grenadines.After decliningby mere th'an25 percentfrom 1980to 1986,exports of manufacturesfrom jamaicamore than doubled over the nextsix years. In contrast,manufactures exportsfrom die rest of the Caribbeanwere stagnant or evendeclined (Barbados, Dominica, Cuyana, and Haiti).
Valueof OtECDImports of Manufactures 1980to 1992 o n(UO00) CompoundGrowth Rate (percent)
1980 1986 1992 AL CARIBBEAN 1,678,4i6.4 2,185,971.5 4,483,0S7.P 8.5 fAntigua.dBarbuda 47.3 2289 6,320.c 0.4 ThIzeBathamtas 166,428.3 276,3480 707,548,0 12.8 Barados 67,077.0 118,0673 41,955.9 -3.8 -Bele 16,895.0 21,840.0 20,836.7 1.8 -ODondnca 14,818.8 3,742.6 5,594.6 -7.8 OouitnicanRepublc 294,892.7 594,5288 2,155,228.9 18.0 Grenaida 150.8 502.6 4320.4 365 Ctiyna :34,088.7 15,623.9 21,289.3 -3.8 HaIt: 230,744.4 374,683.9 122,539.2 -5.1 $a-al-a 479,480.8 352,817.1 779,819.2 4.1 ALI(..lts anid Nevis 17,70&.3 61,455.9 19,858.7 1.0 SK.Leia - : ~ 344.8 533.9 36925.9 47.3 S : ::--.,. :650. .i-: an Gre-adl-e- 650.1 -1,509.S - 1C,201.3- 32.0 Suzlname . - 238,337.1 = 148,490.6 260,599.9: 0.7 Trinidadand Tobago 1146,7j21 215,598.3 280,020.7 7.6
What cnausedthis arkedlydifferent export nof Carb countries? deaiy, one factor accountingfor the supeior sucoesswas eIncenives ofed to atrit OAPactivity. These indude speed and simplity in processingInvestnt s relativeabsence of foreigneixcliige iestrctons wonOAPinvestors, factors lnfluenang the generalIndustra reltions 4ruati , diferences duthe roductivityof dometic labor,relatively ow internadonaltransport costs, andthe absenceof maJor.upply bouenecks. tSima, severalspecfic negate 6ktorscontributed to the otherCaribbean countries exportperom e,: insta.y (Ha... frgn cnge estrictions(Guyana.- until'198,Dominlica in the 1990s, Barbad'ssince 1989,etc- an n dsilness environment (Guyana) or`lackof adequateair trnsport(Dominica).
rIWhtesaee sfom thisassessenW The key point I at Cabbean countriessuccess or filure as exportershas in l pat been deerminerdir these nations!own- domestic polies. lhose that adopted oitwaod onented' rade poles generallyhave succ whileihose that spursuedmore restrcihve-inwantiooldnin trade -iemds havegeneraily fall-&:-
dothing Thisraises questions on the effects(EU plus showsthe total valueof exportsto thesematicets ar.d U.S) of tariffcuts on Catibbeanexports, and on how proides similarstatistics for foods and manufactures. they would differ for indivdual countries. For Two measuresof theprojected change in exportsare answers,a tradeprojection model developed by the givenin the lower half of the table - die f;rstis the WdAd Barnkand UNCrAD (SMART- Softwarefor trade valuechange, while the secondexpresses this MarketAnalysis and Restrictionson Trade)was used dcangeas a percentag-of currentexports. Negative to simulatethe effectsof UruguayRound MFN tariff valuesindicate that ti d'isplacementof Catibbean cuts(and preference erosion) on Caribbeanexports. exports(due to preterenceerosion) is greaterthan Lhe (positive)trade creation effects. Table5.8 below summarizesprojections of the likely effects of Uruguay Round tariff reductions on Overall, UruguayRound tariff cuts shouldproduce Caribbeanexports to the EUJand US.4 ' The table annual Caribbean trade gains ef approximately 4- The prolections~ basedon an averagereduction of one-quarter billion dollars, which is an increase of 41lte ptjectionsan-3 base on an averaged.uEon of 40 just over4 percent. However,these overallresults percentinU.S.and EUrffsare very dependenton full MFN tariff reductions
91 COPINGWITH CHANGESIN THEEXTERNAL ENVIRONMENT
for textilesand dothingas the Caribbeanshould from a UruguayRound tariff liberalization,the experiencenet exportlosses for mostother goods possibilityexists that overalleffects of the Round due to preferenceerosion (see Box 5.3). couldbe largerand more generally positive. Apart Moreover,the tradeeffects are quitedifferent for from tariffs,Caribbean exports encounter nontariff individualcountries, with the DominicanRepublic measures,and in sectorslike textiles,dothing, or accountingfor about60 percentof theseoverall sugarand these restrictions have important tradc gains(US$148 million , an exportincrease of about retardationeffects. 8 percent). Haiti and Jamaica!sexports should Increaseby 8.5 and6.5 percentrespectively, largely Table 5.9 below provides some relevant dueto thehigh share of dothingproducts in theirtotal informationon how extensivenontariff measures expq,rts,For the remairingCaribbean countries, the areapplied to Caribbeanexports, and what sort of overallgains are minimal - lessthan PIh percent - or a responsemight be expectedif theserestrictions evennegative as tradecreation is offsetby the were liberalized. It doesthis by tabulatingthe preferenceerosion. Four Caribbeancountries, shareof all Caribbeanexports to the U.S.and EU narrely,Surinamne, St.Vincent and the Grenadines, St subjectto 'hardcore nontariffbarriers, and also Ludaand Dominicacould experience direct losses givessimilar information for foods,manufactures totaling IJS$8milior, with thosefor Dominrica andchemicals.44 As indicated,about 21 percentof representingabout 3.5 percent of currentexports.' 2 Caribbeanexports to the EU encounterhard core nontariffbarriers while the conrespondingshare for The effectsof the UruguayRound tariff cuts are the U.S.is 3 points higher. This impliesthat considerablydifferent in Europethan In the US. approximatelyUS$1.6 billion in Caribbeanexports EuropeanCommunity preference erosion (induding to thesemarkets are affectedby hardcore NTBs. preferencesfor textles and dothNng) resuts in overall However,there is considerablevariation in this export lossesof US$8 million annuallyfor the share acrossindividual countries and product Caribbean,which reduces the effects of positivetrade groups. EU variableimport levies on sugar, gainsin theU.S. 43 Dominicaand St Ludaaccount for molasses,rice and arrowroot account almost akmosttwothirds of theprojected losses (the total of entirelyfor the high coverageratios for Barbado%, Merdisdaced trade is US$10milion) with thosefor Belize,and Jamaica, but in the U.S.the situationis Suinarneplus St. Vincent and the Grenadines coming morecomplex. Trade barriers on sugar(variable to aboutUS$4 million, levies, quotas, and anti-dumpingactions) are important,but relativelyhigh NTB coverage ratios Nontaiff MeasuresFacing Caribbean Exports occurfor severalcountries' manufactured exports - largelydue to MFAand othertextile quotas the Althoughthe previousanalysis demonstrated that U.S.imposes on Caribbeandothing exports. Caribbean exporters, as a whole, should experiencelimited net export gains (some Althoughthe estimatesare subjectto a degreeof individualcountnes will experiencetrade losses) error,several studies suggest that the OECD nontariff barrierson sugar,textiles and dothing almost certainly 42 Ti SMARTpolectom do not incorpo vadousect havea majorretardation effect on Caibbeantrade. efe o*ide UruuayRound tariff cuts which may offset some of U.S.nontariff barrier protecion for 54 broaddasses the directtrade loe.B For example,If dte lound incaeass'te of dothingproducts ranges between ad valorem leMeof economicactvity an major OECD countries this (growth dvdend) coutd increase teir demand for imports from e eqtivalentsof 30 to 40 percent,and is over 100 Caribbeacountes. percentfor several product groups. Similar high levels
43 A cucal factorinftuencing trade gains and iosses In the U.S.is thedepth of the MFN tariffcut sincesome prentia dutiesare 44 Handcore nontaiff barrietsare measureswhose intent s setat relavelyhigh levels. As U.S.MFN rates are reduce i down normallyto restrictor controltrade. Theyinclude: tariffquotas, to tie levelof the non-zeropreferentiai tarff Caribbeancounties productspecific charges like anti-dumping duties, variable impot wl expriencetrade diversion. Hoiever futher reductonsin levies,quotas, embargoes, voluntary export restraints,MFA MFN rateswill prduce trade creation(gains) tdat wl sutartto restrictionsor consutations,textile restraints, MFA adminstrative oft the pvius osses.If U.S.duties were reduced by only 20 agreements, reference prkes, countervailng duties or percent(and not the assumwe40 percent),for eampl, someof investigadons,and antidumping and countervailing underading the Caibbeancountres with projectedgains would experknce The tabulationsin Table S.9 utilze an inentory of nontariff tradelosses measuesmaintained by theUNCTAD Secretariat In Geneva.
92 5 PROSPECTSFOR CARIBBSEANEXPORTS IN MAJOROECD MARKETS of NTB protectionagainst dothing importsoccur in ob;ectivesfor the Round, states the multilateral the EUand iErA.Studies by the UnitedNations Food negotiationson services'shall aim to establisha andAgricultural Organization and by OECDindicate multilateralframework of pnndplesand rules for trade domesticEU and U.S. support levels are very highand in services, induding elaboration of possible NTBprotection against sugar imports almost certainly disdplinesfor Individualservice sectors,"and this exceedsan ad valoremrate of over100 percent The shouldbe carniedout 'as a meansof promoting problemof hgh protectionis compoundedby EU economicgrowth of ali trading partnersand the export subsidiesfor domesticaRyproduced beet developmentof theacteloping countries* sugar,a practicethat cisplacesCaribbean exports in internationamarkets4S Freertrade in serv:.esshould produce two typesof welfareand revenue gains for theCaribbearL The first A 40 percentliberalization in EU,US. and Japanese stems from inceasedeffidency in local producers' bantersfadng dothingcould resultin a doubGingof operationsas nationalbarrers against(lower cost) exportsfrm developingcountries. An expansionof foreign service providersare reduced,while the this magnitudewould meanthat Caribbeandothing secondset of gains should come from increased exprs could have the potential to expandby as export o%portunitiesas other countriesbarners are mudcas oneand one half billon dolarsannually. This lowered. Caribbeancountries often pay higherthan.- figureis morethan six times the overalltrade gains the averagefreight costs on exportsto the U.S.in spiteof Caribbean countries would experience due to their geographicproxrmty to the North American UruguayRound tariff cuts(See Table 5.8). However, market. Amongthe major factorsbeing responsible thre is someuncertainty regarding the net effectson for the inflatedc freight costs are the CanSbeai the Caribbeangive the highshare of dothingexports nationalpolides that restrictcompetition for transport that originatefrorn offshoreassembly and wheher a services,or requireshippers and port authoritiesto geral NTB (and)taiff reductionwould causesome empklo ineffident (high cost) transport or cargo of theseoperations to becomeless compettive. A handling technologies. Liberalizingbarriers and numberof stdies indicatethat the effectsof a fuli promoting competitionshould lower freight costs liberalzationof industrialcountries' trade banmers whid, in turn, would increaseCafibbean exporters' facing sugar could produce an annualdeveloping abilityto competein foreign maikets Sincelower country export expansionof 15 to 30 percent freightcosts also would reducethe landedprice of Increasesof this magnitudesuggest that Caribbean domestic (Caribbean)imports, consumerswould sugarexports from effident produdngmight rise by benefitalong with manufacturersthatrely on foreign someUS$70 to US$140million annualy. supplersfor productioninputs. Woild Bankestimates show that degulation of transportrestrictions, and 7he UruW Roundand Trade in Senbes the adoptionof policiesto promotefree and open competion, has the potentialto lower international Unlike previousmultilateral trade negotiations,the freightrates by as muchas 20 to 40 percenLTo the 1993 Uruguay Round agreement emphasized externtthat domesticconsumers and producersare liberalizedbanters to intematonaltrade in services. now preventedfrom havingdirect access to the most 'he Puntadel EsteDedaration, whidh establishes the effident providers of other businessservices - banking,insurance, construction, telecommunications, 4a The dra agreefmt on the Umguay Round conunited etc - the Caribbean should experiencesirmlar govenbmesto theimmediate 'dffication' of aSau al 'effidenrygains" from a lberalizationin theseservice impostbanie nchudingsugar) and to specificreductons in sectors.As pointedout in ChapterIII, this could be of levelsof barie to maket access(a simpl averagereduction of particular imporance in improving finanidal 36 percent with a 15 percentminimum reduction on all aifrf _nes,fram 193 to 1999). in the areaof texalesand clothing intermecDiaresability to moblizedomestic savings. the wil be an immediateremovw of all restictionson goods accountingfor abouti2 percentof urrent tding impors,wih A reducion In domesticbarriers to serviceImports in the the remainin quotawphased out over a 10 year perod usinga Cadbbeanis likely to give rise to developmento tities in threetae shedule. In stage1 (1993to 1995)quotas will be the shortterm. Thereason is that gainsin effidencyare realized epanded by a ratenot lower than 16 perent per annum;in as the qualityof availablesewvices becomesbetter, the costsof suge 2(1996 to 1999)the growthrate wiD beepanded by 2S protectionare bwered.and resource alocation k improved. in percent;and in stage3 me rate wll be expandedby 27 percent thelonger term thereare likely to be dynamicopportunitis from with al quotasphased out in theyear 2003. the transfer of sidls, frequently as a consequenceof tie operationsof multinationalservice provides
93 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
Asidefrom effidencygains, the iberalizationof conditionfor displacemnentis that NAFTAcounties serivcescould havea major positiveimpact on must be viable competitotsfor those products Caribbean'sdirect export eamings. For example, due exportedby theCanibbeam That is, evenIf Caribbean to factorsOke cimate and relatively low wagecosts exportsface North Amencan trade baniers, NAFTA the Cafibbeancoutd become a malorhealth care membersmust have the capadtyto displacethese proider If barrersto trade in healthservices were goods.If thisis not thecase, Caribbean trade wil be relaxecL A major existingconstraint that now unaffectedInthe short to mediumterm. preventsthe CaF.bbean from realizing its potentialin this sectoris the requirementof manypersonnel he CaribbeansNAFrA Competitve Ptoducb Insuranceplans that health care be providedwithin nationalboundaries. The Caribbean may also have a In orderto identifyproducts that meetthese two comparativeadvantage as providersof certain conditions,the fodowingthree-step procedure was educationalservces, but are preventedfrom fully adopted First to eliminateitems that were realizingthis potentialby othercountuies national unimportant,a fist :f fourdigitSiTC products was poP-s (like unreasonableaccreditation standards compiledwhose value was at leastone percent of that dis!3iminateagainst foreign suppliers). Clearly total Caziobeanexports to the U.S. ltemsfalling theCaiibbca-. lias a majorcomparative advantage as belowthis cutoff (i.e.,the one percentrule was providersof tourismservices yet there are important equivalentto a valueof US$50million) were exduded baniers,such as restictions on transportto andwithin fromfurher analysis. Next productswere dropped the Caribbean,that preventsthe regionfrom fully fromnthis "onepercent" list if exportsfrom either achievingits potentiaL Canadaor Mexicoto the U.S.were not at leastan equivalentamount - theassumption being that, unless heInfluenoe of NAFrAon CaribbemExpors ths minimaltrade value occuned, neither Canada or Mexicohad a majortrade expansion potential wittin WhileTable 5.1 showedthat NorthAmetica is of thenear future. The U.S. was the focus of thisanalysis primayimportance for most Catibbean exporters (66 sinceIt is by far the most importantoutlet for percentof Canibbeanexports go to Canada,Mexlcc Cauibbeanexports to NAFTA(see BO 5.4 for andthe U.S.), two separatecondition3 must exist for informationon Caribbean;ountries' trade with anyof thistrade to be diverted first, tradebaniers Mexicoand Canada). (taiiffsand/or NTBs) must be appliedto Mexican exportsin a NorthAmedcan mafket UnderNAFIA, Thisselecton procedure produced a list of twelve restrictionsagainst the intratrade of theU-S, Mexico, fourdigitsrrC products(which accounted for about andCanada will be removed,but wii continueto be 68 percentof all Caribbeanexpors) in which appliedto importsfrom thirdparties (ike Caribbean competitionbetween the Cadbbeanand Canada countries).This preferential removal of tradebarriers and/orMexico exists. The four-digit SITC items were will causesome Car'bbean exports to be diverted thenseparated into two groups- thefirst consisting of (displaced)by NAFTA mnemrbes BEpressed four items(35.6 percent of all Caribbeanexports) differentl,ir Mexicanexports currently do not face whichfaced important" U.S. tariffs and/or NTBs - and tradebariers In North AmenckNAFTA wil not a secondgroup where there was competition Induceany displacementbecase no erosionof betweenthe Caribbeanand Mexico and/or Canada competitiveposition will occur."'A secondrequdred (8 productsaccounting for 32.2 percent of Caribbean Se oeports), but which facedno NTBsand zero or low Sevf broaddmsss of goodsenter tie U5.6ee of or S. inmportduties. Table 5.10 below Idenifes NKMs.These indKde most metal ores and mina, eney s fied " productsliMe crude petroleum, many agriultural raw matefiak, proucts in thesegoups i.e., "NAFA andoher rawmaterials used as productionInputs. Also, under affected"products where competitionand trade the termsof the GSPand CBL U.S. xpo.tsfrom desi-nated barmiersmay combine to divertCaribbean trade; and developingcountries face zero or lowimrt dutiesthatre a NAFrA competitive"group whereMexico and underMFN rates. A firther pointto noteIs thatGATT Ardde VWovrequres that FTAs(Free Trade Areemwnts) meet three conditons:() duties and other rescive regutions are elminatedon 'substanti al 'tradebetween partner countries; (ii) theageement contis a planand sdcedule (or Itseomplete agreenen.LThe last provision, as wel as the kgl bindingof fmat withina reasonablelengtl of me;and (ii) thegenra many tariffs within GAIT, would prevent bariers bcing Incidenceof dutiesand regulions affecting third pates is not Cadbbeanexport being aised. higherafter than It was beforete estbsmnt of the
94 S PROSPECTSFOR CARIBBEAN EXPORTS IN MAJOROECD MARKETS
Box 5.3: Why are CartbbeanUruguay Round ResultsGenerally Positive in the U.S.?The Keylmportance of Textilesand Clothing
Althoughthe previousanalysis showed most productsexported to the U.S.received preferences, net tradegains were stil projectedfor the Caribbeanas a resultof UruguayRound MFN tariff cuts,ibs seeningly.paradoxiclfi.nding is theresult of two factors;the very [igh U.S. MFN tariffs facing caribbeanexports of textiles and clothing (seeTable 5.7), and the importanceof these goods In total Caribbea expr'. As a- e':proj,ctedgainsi exports of textilesand dothing exceedsVe ewected export 1e that Id' occur on all other(preference receiving) Items.
The ub'dhl e thdtal exortiige projectedfor severalCaribbean coune oas:.wvlasiti~e chteJl A Wupsof produQcts(i) textiles, dothing and fbotwo and (IIe other products exported t e U.S.n every'lristane, the Caribbean country experiences'positive trade gains in.thie'clothing group' but negative net effects (which range up to US$1.8 million for Belize) or other items. in most c.aes (TheBahamas 'is an exception), the trade gains in textiles and 'cloting are sufficientto Oset the iosses tiat occur elsewhere.
i ey me eom s is isat US. MFN tariff concessions on textiles;, dotn .and fowIear are of key importan.ceto the Caribbean countries since below average reductions 'could m..ean':that h':.ne.t e:p6 eft" s-'Qfothe Uruguay Round ini the U.S.;:,coudbe negatie.. 't shiouitfalsobe-noteid thiat the,textile dlothing export expansion,combined with losses.forotr product Wouldtend to incre.asethe~ .alre~adhigh concentration of these'goods.Caribbianexports.:
Textiles, . - All Other' All ponot . -othingr1ut Exportttems adFootwear Anbgtt...... d I arbuda::, 43 -Z ibe8ahamas.9 .. .7~.....66 5'. Baibacao- 1.235 -3280 el z )3,136 -1,78 ' 1,3 76.-:.
Dominkai ; - ? *5; .- ?T ~...< .- 727 48 678' l?ominicanRepUblic ;1. ^ tS . ;.47,922 -1,397 .146,524 HaIti -37,3713.'<:5 x -167.o. .; 37,199hi.f Jamaica'5; ::54... 274:',. _ ....-400 . ..53,874 , i 'ii Stirtst N S 502 4187 315 f Si j. "u . j '.-.- f.y X -468 .10 . . 3,361': StVint~ndtheGrena-lnes' 744 , 105 6 9. .". ~~~~ ~~57 _.9 49 -a.m.th na~i paiif lipjJy..: ~1jwt-4 productsgtoupdoes'not hlPd for ryindardand Tobaw:a ~wtiereapoetrade jkii soCct m>i resultuf - taadflcul MFNtaAfl` of 0.3-to o. perct (andno CDI pefe.ren¢ces) n .troleumhe. Tri f1eIse~latnsn. .hosefor Guyanare due to thiscountys excwon fromthe COL
95 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
Canadaexport goodssimilar to thosefrom the Dueto majordifferences in the scaleof individual Caribbean,but no meaningfulUS. trade barfiersexist countty exports,the previouscomparisons may to divertexports Thetable also shows the value and understateNAFTAs impact on thesmaller Caribbean share(about 33 percent)of Caribbeanexports which countries.That is, the value of exportsdisplaced from encmunterno significantcompetition from Mexico a smalcountry might be relativelyunimportant from and Canada.. Table 5.10 suggestsany trade the viewpointof the entireCaribbean Region, but displacementdue to NAFTAshould be highly quite importantfrom the viewpointof that smal concentratedin a few textileand dothing products country.As such,Table 5.12 examines the relative andone otheritem - uppersof leatherfootwear. importanceof NAFrAaffected products in the total However,U.S. tarffs on the latterare only in the 2 exportsof eachCaribbean country. Under this new percentto 3 percentrange so the major trade criteriathe DominicanRepublic Haiti andJamaica divertingeffects (if they occur)would ofiginate againemerge as countriesmost 'vulnerable' with throughthe country spedfic quotas. The situation is between46 to 61percent of theirexports subject to very differentfor both knit and nonknit dothing potential NAFTA displacement. Althoughthe wheremultiple nontauiff measures would reinforce the correspondingshares for SL Luda and St. Vincent and potentaltrade diversion effects of tariffsof over20 the Grenadinesare somewhathigher (between 66 percent.A pointto noteis thatU.S. and Canadian and 79 percent)these countfes vulnerability to MFArestrictions apply to Mexico,but not to each NAFTAis 'apparenV lessenedby their prirnary oUter.As a result US. and Canadian dothing exports relianceon Europeanmarkets for merchandise huld inease withinNAFTA due to thepreferential exports. Althoughless than one-quarterof their iiberalizationof tariffs,while the Mexicanresponse exportsare destined for NorthAmerica, as opposed wouldbe due to both the removalof tariffsand to morethan threequarters of lHaiti'sexports, the nontariffbamiers. Ths suggeststhat anynegative combinedeffects of NAFrAand the bananashodc" effectson Caribbeandothing exports are more likely wil depressthese two econormies. to comefrom Mexico than Canada - particularly with Canadianunit wage costsonly slightlylower than To estimatethe potentialdisplacement in North thosein theUS. Amencanexports that these countries might expect theSMART model was used to projectthe effects of NAFIA'sImpact on IndvidualCaZdean Counbies i) U.S.tariffs being removed against NAFrA intra- tradein all products;and pii) the removalof all US. Wthineach product group lsted in Table5.10, some nontariffbariersfadng Mexicos dothing expors Caribbeancountries would be mostheavily affected by a potentialNAFTA induced export displacement. However,first, these estimates only incorporate the Thereare two independentcriteria for assessingthis short-termneffects of tradebarrier changes and do not impact Thefirst is basedon the shareof potential indudelonger-ternr economywide impacts, such as NAFTAaffected trade orignating in eachCaribbean dcangesin investmentflows or capadtyutilzation country,while the second exarnnes the shareof this thatmay occur over a moreextended (say 5 to 10 tradein eachcountrys total exports. For the most year)interval nor do they take into consideration part bothmeasures suggest the Dominican Republc developmentsin the Caribbeancountries that may is thecountry most likely to be affectedby NAIA, derivefron domesticv onomicreformns. folowedby Jamaicaand Haiti. Table 5.11 shows that between55 percent and 99 percent(76 percent on Second,several key assumptionsconcerning the average)of the fourdigitproducts that havethe impact of NAFTAwere incorporatedin the potentialto be displacedoriginate in the Dominican projectionswith the first concering the time elemnent. Republc.About 17 percentof theseexports come Underthe termsof the agreementtrade bariers fromJamaica followed by Haitiwith 4 percentof the fadr.gmember countries are to bephased out over a affectedtrade totaL Aside from these three countries, periodthat mav be overa decade.No attemptwas noother Caribbean exporter accounts for as much as madeto projectthe separateimpact of eachof the 2 percentof total tradein anyof the four groups stagedcuts, but insteadthe focus is on thefinal stage wherea NAFrAdsplacement might occur. in whichal barrersare eGiminated.
96 5 PROSPECTSFOR CARIBBEAN EXPORTS IN MAJOROECD MARKETS
Thrdc the projecdonsassume that aU tariffs and in the Caribbeancountries' export earningsstream nontauiffbarrers fadng NAFTA memberswill be will be considerablyhgh than the US$53million rimoved (thiswas not the caseunder the Canada- figure implies. Unuer current InternationaRy United StatesFrA where barrierswere retainedon competitiveInterest rates (7.5 percent),the present some specificproducts). To the extent that some valueof the lossesin future exportscould total over restictionsremain, the projecdonswill overstatethe three-quartersbillion dollars. agreementstrade effects. NAFTAand Direct ForeignInvestment Flows to the Fourtl liftle reliableinformation exdsts about supply CaribbeanCountries constraintswithin NAFrA countries. lTerefore,the intial projectionsare based on the assumptionof Staticanalyses of merchandisetrade diversionmay infinitelyelastic supply (.e., no supptyconstraints). underestimatethe effectsof NAFrA on the Caribbean countriesto the extentthat shiftingtrade preferencs To theextent that these exist the actul tradediverting may resdt in Investmentdiversion. DFI has an effectsof NAFTAwil be lower thanthe projections importantrole with respectto grosscapital formation (seeBox 5.5).The projectionsdo not incorporateany in the caribbeancountries. Over the 1986-1991 possibleeffects resdting from a higherrate of growth period,for example,the ratio of DFI inflowsto gross in the NAFTARegion-if growth ratesacce;erate this domesticcapital formation was 9.6, 9.4 and 6.6 would potentialy increase imports from the percent in the Dominican Repubic, Trinidad and Caribbeancountries. Finally,to account for any Tobago,and)Jamaica, respectively. uncertaintyassodated with the underlyingparameter, thelosses are projected as a range(high and low case The effects of RegionalIntegration Arnements scenanos)rather than a fixedamounL (RIAs)on irwestmentflows are lesswell understood than their effects on trade. It is recognizedthat Table5.13 sumnaizes projections of NAFrA'strade developingcountries can be affectedboth in indirect divertingeffects for individualCaribbean countries anddirect ways by regionalinitiatives. FiM assuming (data for several countres where only minimal that the pool of globalsavings is relativelyinelastic in affectedtrade occurred are not induded). The top the shortrun,a bulgein investmentactivity associated halfof the tableshows 1992 exports to the U.S.of (i) with the creation,widening or deepeningof a large NAFTAaffected,and pii)NAFrAcompetitive products, regionalbloc mayimply a highercost of capitalfor the whie the lowerhalf of thetable indicates the valueof rest of the world Second,transnational companies this exchangethat might be displacedby NAFTA. maydivert funds onginally earmarked for irnvestmnents Wrthinthe NAFrA affectedproduct group, estimates elsewhere to the members of the regional of Caribbeanlosses range from US$35mniMon to over arrangementin responseto incentivescreated by the $US53million. To put thislatter figure in perspective, RIA. It is only slightlylower than the ormbinedtotal exportsof Barbadosand St. Lucia to the U.S.market There is no evidencethat regionalinitiatives (and NAFTAin particular)are keepinginvestment demand Two related points shouldbe noted regardingthe above its historicaltrend in the 1990s. In fact proJectedCaribbean loss. First,the projectionsonly Inrestmentdemand is currentlycycically depressed incoporate shor-termNAFTA effects Caribbean aftera periodof rapidgrowth in the secondhalfof the lossesmay be considerablyhigher once new capacity 1980s. In any case,the relativelyhigh real interest Is addedto productionfadlities and other production ratesof thelast ten years seem to be mainlyrelated to cnstraintsare removed.4 Second,it shouldalso be a decine in the world supply of savings. The recognizedthat the short-termloss estimates reported possibilityof policyledirnestment diversion, however, in Table5.13 are annualfigures-the same losses will meritssome attention. occur eadc and every year after NAFrA Is Impemented.The point that followsis that thelosses Theformation (or enlargement)of a RIAmay promote both investmentcreation and diversion.Investment whedr or not Meco isable to achievea mapoexpon creationoccurs when the RIA removesbarriers to expansiowil eadydepend on thevoume of newivestmets in tettiles,dothing and ote sectos
97 COPINGWITH CHANGES IN THEEXrERNAL ENVIRONMENT
iox154: NAT' Effectsin Meimcoand Canada on CaribbeanExports
thie U.$s.,is by far tie mostimportant h!AFTA market for Cadbbeancounties' exports. in 1992 the U.S.Imported US$S.0 billion from the Caribbeancountries compared to only US$316..5mn11Ion of combined fmports by Mexicoand Canada (at US$262 million Canada's impoitsfrom hCaibbeanite areAmrnost five timesthose of Mexico). Evenso, one would wantto.4ern det whicdisectors in theCanadian and Mexican market were most vulnerable to displacementand what the magnitude af thisdisplacement might be. In Canada,dothing prUcts 1ookmost.vulnerable 1 displacement, although the shareof thesegoods In toa impori froM abbean (1Qpercnt) is rhmuch tower than in the U.S. AsIn the U.S.,the evel anpoteto againstotngi svery h . .'
>Thefollowitabu6iration prO i trdea4d tradebrierinformationon the majorfourdgit rroidtsCinad andMec import from the Caribbean.Items were exduded from hislist if tei was-no directcompetition from a NAFTAmember. In the caseof Canada, .wprodduct(alIumina nrd motor fuels)account for about 57 percentof all *NAFTA eopet prodblcts,tb thee are no tradebarriers to divertCaribbean exports. High ,Cadifibarriers an colpetition u for four items- two of which are clothing 'productsi but theseItems account for less-than 17 percent of ali Caribbean export. In otherwd, ut 83 percent of all Caribbean expo:rtsto Canada appear *safeXfrom a NAFTAInduced hej .on.:r
1992tmpoft fromdie )aribbean rnpo4er/Iteacstp-;gi ;:I ;C) NTMsApp#eI .Tadiff value ShareM ;i'';'~~~~~~~~ <'.-':-'.'-2 'f '''...... '.(Smolq': M% (us$miiOR6) ,CA1i^ADA. POU3 0 : ' .261,680 100.0 AlUminuIiiao44(5136) ...... :.- ... : 0.0 113,600 43.4 a 3ot~rfue1{3321, ,''.., ', :t',',';'i:.:>,:n,e,," f, : 0.0 35,413 1.5 5i1phur&e9Mt31kti n ; ; ,:12.5 16,464 . 3 it..ft.. .X 124): '. *aone 1&7 12 79 4.7 A. --... 4 M K `A': 2.0 . 8.350 3.2
(.... ' p...... 54'-6 17.' knwiq*ahdtodj673t)~Antkzmplng actIons laD 15'I6 "287.7 4% *a' sos(71J oe10098417.9 hReidu1fuloti3324 cniifig 0;0;"4'i7 7,602 . -13.9 'g'¢$~riImbe(233 - ;':.:' ' :: ' : ... e;' 15.0 2,559 4.7 fled*oI$ol (1124), ' ; : .IeaJh...... WsIan s .20.0''; : 2,373 : 4.3 'oili!ts&,ba{6725). ., .,,.,; .:b,one ; ...... 2.25410.0 4.1 'i .jbii.at.n..I..43325,,-- ;- ...... 15.0 . 1,636. 3.1
' -ne`:`-r r greater than in Canada in terms of the share d goods 4fectedi but-far smaller e values are involved. About 76 percent ~a~pro4mat3eIUS$40 rriifl) of Caribbeanpotts are subject to NAFTAcompetition-and me-w -liirnwireand'shot accounting for some US$25 milionof total.UniketheS. Canada,however, tariffs on the rangeof 10 to 20 per~eit)are the mde contio e- thatwoukl cAuse a displacementof.Caribbean exfriitsNCwfbbea y;birta e absorbthese margins more easily than they eaU andCs - cpartiulaly those in sugarand dothing.
98 5 PROSPECrSFOR CARIBBEAN EXPORTS IN MAJOROECD MARKETS entryin ceran industries(eg, regulatorybariers that protectedmarkets in the FrA. But rulesof origincan deny accessto foreign service providers)and/or alsobe usedto exportprotection. What thismeans in generatesexpectations of highergrowth rates in the practiceis that oaeFT,' partner can effectvely impose partidpatingcountries. Investment diversion, in turrn its higherextemal barrier on an exportingparner, is directlylinked to the amount of trade diversion whichhas lowerrestrictions on an input enteringthe fosteredby the RIA. It will be exacerbatedwhen the production of a good qualifying for duty4free RIAincreases the levelof protectionagainst outsiders treatmentwithin the F rA. In sensitivesectors such as or thereare expectationsthat thismay happenonce textilesand dothing, and autos, afree-tradeswithin thebloc Isfonmed. NAFt'Acame togetherwith strict rulesof origin. A cotton shirt-makerin Mexico,for example,can only For nonparticipating developing countries both sellthe shirtfree of duty in the U.S.if it is madefrom effects (investment creation and diversion) are cotton fabricwoven in the NAFrA region,which in perceivedas a threat to the extent that they may turn comesfrom yam andthread spun in the region. divert DRI flows from them. From a pokcy This riple.transformationtest" is morerestrictive than perspectve,however, the main focus of analysis the one establishedin the CUSFrA (a double. shouldconcentrate on investmentdiversion, since the transformationtest appliedin that case)and entails a forcesbehind investmentcreaton typicaly do not higherlevel of implidtdiscrimination against outsiders. entail disariminationagainst outsiders. In those sectorsin whichpreexisting levels of protection(e.g, In the caseof the CaribbeanRegion, the extent of textilesand dothing,and frozenconcentratedorange investmentdiversion in manufacturingwili ultimately juice)are relativelyhig, futureDPI flows may expand depend on how NAFTA affects the relative supplycapadty in membercountries at the expense attractivenessof Mexicovissavis Caribbean countries of more effident producersoutside' th. RIA. This as a location for labor-seekingand compon-nt outcomeshould not be attributeto the RIAsper se, outsourdngDFI. Undoubtedly,locational deds' s but primarilyto the maintenanceof protectionisttrade are nfluencedamong other thingsby the cost and policiesby the membercountdes. qualityof labor,transportation costs, infrastructure in the host country,and availabilityof fiscalincentives. Two typesof DPI,in whichmany developing countries However, the apparel sector in the Caribbean can offer locational advantages,are partidulaly countriescould be subject to investmentdiversion susceptibleto the influenceof North-SouthRiAs (Gke because of concessionsgiven to Mexico under NAFTA): laborseeking DFI and component- NAFrA. At the present time, over seventylive outsourdngDFI In both drcumstancesthe potential percent of U.S. apparel imports from the CBI for investmentdiversion is dosely related to the countriesfall underthe 807 program,in which fabric discriminatorycontent of the agreement Restrictive cut in the U.S.and assembledin the CB1Region is rulesof origin,for example,can disruptpreexisting subject to duties only on the value-addedon re- tradenetworks and divert trade in favorof firmsin the enteringthe U.S. As of january1, 1994,duties on membercountries. 807 apparel imports from Mexico have been eliminated,effectively plating the Caribbean countries Rulesof origin are the instrumentused to determine at a disadvantagewith respectto new and existing whichgoods (and serices) in a FTAor in a customs DFIin thissector. unionare entitledto preferentialtreatment RIAsuse differentmethods to determineorigin. Substantial In relativeterms there has beensignificant growth in transfomnaiion,change in tariff heading,minimum U.S. foreign direct investmentin manufacturingin valueadded, and spedfied.processsystems are the both Mexico and the Caribbeancountries. From main methodsused. In customsunions, given the 1985 to 1992 these regionshad above average existenceof a commonexternal banier, rdes of origin growthin thestock of U.S.manufacturing investments are equvalentto domesticcontent requirements. In (12.5percent in Mexico and 18.0 percent in the FrAs,however, nrles of origin also play.the role of Caribbeancountries compared to 8.9 percent for impedingtrade deflection by which outsiderswould LatinAmerica and the Caribbean as a whole,and 10.4 use the partner in the FTA with the lowest trade percentfor the rest of the wodd. In the Caribbean bariers to tran.ship their products to the more countriesthis growthin DFI was almostexdusively
99 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
fox SJc kupUvatlonsof MexicanMFA Quota Ul1llzatlont Rates
e d4s demonstratedthat the potentialfor a NAFTAinduceddiversion of aeaeports is concentrated4In a few keygroups like textilesand dothing. Howevetr whetherMexco'sACcession into NAFTAwill in factcause a majordisplacement of Caribbean te dependst a greatextent on how'tompetitiveMexico has been, or is likely to be'me,In thse two sectos Some:evidence on this point can be gained by exanining Mec Eb`ityt o fillTts established.US Multi-Fiber Agreement (MFA) quotas. If a relatively age 'ortonof tie Mexican quotas are unfilled,this could indicate important supply cXnstr.its exist that will restrict'Mexico'sability to displace third country exports under NAFtA., Thisconsideration appear muchless importantfor Canadawhere the potential for trde iversion sees limited due`A-ong other factoirs,to its relativelyhigh labor costs. Canaa sntconstrained by the effectsof the MEAbut still its 1992exports to the United million)were4about one-third those of Mexico.
ThestAs belowshow Mexco's U.S. impor shareand MFA quota utilization rates for all eti nd gdoingproducts over the 1985.89period (1989 is the latestyear for which comprehensive4ata are availlable). uJi ng thisperiod Mexico only filled about threequarters t treihted 1A quotas.
A.erageWeighted MFA Quota Utilzation-Rate (%) b
9 89 i .- 1985 1986 1987 1988 1989 1995985989 ~~I rtSha.x.:.. %. Mexio Z .2 : 7:8 ^81.7 ;86.0 73.9 68.9 77.1
imts US. .teft cdothingMFA quotas. i~ Welgfi arebaed on thevalue of exportswithin each MFA quota group. Mexico's1985$89 pieavragequota tiation ratewas 34.2 percent $ort:Wrld Bak MFAData Base .-
Therelativly ow, Mexican utUiiza-onrates comne as someting of a surprisesince U.S. textile and _don s ihave'already been considerably relaxed for Mexicoand the Caribbean countries In ,199Mexico ex;p6redUS$728 millvon o textilesand dothing products to theUnited States and It Is 1stimataS5 (or 90 percent)'benefiitedfrorn duty relief provisions under subheading 9802 df tdff o System.Under these provishons, U.S. produced inputs are processed In foreign ountdies and' inf- are only levied'onvalue added produced outside the United States These shipmentsaccounted for 16'percentof"total JS bmportsin 1989compared with 10percent in '1986.Of ihese onlyUS$195mfiillion (or 30 percent)worth of textlesand dothingimports from Mexicowere suecWtto"jduties which would make the-average duty rate for 9802imports around 6.5 percentmaking thweighted aveae duty on all USimports of textilesand dothingfrom Mexico equal to about14 perent.Allin all,the evidence suggets that internal constraints are likelyto limit Mexico'scapadty to ',4lac oher xti.land dothing exporters In theshort to meediumterm.
100 5 PROSPECTSFOR CARIBBEAN EXPORTS IN MAJOROECD MARKETS associatedwith inflows into Jamaica and the Govemmentof Puertonco that can issueindustrial DomrinicanRepublic From 1990to 1992 the large revenuebonds to financeprojects that complywith relative inflows into Jamaicaand the Dominican the federaland localregulations that govern the useof Republicwere matchedby the net outflowsin other the funds. It was developedto further reducethe Caribbeancountres. Theseinvestments are in part costsof large size projects'finandng. Rnally,the linkedto the offshoreassembly provisions of the U.S. CBPPis a specializedfinandng institutio designedto tariff code 9802,for which the DominicanRepublci lend Section936 funds up to US$10 million to Jamaica,and Haiti arethe mainexportes 'eigibleprojectse. lhe US. tax preferencetreatment of investmentsin NAFTAdoes not provideanything similar to Section Cauibbeancountries under Section 936 of theUS. tax 936benefits to USl investors.Moreover, NAFTA puts codealso influences DFI dedsions with respectto the restrictionson the use of duty drawbacksand tax region. Since1976, Section 936 of the U.S.Intemal deferralprograms as a way to inhibit the creationof RevenueCode has granted tax exemptstatus to funds exportplatforms in Mexico,something that may divert generatedby US. corporationsin PuenoRico during Dfl from non.nember countries to other host their nonmalproductive activities or by secondary economiesand eventually to the Caribbeancountries. finandalinvestmnent of previously generated revenues And if thegrowth dividends of the agreementbecome ('PassiveIncorme"), when they are reinvested in Puerto a reality,Mexican labor costsshould be expectedto Rico.These funds can be repatriatedto theU.S. upon continueto rise in relativeterms 49 On the other payment of an adjustable'tog gate' tax to the hand, NAFTAis expectedto greatlyincrease the govemmentof PuertoRico, which dedines the longer credibilityand transparency of Mexico'sDfl regime,a the fundsare investedin th islad Becauseof their developmentthat will improve the perceptionsof tax advantages,the funds depositedin PuertoRico foreign investors(particularly from the US. and underSection 936 are loanedout for projectsat lower Canada)about the potential of theMexican econony. than normnalinterest rates. In Januaty1987, Secion Moreover, Meico's infrastructure is already 936 funds were allowed to be investedin active benefittingfrom NAFTA-relatedinvestments and as a businessassets eligible development projects (Eligible consequencetransportation costs (as well as the Projects'outside of PuertoRico in selectedcountries quality of intermediateservces in general) are that have completeda Tax InformationExchange expectedto continueto improve. Agreementwith the U.S.,as a finandalcomplement of the US governments'CBI. WhileSection 936 and The overallresult of these conflictingtrends with the CBI are separatepolicy measures,they are respectto DFldiverson are difficultto forecastat this complementaryinstruments from the perspectiveof stage. It seems,however, that potentialdianges in foreigninvestors U.S.fiscal laws may pose a more direct threat to Caibbean countries (as far as DFI flows are The 'passiveincome earnedby US. corporationsin concerned)than NAFrA. It remainstrue, however, PuertoRico, resudting from the investmentin eligible that investment diversion can have important projects'in qualifiedCBI countriesthrough finandal economic consequencesif agglomerationeffects institions physicallylocated in Puerto Rico, also translatea minor locationaladvantage derived from qualifyfor tax exemptstatus. Secton936 fundsare preferentialaccess into a major sourceof attraction lent at one to two points below marketsrates, for foreigncapitaL In thissense, the effectiveimpact representingup to 20 percent savingsin finandng of NAFTAshould be doselymonitored. costs,thus, increasingthe viabilityof a projectand reducingthe amountof foreignexchange that would haveto be employedby a county to financea similar project with conventionalfunds. Besidesthe 4 sy 1987,Mexican hourly compensation costs for smkkiied commercialbanks, there are two financial productionworkers In exportplatforms were aroundUS$0.84. mechanismsavailableffmiadms foravilabl Sectionecdon 93636 tecDnglending inn CBI percentTheywere lowe 6 Inpercent the caselower of Jamaica,in the Dominicanand 30 percentRepublkI lower 25In eligible countries CaribbeanBasin financing Haiti.It isworth noting that sincethen, wages In Meacohave Audtority(CARIFA) and the Caribbean Basin Parners beengrowing (in dollar terms)at a steadypace of mere than6 for Progress(CBPP) established in 1990and 1991, Percentper year, a performancethat has not beenmatched by respecvely. CARIFAis an instrumentalityof the the othercountries (particularly Haiti and Jamaica).
101 COPINGWITl CHANGESIN THEEXrERNAL ENVIRONMENT
ox 4 G8iAiTSiluaes Onceintgh Free fade Areas hecornefstone of the General A8reement on Tariffs and Trade (GATT) is the nondiscriminationor most. favored.nat (MEN)principlei of GAIT ArTdde1. Tradeconcessions awarded to onemember country areto: be extnded lo all GATTmembers. ETAs conflict with thisprindple. sof i coflct. GAiT rules.canaccommodate the promotionof tradeliberalization through I n aon between the economiesof the countriesparty to such agreements.' GArr Artide IVpernits ideparturesfrom the MFNobligation provided that the FTAor customsunion meets three oditions: @( duties d otherrestrictive regulations are eliminated on 'substantiallyall" trade between pa.Frtnercountres; (2)the generalincidence of dutiesand regulations affecting third parties Is no higher aftr tn it wasbefore the establishmentof an agreement;and (3) the agreementcontains a planand . f .defor its completefomution within a reasonablelength of time. Althoughthe intentof these rue.Issome1itimes interpreted as meaningthat an FrA shouldbe tradecreating, there is no guarantee thttis will be te case. .14. more.han 60 EAs andpreferential trade arrangements have been reviewed by the GATT Un Ver.ArtioeXXIVprisions (seeSdiott, 1989, Annex A for a list). Only four agreements- the South aneanCustoms U}nion (1948); the Nicaragua-ESalvador Agreerient (1951); Nicaraguan tai te C - a erican FreeTrade Area (1958);and the CaribbeanCommunity and __oMonMarket (1973) - weredeclared full compatiblewith Artide XXIX requirements. However, no greementhas been censuredby a workinggroup as being incompatible with GAITrules. As a resultof M precedents,counries are perceived to be ableto derogatefrom MFN obligations in FrAs without re:.~ t6 theeffec onthird countries. ills impressonhas been reinforedh bythe introductonof the 1979Decision on Differentialand More "av e reatnroecs:ip:ro and fuler Participationof DevelopingCountries (also known as the naresult of thisdedsion, regional arrangements involving only developing countries df.romth..reqparement to meetthe formalcriteria of ArtideXXIV. Regionalarrangements onthe toutries~are piermittedas longas theyfadlitate trade, do not create'undue difficulties' for tcountries,and do rot act as an impedimentto the reductionor eliminationof trade S1ajnieon.a most4avoredoationbasis. Formalprocedures have not beenestablished to ensurethat aremei;
OpSons (1973),Cyprus (1972) and Malta (1970), or the 1969 accessionof Icelandto the EuropeanFree Trade A questionfor Caribbeancountries to consideris Association.Although Israel's exports to the U.S.are whetherto applyfor membershipin an expanded only aboutUS$3.6 billion - about US$1.4bilion NAFTA.5 Differencesin relativesize shouldnot belowthose from the Caribbeanregion - thesetwo predudean associationbetween the Caribbeanand countriesconduded a FrA in 1985 wfhichhas Canadaor theU.S. since FTAs among large and smafl operatedsatisfactorily. countriesexist and been operational for more than 20 years.eg, EU associatonagreements with Tutkey Whileconsiderations relating to sizealone should not predude a Caribbean 'NAFTAoption' several 50A hemisphericsystem of freetrade areas Is thecomerstone of institutionalarrangements do havesome negative the US. Enterprisefor the AmericasInitiative (EAl) announced in implications.One problemis that the U.S.and June 1990. arguablythe single mostimportant U.S. initiative Canadaseemingly have little latitudefor further toward LatinAmerica and the aribbean sincethe Airiancefor discriminatingin favor of Caribbeancountries which Proess If successfulthe EAIwould result In the largestmarket in the world- more than 700 milnlonpeople and a combined countriesare alreadyentited to importanttrade GDPof nearlyUS$7 tnUiUon which represents 14 percentof the preferencesoa mostproducts through the CBIand worldspopulation and 31 percentof globalwealth. CARIBCAN.Under NAFIA, U.S. tariffs and nontariff
102 5 PROSPECTSFOR CARIBBEAN EXPORTS IN MAJOR OECD MARKETS baiers couddbe phased out against footwear, textles Condusbons anddothing, but for other Cadibbean products mafket acassconditions could not be furtherimproved. 51 Any assessmentof the effectsof NAFrA must recognizethat Canbbean countries have numerous A secondproblem with the 'NAFTAoption" is thata domesticpolicy options that couldbe adoptedto FrAwith the U.S.would be tantamountto full trade offset competitivelosses their exports right liberaizationin the Caribbean(see Bex 5.6) above. expedence.These options involve domestic reforms TheU.S. Is an activesupplier of almostall goodsthe inducling:() a Cberalizationof the Caribbean'strade Caribbeanimports so preferences(I.e, zero import barrierson goods and servicesimports; (ii) the duties)for the U.S.would lead to directand equal adoptionof more rationalreguations regarding competon betweendomestic and US. producers in production,employment or transportpolides; (iii) Cadbbeanmarkets Unlessthe Caribbeanwere initiating measuresto fadiitate new foreign wilng to foregoal Lom6Conventon prferences, the Investmentand businessventures (parcdadya YAFTAoption" would also mean that trade bamers regardingoffshore assembly operations); and piv) fadngthe EU would have to be removed.Artde 174 pursungmonetary and exdcange rate polides that do of theLom6 Convention requires that the EU recewe not constrainthe growthof exports. Caribbean at eastas favorabletreatnent as any other(non- countriesthat adoptedthese -outward oriented" developingcountry) trading parter of the Afiicar refonnsover the lastdecade experienced a dynamic Caribbeanand Padfic (ACP) signatories. Caribbean growthin exports.Countnes that did not implement beneOfajieswould, therefore,have to provide suchmeasures saw their exportsstagnate or even unrestrictedacoess to the EU if it providedsuch decine. aom to theU.A and Canada. Governments should broadentheir tax base and improve tax administration To properyassess the implicationsof international to offsetthe siort4enn revenue losses that would take initiativeslke NAFIA,the Uruguay Round, or dianges placeIn such drcumnces. in CARICOMon their economies,Caribbean countriesneed accurate and relable information on However,the costsof not JoiningNAFrA would thelevel and comnpostion of their trade. Small open deadyoutweigh these considerations assomne of the economies,like those In theCaribbean, also need this Caibbeancountries' exports to the US wouldbe informationfor the properformulation of domnestic graduaClyeroded, potential new tradewould not measureslke tax, finance,transport and Insurance materiae and DR flows could be diverted. poldesthat would influence imports and exports. Moreover,the Caribbeancountries should also look However,the analyssundertaken in this report beyowndthe cuent benefitsof NAFrAand look at revealedthat marny Caribbean countries had ittle or other possibilitiesIn sevices,induding acoess for noinformnaton on theleveL direction or compositon temporarylabor movements. of importsand exports. Evidence is also presented in thereport that, where trade data were availble, the overallvalue of exportswas two to threetimes higwer thanindicated. Given the importance of tis problen, is report recommendsthat a high priority be assignedto theformulation and implementation of a programto upgradeCaribbean trade statistics. s" SeveralUS. proam alreadyrweaen h effec of U.S nontaiffbanies on textilesand clothg epomsfrom dte Giventhe speed and direction of dcangeIn theglobal Cxrbeam As previous noie4 the e07 progm of dte US. trading environment,the Caribbean countries should allowsdu freeenty on thatportwn of a finishedproduct whkh isa US.produc componet For some Ca&bbean counies, a mnovequiddy to reach an understandingwith the U.S. bre assemb dusty has developed parturly in freezone and others as to the process and timingof an eventual (alsoced agporprocessing zone) areas. In Igas a new enlargement of NAFrA to indude the Caribbean prePerentprogram 'super 807 wasintroduced This i onlykw countres. Given current arrangementsfor those CBIeligtblecounties with whom the U.S.hw negodatedtextile nd clotingbilateral areente Thesuper 807 guarantees countneswith preferentialarrangenments with the EU acss fr dodtigasenbled in theCarbbea without regard to redproatyarrangements would have to be negotiated quotaleveh, but only If the cdotng is madeentrely of US. withthe EU.
103 COPINGVWiTHaCHANGES IN THEEXTERNAL ENVIRONMENT
Tabh 5.1: The Gerapt4c Destaulon of Caribea bpwts. 1590 Exporin Countiy World OECD of which: m ) Markes Notlh AftU and Eure The Sabuda Amerca Bahamas Japan eoping of which Bafbados 27.0 Ofth 528 Counries Bze 297.3 (pe_c_nt Amerca Domnia 982 as d total 213.4 2.2 49.0 exports) Asa Dominican 124.4 36.6 94.9 0.4 Afrca Grenada Repubx 875 20.3 0* - 43.6 42. 15.9 0.2 472 Guyan 924.4 69 44.2 0.3 20.0 592 0.1 1. 1. HRU 32.4 85.0 7.7 08 33.0 1.7 Jamaica 76.5 21.0 - - 0.1 1.7 233.7 63.0 59.1 - 12.5 2- - St. Kits 117.1 83.4 5.7 12, - and 47.8 13.6 - 31.9 - St Loci Nevl 1,017.0 96.4 - 31.9 - 17.4 20.3 - 20.6 St VYiet 302 85.3 62 18.4 end 34.5 77.1 0.1 23.1 - - Surlnm the GrAdns 732 0.8 23.1 0s taQ3 22.8 49.6 0.1 15.3 _ 1.7 Trindad 618.0 82u 50.3 09 4.6 14.A and Tobago 76.0 63.1 - 0.3 - - ALLABOVE 364.0 50.9 19.4 - 12.6 4.0 0.4 COUNTES 2080.4 86.4 - 9* 0.3 577 24.0 - 26 0.2 So 3932 69.2 22.3 1.1 17.6 26L2 - Seies atst compd 9.7 6.5 - 0.3 2.5 D Trade fm 84.5 5B2 24.0 17.3 tapes. UNCTAD, 17.0 0.9 - - Hadbook 65.6 13.6 223 0.2 Dataa d Intenadonal 1.7 05 132 1.7 for 1990 26.7 - not or the latest Tradean 02 25.3 0.4 nchd expofts year Devopmn 14.1 - this prac d assembly avallable. StIis, O0 Is not typ The above 1991 13.0 0.6 be1n folowd opeaton statis undersae or diectl OA In th CardbbeThe United the m the Unid 0.7 ontries. Natbnsstcal Mpoune Naios Exps fce of No Ameican Stlca Office f thse rquests that market so assm thes shpmts to sm Car goodsto bWfull cutrsdnce the Unied i d In Sats now atnalt they do meed US$1 stats, blon anuy. but 5 PROSPECrSFOR CARIBBEAN EXPORTS IN MAJOROECD MARKETS
Table5.2: The ProductComposition of Ca _bbeaCotrbes' Exports:AN OECD Markets. 1992
ProductGroup as a Percentof TotalEbxots odwhch: Total Ores TeOxie Transpost Bxfrt All Agrcultural and ANl and and ExportingCountry ($mUI.) Foods Materials Fuels Metals Manufacures Clothng Chemicals Machinery Antiguaand Barbuda 12.8 14.5 2.6 11.5 7.8 49.4 6.8 0.8 25.8 TheBahamas 1,025.0 10.6 02 16.8 2.1 69.0 0.1 46.8 181 Barbados 85.9 46.2 1.0 0.0 0.6 48.8 8.4 0.5 28.5 Belize 133.9 80.8 0.9 - - 15.6 14.5 0.3 0.2 Domhica 56.0 87.1 0.3 0.0 02 10.0 1.8 5.6 1.4 DominicanRepublic 2,710.8 15A 0.3 0.0 0.7 79.5 47.7 0.5 6.8 Grenada 19.5 66.1 - 0.0 0.0 32.4 10.6 0.0 3.9 Guyana 326.5 59.0 0.8 - 32.4 6.5 1.7 22 0.9 Hati 145.2 13.1 0.7 0.0 - 84.4 55.9 42 52 Jamaica 1286.2 21.8 0.3 - 15.7 60.6 29.5 29.7 0.5 SL Kitts and Nevis 36.9 43.3 0.3 0.0 * - 53.3 132 0.1 37.4 St. Lucia 139.3 72.7 0.3 0.0 - 26.5 18.1 0.0 6.4 St.Vincent & Grenadines 99.5 78.9 0.1 2.6 - 18.2 32 0.1 14.9 Suriname 385.9 21.3 02 0.0 9.8 67.5 0.1 67.2 02 Trinidadand Tobago 1,217.9 13.5 0.1 60.3 0.7 23.0 0.2 16.3 1.1 ALLABOVE COUNTRIES 7,681.3 21.8 0.3 11.9 5.2 58.4 23.8 17.6 6.1 Source: UnHedNations Series D TradeTapes. Import statistics as reported(c.l.f.) by theOECD countries. Product groups are defined as foliows:all foods feeds(SITC 0+1 +22+4); agriculturalmaterials (2-22-27-28); minera fuels (3); ores rinerals and nonferrous metals (27+28+68); all manufactures(5 to 8 less 68);texties and clohing (65+68);chemicals (5); transport and machinery (7). COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT 0) Table 5.3: The Cartibbean'sThrty LargestThree-Digit Exports to OECIDCountries, 1992
Value of Caribbean Exports (USS$million) Pert of Total Exports (%) Description (SlTC) 1970 1980 1985 1992 1970 1980 1985 1992 TOTAL OF ALL EXPORTS 1,411.1 8,914.9 5,774.8 7,681.3 100.0 100.0 100.0 100.0 Cothing not of fur (841) 17.2 218.8 483.6 1,795.6 1.2 2.5 8.4 23.4 Inorganic chenicals (513) 179.9 780.4 542.6 763.2 12.8 8.8 9.4 9.9 Crude petroleumn(331) 22.1 1,559.3 1,013.7 517.3 1.6 175 17.6 6.7 Sugar and hoy (061) 264.0 688.3 397.5 495.5 18.7 7.7 6.9 6.5 Organic chemiab (512) 11.2 66.9 159.4 462.5 0.8 0.8 2.8 6.0 Presh fmit and nuts (051) 50.1 109.1 172.9 392.1 3.6 1.2 3.0 5.1 Refined petroleum (332) 280.3 3,450.8 961.5 376.9 19.9 38.7 16.6 4.9 Non-ferous meal ors (283) 236.5 489.5 156.1 292.8 16.8 5.5 2.7 3.8 Alcohoi bevrages (I 12) 19.7 105.5 85.4 211.3 1.4 1.2 1.5 2.8 Spei transactions (931) 33.2 84.7 130.1 187.6 2.4 1.0 2.3 2.4 Ships and bods (735) 0.3 0.4 20.5 t86.2 - - 0.4 2.4 Eeetric power machinery (722) 0.7 36.2 97.0 177.4 _ 0.4 1.7 2.3 Leather nnufactures (612) 0.5 20,3 60.0 176.9 - 0.2 1.0 23 Fresh fish (031) 27.6 75.7 67.6 170.1 2.0 0.8 1.2 2.2 Pig Iro (671) 0.0 139.1 112.7 139.4 0.0 1.6 2.0 1.8 Scientific instrmenAs (861) 0.3 4.3 2.5 127.3 - - - 1.7 lewelry nd gold wrc (897) 0.9 1.8 59.8 116.4 0.1 - 1.0 1.5 Medicinal products (541) 15.5 92.9 106.0 66.8 1.1 1.0 1.8 0.9 Green and roasted coffec (071) 49.3 199.8 162.0 63.4 3.S 2.2 2.8 0.8 Iron and steel bars (673) - - 18.9 57.0 - - 0.3 0.7 Cocoa beans (072) 30.2 86.3 97.8 54.8 2.1 1.0 1.7 0.7 Preserved fruit (053) 9.6 15.8 23.5 52.2 0.7 0.2 0.4 0.7 Unmanufactured tobacco (121) 15.4 43.2 39.0 51.4 1.1 0.5 0.7 0.7 Fresh and frozen vegetables (054) 5.9 25.4 45.0 43.4 0.4 0.3 0.8 0.6 Aluminum (684) 29.1 96.3 28.5 37.4 2.1 I.1 0.5 0.5 Tobacco manufacturs (122) 1.7 19.1 30.5 36.9 0.1 0.2 0.5 0.5 Rice (042) 4.8 50.2 44.5 35.5 0.3 0.6 0.8 0.5 Travel goods and handbags (831) 0.1 15.9 12.8 33.0 _ 0.2 0.2 0.4 Electrical Machinety (729) 2.6 45.9 164.4 31.8 0.2 0.5 2.8 0.4 Manufactured fertze (561) 3.8 5.9 11.9 29.5 0.3 0.1 0.2 0.4 MEMORANDUM ITEM AD foods and feeds 496.5 1,459.9 1,232.4 1,673.1 35.2 16.4 21.3 21.8 Agricultl materials 16.3 25.5 23.4 23.7 1.1 0.3 0.4 0.3 Mineal fuck 302.4 5,018.7 1,988.1 911.0 21.4 56.3 34.4 11.9 Omesand nonferrous mntls 278.8 633.1 233.1 398.3 19.8 7.1 4.0 5.2 All Manufactures 281.3 1,678.5 2,161.6 4,483.1 19.9 18.8 37.4 58.4 5 PROSPECTSFOR CARIBBEA EXORTSIN MAJOROECD MARKETS
TabJW5.4: DyamI k odts In the Car 's Exports to Noth Amerka ad the EEC
EEC(12)and North Proage Ameican Imports(US$miuL) chage Product(SITC) Major 192 Supplier (Shar) 1986 198 19 1988-92 1986-92 Scientifh instrunents (861) DominicanRep. (94) 7.6 41.8 127.2 204.6 1,583.1 Ships and boats (735) Bahmas (84) 11.3 74.4 97.4 31.0 760.5 Organk chenicals (512) Bahamas(89) 86.3 105.5 454.7 331.0 427.1 Lacc and nbbons(654) Haiti (67), Jamaio (26) 1.2 3.2 5.2 65.6 350.1 Aircraft and aircraft parts (734) Bahamas(79), Guyana(13) 1.9 0.1 8.3 * 337.0 Manufacturesof metal, nes (698) DominicanRep. (66), Haiti(21) 1.8 2.2 7.1 216.1 285.5 Plastic materiats(581) DominicanRep. (86), Dominica(9) 1.3 1.6 5.0 215.5 275.0 Mineralmanufactures, nes (663) DominicanRep. (88) 0.4 0.2 1.3 636.0 228.8 Cothing, not of fur (841) DominicanRep. (72), Jamaica(20) 585.9 1,022.4 1,771.0 73.2 202.3 Footwear(851) DominicanRep. (90), Jamaica(10) 8.4 5.8 25.4 338.5 202.2 Wovencoton fabics (652) Jamaica(77), DominicanRep. (14) 0.3 0.2 0.9 293.6 192.7 Leather manufactures(612) DominicanRep. (100) 63.4 92.7 176.8 90.8 178.8 Power generatingmachinery (711) Trinidad& Tobago(74) 5.0 4.3 13.1 203.7 163.9 Pearls and precious stones (667) Guyana(70), DominicanRep. (29) 2.7 6.7 6.9 2.9 154.6 Clay constructionmaterial (662) DominicanRep. (98) 0.6 0.4 1.4 229.9 145.3 Sanitaryfrxtures (812) DominicanRep. (70), Haiti(16) 1.6 2.6 3.9 50.0 139.8 Other inorganicchemicals (514) Bahamas(69), Jamaia(28) 0.8 1.0 1.8 80.4 137.3 Travel goods and handbags(831) DominicanRep. (92), Antigua(5) 13.8 20.0 32.3 61.9 135.1 Articlesof plastic(893) DomimcanRep. (74), Haiti (9) 4.5 11.1 1OA -6.4 130.9 Base metal householdgoods (697) Haiti (61), DominicanRep. (38) 0.9 1.8 2.1 21.7 130.7 Office machines(714) DominicanRep. (53), Bahamas(32) 8.8 24.6 19.1 -22.2 118.3 Office supplies(895) DominicanRep. (100) 4.2 4.3 8.8 tO7.7 t a.6 Electricpower machinery(722) DominicanRep. (79), Barbados(7) 106.6 145.1 176.6 21.7 65.7 Toilt preparations(553) Jamaica(39), Bahama (16) 1.5 1.7 2.5 52.1 64.8 Pig iron (671) DominicanRep. (99) 62.9 152.3 100.5 -34.0 59.7 Inorganicchemnicals (513) Jamaica(44), Suuinam(30) 3S4.8 555.3 523.7 -5.7 47.6 MEMORANDUMITEM All Manufactures(5 to 8 - 68) DominicanRep. (53), lamaica(16) 1,"4.9 2,935.9 3,981.7 35.6 99.6 Clothing(84) Domin Rep. 73), Jamaica(20) 593.7 1,031.5 1,772.1 71.1 198.5
Source: United NationsSeries D Trade Tapes. _ COPING Wri CHANGESIN THEEXrERNAL ENVIRONMENT_ 0 Table 5.5: The Valuead Shar of Varou TypesOf M ufacures In the Caribbean's Totl Bxport tbhe OECD: Seeed Yer fro 70 to 1992
GrawthRate ProductCategory 1970 1975 1980 198 199292 1 9 Valueof exports (USS mlion) Tot Expor of ADGoods 1,411.1 4,807.9 8,914.9 5,774.8 7,6t8.3 8.0 -1.2 LaborIntensive Meanuactua 485 156.4 503.2 1,085.7 2,676.4 20.0 14.9 UnskiledLabor IntensiveGoods 29.5 10t.2 331.0 645A 2,1605 21.6 16.9 Othe ManuActures 236.1 634.6 1,246.5 1,094.2 1,828.4 9.8 3.2 HumanCapita IntensiveGoods 10.9 33.8 553 149.4 264.3 15.6 13.9 NaturalRasourc osd Prducts 18.6 95.4 197.6 221.8 372.7 14.6 S.4 HighTecoIgy Pducs 207.9 502.8 1,021.6 865.2 1,052.8 7.7 0.3 Prducts of Higy FolutingIndustry' 526.0 1,959.1 4,712.7 1,923.2 1,929.? 6.1 -7.2 MwEMORANDUMlTEbt Reccipb from Tou___ ns no 1,598.2 2,669.4 4,556.2 na 9.1
As a Share of MAfxpots Tdtallpotts 100.0 100.0 10.0 100.0 100.0 LaborIntensive Manufacures 3.4 3.3 5.6 18.8 34.8 Unsiled Laborlntcmhn Goods 2.1 2.1 3.7 11.2 28.1 O*cwManufaduret 16.1 13.2 14.0 18.9 23.8 HumanCaptal tensive Goods 0.8 0.7 0.6 2.6 3.4 NatwraResource Dosed Prducts 1.3 2.0 2.2 3.8 4.9 HighTechnology products 14.7 10.4 11.5 14.9 13.7 Productsof HighlyPolluting Indust 37.3 40.7 52.9 33.3 25.1 MEMtORANDUMITEM TourismRceipts Relativeto Export Earings of ao Goods no no 17.9 46.2 59.3
Note: Theprocedureausedforidentifyinghigh4ehnology,tabor, and capital intensive goods (as wsltas a list oftheseitms) can be foundin WorldBank, Global Economic Prospectsand the Deropiag Cowres, (Washington:World Bank, April 992), AppendixB onpages 42 to 48. Unskilld laborintensive and nauralt esourcebased 2produs aedefined in LawrenceB. Knuse, Unied StatesEconomic Policy owardsheAssoiation ofSoutheastAsian Nations, (Washington: Bookings Irsitution. 1984).Products whose manufacture normnaly ato highlypolluting are defincdin PatrickLow, editor, Internaional Trade and &teEnvironmnt, (Washington: World BankDiscussion Paper Ntumber 159, 1992).
a. Whileol other productgups only inckue manufacturedgoods clasified in SITCcategories 5 dtrough8 tess 68, severaladditional items outide this ranmeae classifiedin the polutinginduw caegory. These includerefined pAroelmm prtoducts in SITC3 and vaetousnonferr metalsclsii in SITC68. 5 PROSPECTSFOR CAR'BBEANEXORTS IN MAJOROECD MARKErS
Table 5.6: Caribbean xport Faing a PreferedIl or MFN Taff In the Unitd States (number of tariff Bue lvel products)
Number of Tariff Line Level Products Exported (figuresin parates show the percentageof al exportsin thatgroup) Tariff Lines Tariff Lines TotalLines Total Limeswith Total Tariff with a Zero with a Zero with a Zero a Non-ZeroMFN Line Products Exportingcountry MFN Duty PreferenceRade Tariff Tariff Exported AntiguaandBarbuda 16 39 55(82) 12(18) 67 The Bahamas 54 86 140(92) 12(8) 152 Barbados 38 88 126 (79) 33 (21) 159 BEiie 28 44 72 (71) 29 (29) 101 Domninica 21 104 125(8 is (11) 141 DominicanRepubec 144 579 723 (75) 240 (25) 963 Granuda 14 20 34 (67) 17(33) 51 Guyana 41 21 62 (69) 28 (31) 90 Haii 64 283 347(66) 176 (34) 523 Jamaiea 86 221 307 (73) 115(27) 422 St. Kitts and Nvvis 7 37 44 (60) 29 (40) 73 St. Lucia 11 60 71(58) 51(42) 122 St. Vincet and deGrenadG _ 6 14 20 (69) 9 (31) 29 Suriname 38 29 67 (84) 13 (16) 80 Trnkdad and Tobago 76 1P9 195'(86) 33 (14) 228 MEMORANDLTM Taiwan, China 822 0 822 (18) 3,830 (82) 4,652 Republicof Korea 655 0 655 (17) 3,300 (83) 3,955
SowrceWorld Bank-UNCTADSMART Trade Data BasE. COPINGWITH CHANGESIN THEEXrERNAL ENVIRONMENT 0 Table 5.7: The Average Levd of Pre-Uruguay Romd Tariffs Facing Caribbean Counties In tbe Eumpan Commucity and Wted Stat" On peate
Averag
Tariff
AverageEuropean Economic Community Tariff AverageUnted StatesTariff Total Exports Total AU Al Total All All Expotting count Exports Foods Manufactures Clothing Exports Foods Manufactures Clothing EEC USA AU CaribbeanCountries 1.6 5.1 0.0 0.0 5.5 0.0 8.5 15.6 -1.8 -2.5 Antiguaand Batbuda 0.0 0.1 0.0 0.0 0.5 0.0 0.9 153 -2.7 -1.0 The Bahamas 4.5 24.3 0.0 * 0.1 0.0 0.0 11.8 1.1 -1.7 Barbados 3.5 10.9 0.0 0.0 2.2 0.0 2.9 13.9 -1.6 -2.0 Belize 0.0 0.0 0.0 0.0 5.7 0.0 1S.0 18.9 -4.4 -0.7 Dominica 0.0 0.0 0.0 0.0 8.2 0.0 9.0 16.7 -3.8 -4.5 DominicanRepublo 3.2 11.6 0.2 10.9 7.5 0.0 10.6 15.5 0.2 -2.7 Grenada 0.0 0.0 0.0 0.0 4.8 0.0 6.4 18.5 -4.3 -2.7 Guyana 5.2 18.8 0.0 0.0 0.6 0.1 8.2 16.1 0.8 -4.1 Haiti 0.1 0.1 0.0 0.0 8.7 0.0 9.3 15.1 -2.8 -2.7 Jamaica 1.5 4.6 0.0 0.0 8.3 0.0 12.0 15.8 -2.7 -2.7 St. Kitts and Nevis t * * * 1.8 0.0 2.2 12.0 * -3.2 St. Lucia 0.0 0.0 0.0 0.0 12.6 0.0 12.7 16.4 -4.6 -2.3 St. Vincentand the Grenadines 0.0 0.0 0.0 * 5.4 0.0 5.5 13.4 -1.2 -1.6 Suriname 0.0 0.0 0.0 0.0 0.1 0.0 0.1 12.6 -2.8 -1.3 Trinidad and Tobago 0.5 1.4 0.0 0.0 2.3 0.0 4.0 17.6 -1.5 -2.4
MEMORANDUMITEM Republioof Korea 7.8 13.1 7.6 12.4 6.8 2.5 7.5 14,7 4.2 0.7 Taiwan, China 7.5 17.0 7.3 12.5 7.1 4.3 7.4 14.9 4.0 0.7
a. The tariff differentialfigure shows the difference(in points) betweenunweighted averagetariffs facing Caribbeancountries and all other expoers of the samegoods. A negativevalue indicatesthat the averageduty paid by Canbbeancountries is below that paid by other exporters. Caribbeanexporters receive CaribbeanBasin Initiativepreferenca in the UnitedStates and Lome Conventionand Generaized System of Preference(GSP) treatmentin the EuropeanCommunity. The above data are based on simple(unweighted) tariffs facing individualtariff line exports from the Caribbean.
Note: a (*) indicates hat no utadeoccurs for the pmduct.
Sowrce:World Bank-UNCTADSMART Trade Data Base. 5 PROSPECTSFOR CARIBBEANEXPORTS IN MAJOROECD MARKETS
Table5.8: ProJetd Wecs of theEEC ad USUroguay Round Tariff Cuts on Cartibbean Ezport (in USS-000) EECand USA ean Bconomic Communitytmpodts United States Impows Combined Exportingcountry M Itans Foodstuff Manvfactures All Items Foodstufts Manufactu ADItems AUlCanbbean Counties 1,368,942 7B0,S41 S04,271 4,234,391 S57,463 2,661,519 S,653.833 Antiguaand Barbuda 7,21S 3,118 3,912 12,949 769 3,4S0 20,164 Ibe Bahamo 126,986 31,704 91,987 478,164 27,219 311,509 605,150 Baibados 36,957 30,955 5,863 46,871 3,708 35,880 83,823 BEano 43,402 40,913 2,410 44,679 27,567 16,876 88.081 Domhnion 65,470 63,088 2,154 7,S43 472 6,886 73,013 DominicanRepublic 122,857 36,649 61,712 1,711,432 381,133 1,214,696 1,834,289 Grenada 21,695 19.S83 2,073 8,079 1.820 6,149 29,774 Guyan 131,571 94,20S 10,977 65,552 18,584 4,012 197,123 Hadii 48,012 40,605 6,543 388,522 18,694 366,389 436,534 Jamaica 246,434 123,739 116,611 S66,236 46,171 389,956 812,670 St. Kits and Ntevs 0 0 0 22,179 3,881 18,298 22,179 St. Lucia 106,797 104,839 1,155 24,828 116 24,712 131,625 St. Vincent& Genadnes 73,144 58,268 2,397 11,216 223 10,945 84,360 Suriunm 177,010 67,15S 94,224 76,755 2,601 72,410 253,765 Trinidad and Tobago 161,392 60,720 82,253 819,886 19,50S 179,351 981,278
______ElstimatedChange in Impts due to Uruguay Round Tarff Cuts' Al Caribbean Countries -7,794 -S524 -2,450 246,023 *4,411 245,835 238,229(4.2) Antigua and Baibuda -56 -53 -3 41 0 IS -15 (0.1) beBahamas 2,104 2,357 -253 -757 -35 J963 1347 (0.2) BabWdos 203 279 -75 907 -39 947 1,110 (13) Belize -586 -581 -4 1,357 -1,777 3,134 771 (0.9) Domlnbia -3,2S3 -3,238 -11 678 -1 681 -2,57S (-3.S) Dominkan Republic 1,189 1,109 99 146,S24 -2,086 146,674 147,713 (8.1) Ghrenda -396 -386 -6 473 0 474 77 (0.2) GSyana 1,084 1,561 -476 474 24 410 1,SS8 Haiti (.8) -30 -14 -13 37,199 -t44 37,346 37,169 (8.5) Jamaica -998 -285 -66 53,874 -288 54,186 S2,876 (6.5) S K3osand Nevis 0 0 0 315 -19 334 315 (1.4) St tLuia -S,741 -5,726 -3 3,361 0 3,361 -2,380 (-1.8) St. Vincent & Grenadmes -2,878 -2,865 -13 747 0 747 -2,131 (-2.5) Suriam -1,251 -669 -581 49 0 49 -1,202 (-4.5) Trinidad and Tobago 2,815 3,257 -415 780 46 -1,560 3.S95 (0.3)
_a a. Figurs in parenheses show peFrta changes. All other figures ae in tms of uSSOOO.
,rer: World Bank-UNCTADSMART Data Ease. COPINGWITH CHANGES IN TiHEEXTERNAL ENVIRONMENT
Table 5.9: l{ard Core NontariffBarrer CoverageRatiaos for Caribbean Exportsto the EEC and Unid States
__urpean CommunityNTB Coverge Ratios" UnitedStates NTB Coveage RatioN' Total AU AU Total ADl AD Expoting Country Exports Foods Manufadures Chemicabs Expos Foods Manufactues Chemnicab
All CaribbeanCountries 21.4 36.4 1.7 - 24.0 29.4 28.A 0.0 Ardiguaand Barbuda 0.1 0.2 0.0 0.0 0.0 0.0 0.0 0.0 Th Bahamas 01 03 0.0 0.0 0.0 0.0 0.0 0.0 Barbados 76.6 91.5 0.0 0.0 7.7 41.4 0.0 0.0 Belize 52.2 55.4 0.0 0.0 16.4 26.6 0.0 0.0 Dominica 0.2 0.2 0.0 0.0 0.1 1t3 0.0 0.0 DominicanRepublic 3IS 11.7 0.0 0.0 33.1 34.4 35.9 0.0 Grenada 0.1 0.0 0.0 2.5 0.0 0.0 0.0 0.0 Guyana 60.9 85.0 0.0 0.0 3.5 12.2 0.0 0.0 Haiti 0.8 0.1 5.5 0.0 16.3 17.1 16.4 0.0 Jamaica 31.8 60.9 0.0 0.0 42.6 21.0 59.4 0.0 St. Kittsand Nevis * * * * 16.7 95.5 0.0 St Lucia 0.0 0.0 0.0 0.0 0.0 0.0 0.0 St. Vincentand the Gradines 0.6 0.4 8.1 100.0 0.0 0.0 0,0 Suriname 24.1 63.5 0.0 0.0 0.1 0.0 0.0 0.0 Trinidadand Tobago 21.9 44.7 9.9 11.3 17.5 18 6 100 0.0
a. Hard core nontariffbarriers include the followingtypes of measures: tariff quotas, productspecific charges like anti-dumpingduties, variableimpont levies, quotas, embargoes,'voluntary' expott restraints,MFA restraintsor consultations,textile restraints, MFA administrativeagreanmnts, reference prices, countemfiling duties or investigations,antidumping or eountervailingduty undakings.
Hkih NTB Covewe Country Nate
EuropeanEconomic Community - The high NTBcoverage ratios for Barbadosand Belize are accountedfor by a variableimport levy on sugarand molasses. These restrictions partlyexplain the high ratiosfor Guyanaand Jamaica. Guyanafaces a variablcimport levy on its exportsof long grainand brokenrice, as doesJamaica on exportsof arrowroot. Jamaica'sexportS of mandarinand otheroranges (fresh and dried)are subjectto referenceprices.
UnitedStates of America- MultipleNTBs (tariff quotas, variable import le"-ics, global quotas and antidumpingduties) account for the high coverageratios for foodexpors fromBarbados, Belize, Dominican Republic, Jamaica, Guyana, Haiti and St. Kiuas.The high ratios for manufacturesexported by DominicanRepubL;c, lamaica and Haitiare accounted for almostentirely by MPA resriction or textilequotas on clothingexpors.
Soxrce: WorldBank-UNCTAD SMART. 5 PRoSPEcrsFOR CARIBBEAN EXPORTS IN MAJOROECD MARKETS
Table 5.10: Uned Sta Imports h 1992wt Substandar Competition BetweenCaribben ad NAfTA Exporters
199 Unitd Vitae Iqmpot
.______U.S. Tariff (S) F_om the Caribbean MPH Carien Vsle Percet of Frm From Pioduct Deciptimon- C) UnitodStates NTMs Ra Rato ($000) Toal Mexico Canada TOTAL UNFFEDa.ATEB IMPORTS S,047,096 100.0 35,856,231 99,998,525 NAPTA oAffete4dCaribbean Trade Texte cblthingnot knit (6411) 1,798,873 35.6 1,164,487 369,059 Knittd cbltg (8414) MPA,TQ,CD,U,AD 20.7 20.7 900,230 17.8 336,861 223,971 Footwearuppers (6123) MPA,TQ,CD,U,AD 20.6 20.6 578,823 11.4 172,321 130,984 Ckbt acoesories (8412) QC,CD 3.3 2.4 175,42S 3.S SS.896 14,104 MPA,TQ,CD,U,AD 10.4 0.6 144,39S 2.9 99,409 13,560 NAFrA Compettve But Unaected Cnrde petoleum (3310) 1,626,894 32.2 6.484,S24 7,306,746 Acids and thir deriatives (5125) ST 0.S 0.5 505,707 10.0 4,496,081 5,498.354 Inorganic(Aluminum) bae (5136) NONE S.1 0.0 368,042 7.3 186,113 114,592 P'oclricswitch gear (7222) NONE 0.2 0.0 245,668 4.9 63,516 281.323 Medicalinstruments (8617) NONE 3.6 0.0 161,629 3.2 1,08S,851 863.726 Goldand silver jewey (8971) NONE 3.6 0.0 117,684 2.3 284,433 43,993 Cnsaca and Mollusks(0313) NONE 4.3 0.0 107,382 2.1 58,471 41,468 Keroseneand motor spirits(3322) NONE 0.1 0.0 68,630 1.4 168,944 298,575 ST 1.1 0.5 52,152 1.0 141,11S 164,715 NAFTA Non-Competiv Trd 1,621,329 32.1 28,207,219 92,332,720 MEMORANDUMn1m Raw sugar (0611) Refinedsugar (0612) QT,AD,CD,GQ,F 13.1 0.0 137,874 2.7 3,372 - QT,AD,CD,GQ,F 13.2 0.0 41 - 20 52,475
'Key to nontariffmasur codes:
TQ - Textilequota or consublion MPA - Mutfiber Amngementquota or cosution CD - Countrvang duty U - Underaking in antidup o ling duty ca AD - Antiumpig duty ST - Specialproduct specific taxes QC - lmpottquot by ounty P - Flxible ipo fee (variablelevy) -b QT - Tariff quota COPINGWItH CHANGESIN THEEERNAL ENVIRONMENT
Table 5.11: I 191 Share of Caribb Coutes NAFTA Affectedad NAFTACompedtte Experts to the Ubed Stes
Share of Carbean Expolts to the U.S. Originating in: noe Dominican Trinidad prodUct b Bahamas Barbados 8elize Ppublic Grenada Guyan Haii Jamaiak Surname and Tobago
NAFTA Affected Caribbean Trade _ 0.4 IJ 76.4 0.3 3.9 16.8 _ 0.1 Clothing otkit A0.4 1.6 85.9 - 0.3 1.2 9.6 - 0.2 Knhttedcohing - 0.2 0.7 54.8 0.1 0.3 6.9 32.8 0.0 _ Pootwr upps 0.0 0.0 0.0 99.9 0.0 0.0 0.1 - 0.0 0.0 Clothingaccsorie 0.0 1.6 0.0 69.8 0.0 0.4 11.3 15.9 0.0 0.0
NAFTA Cmpedte but Usaffeted Trade 25.6 0.6 0.3 22.1 0.1 0.9 0.2 6.1 2.6 40.1 Crudepetolum 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 100.0 Acids and derivatives 100.0 - 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 lnerganicbases 0.0 0.0 0.0 0.0 0.0 0.0 0.0 36.8 16.9 46.2 Elt4xic swtch geat 0.0 6.0 0.0 83.9 0.1 0.0 2.4 2.1 0.0 0.2 Medical in_stumens 0.0 0.0 0.0 97.6 2.4 0.0 0.0 0.0 0.0 0.0 Jewelry 0.1 0.0 0.0 99.6 - 0.1 - - 0.0 0.: Crustaceaand mollusks 54.0 0.0 8.9 4.3 0.0 20.9 - 8.6 0.9 1.9 Kerosenemotor and spits 21.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 79.0
a. Antiguaand Barbuda,Dominica, St. Kits and Nevis, St. Lucia, and St. Vincentand the Grnadines combinedaccount for six-teathsof a pereantof NAFTAaffected trade originatingin the Carbbean. b. See the previoustabl for the SITC numbersof NAFrA affectedand competitiveproducts.
Srouce:Compied from UNSOSeries D trade tapes. Import Statisticsas repoitedby the UnitedStates. 5 PROSPECTSFOR CARIBBEAN EXPORTS IN MAJOROECD MARKETS
Tahb 5.12: Tlhgeawe of MA Affeted Trade a Cublwm C_mkCw' &qhtls to theWbi" 9ats
Shareof Categoryin TotalExports (%) 1993 Total Exports Exportig Country Clothig Knitted Footwear Cbthing ANlAfd (USSOO) notknit Clothing uppers Accessories Products _ AllCaibbean Countis 17.8 11.5 3.5 2.9 33.6 5,047,096 Antiguaand Barbuda 0.0 0.0 0.0 0.0 0.0 S,819 The Babam - - 0.0 o.n - 607,162 Barbados 10.2 3.8 0.0 7.4 21.3 31,453 BdeIze 23. 6.7 0.0 0.0 30.3 61,945 Dombdea 0.1 7.8 0.3 - 8.3 4,719 DomEinianRepublic 31.8 13.1 7.2 4.1 56.2 2,430,860 Grenada 3.5 8.2 0.0 0.0 11.7 8,000 Guyana 2.2 1.3 0.0 0.S 3.9 119,102 HaFI 10.1 36.3 0.1 14.7 61.2 110,670 Jamaica 13.4 29.5 - 3.6 46.4 644,280 SL Kils and Ne,l 2.0 14.7 0.0 3.8 20.5 23,621 St. LucIa 14.8 62.6 0.0 2.1 79.4 29,930 St. Vincentand the Grensdines 44.5 21.8 0.0 0.0 66.3 4,673 Sur*me - 0.0 0.0 0.0 - 49,734 Trinkdd and Tobago 0.2 _ 0.0 0.0 0.2 913,126
Source:United National Series D tradetapes. Importstatistice as reportedby the UnitedStates.
-a COPINZWITH CHANGEBIN THEEXTERNAL ENVIRONMENT
-a
Table5.13: The Pro d Dlceet of 1992Caribbea Exprts In the Une Stt Dueto NAVTA
.IDo Ini atDomh*nt St.Kit St. All Prduct Babados lBelize Rpubli Haiti lamaica and Ncevis St. Luci V Caribbn
- __ Value of Expoits (in USSthousands) NAFTAAffeeted Caribbeaf Trade 6,713 18,922 1,366,916 67,708 299,178 4,839 23,775 3,180 1,798,872 Clothngnot knit 3,201 14,776 773,450 11,141 86,429 46C 4,419 2,078 900,230 Knittedclothing 1,180 4,147 317,420 40,192 189,785 3,467 18,741 1,102 578,822 FootwearupprS - -. 175,283 116 10 - - - 175,424 Clohingacessories 2,332 - 100,763 16,259 22,954 904 615 - 144,394 NAFTAC.mpentltve but Uneffed Trade 9,776 6,094 360,409 3,840 99,783 6,488 1,951 388 1,626,894
Projeced Trade LossesDue to NAFTA(in US$ thousands) NAFTAAffected CaribbeanTrade LOWCase Scnaio 74 322 28,705 1,286 4,487 82 309 43 35,980 High Case Scenaio 125 485 43,075 1,930 6,730 123 465 65 53,110
NAFTA C;mpeddtv but UnaffectedTrade LowCas Scoenaio .. .. 360 100 .. 2 .. 462 HighCase Scario .. .. 540 .. 152 .. 3 .. 695
Note: The projeced Caribbeantade loses due to NAFrA only bnoqpowateshotttenn effects of NAFrA. In a longer-tem hramewDk,afler new investmenthas removedMexbcn supply oorstrants, the poteria Caribban cport knses could be considemblylarger than shownin dts table.
Souce: Projectios mnadewith the World Bank-UNCrADSMART system. 1992trade dat. -wn from the Unied NationsSeris D trade tapes. 6 ExportProspects For Caribbean CountriesProducing Bananas And Sugar :8 .....
Banmanas from other sources of supply. Under the new regime, the UK market canneotbe insulatedfom Ove hiew third country bananas once they enter arvyEU member country. Banana exports from al The EU markcet for bananas was organized Caribbeancountres are, therefore, vulnerableto prfimartiVon a national basis with different the changing market emironment and to the reguationsapplying to each of the memberstates monopdy powers exerdised by tracitional up to June 30, 1993. The advent of the singleEU importems Rapid downward changes in banana maicet on July1, 1993 made it essential however, pices have, thus been descibed as a banana for these fragmented markets to conform to a shock'to the Caribbeaneconomies. The impactof singlemarketing system. The new regimepermrts ambananashotch wiU be considerable,espedaro in free movement of bananas. The regulations Dominica, Stt ucia and Stnc hyent and the contain,inter alia,quota provisionsgoverning trade Grenadines, but it all also affect the other with traedtionalEU and ACP bananas, and wabe countries of the Commorwealth Cavibbean. In norracritional baranas. For the importationof fact this process has alreadv begun to have an quota bananas,1 a censing system has been adverseeffect on their export eardings, icause of establi whichymed strengthens the position of the the easingof ppicesin the UKmarket, owing to the established marketers in the EU market realignmentof currendes in the EU, and of the Consequentlv, Cafibbean bananas. although depreciationof the PoundStedinc a lowed dutyeireeentry under a fixed quota, face increasedcompetition from other sources. The new EU poticy on bananas is more complex and less transparent thanar e pregviousto x of Priorto Julys, 99 mostbananasyoeiginasbngfrom national banana polires, and it has, therefore, the Caribbeand ounties entered the protected UK initeased the uncertainty attahmed to the market under a preferential athangement that production of bananas inthe CaEbbean. This paowdedsignificant benefits ba restdictinaimpofs
117 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT posesmajor problems for governmentsas well as member countries of the EU itself which producers The complexityof the new regime traditionallyhad zero or low tariffs on bananas arisesfrom the mannerin whichquotas and tariffs (Germany,Netherlands, and Belgium, in particular). are allocated:traditional EU producers(such as Otheropposition has come from supportersof the Guadeloupe)enter the EU duty-freeand do not UruguayRound who seethe new bananaregime facea quota;traditional ACP suppliers receive non- as runningdirectly counter to GATr polideson transferablecountry specific quotas based on past agriculture.It Is a majorcondusion of this report exportperformance, whose quotas are not subject basedon the evidenceof trends in the world to a tariffin the EU;and other producers receive a tradingenvironment, that the preferentialposition transferablequota initially set at 2 milliontonnes of traditionalEU and especiallyACP suppliers, is per year,the allocationof whichis determinedby likely to be substantiallyeroded over the next past exportperformance. A key pointis that 30 decade and that the Caribbean countries, percentof the 2 milliontonnes - 600,000tonnes - particularlythe WindwardIslands, need to move is to be allocatedto traditionalEU and ACP nowto preparefor the inevitabledisappearance of marketersbased on the level of their primary theirpreferential banana markets in the EU. imports(shipping to Europe),secondary imports (customsdearance) and ripeningactivity. The 2 WorldBanana Production milliontonnes quota is subjectto a tariffof EC100 per tonne. However,non-traditional quantities of World productionof fresh bananasconsists of ACP bananasare tariff-reeinside the 2 million bananas grown for subsistenceand local tonnesquota. Taiiffson abovequotaACP and consumption,and for intemationaltrade. The other suppliersare at prohibitivelyhigh levels, latter is a distinct economicactivity in mof effectivelyrestricting supply to the 3.7 million exporting countries, with a few varieties tonnesallocated under the newsystem. predominant,selected for their high yields, durabilityIn long distancetransport, consistent Thelack of transparencyin the new regimearises qualityand unblemishedappearance. In recent because:(i) key decisionsare madeby a Banana years,world production has hovered around 45 to ManagementCommittee, which has among other 48 milliontonnes. However, only about 11 million powersthe abilityto issuelicenses to importand tonnesenter international trade. to alter the level of the current2 milion tonne quota;(ii) the Committeehas no dearly defined The geographicaldistribution of productionis transitionprocedures; and fii) income support wide,although mainly confined to tropicaland sub- schemesto provideassistance to traditionalACP tropicaldimates. In 1991,the largestprodudng producersare not defined.A distinctpossibility of regionswere Asiawith 40 percentof tota world the new regime is that the quota rents will productionor 19 million tonnes, and South increasinglybe capturedby the marketersas Americawith 26 percentor 12.4mirfion tonnes. opposedto the producers,owing to the enhanced Thelargest single producers were India and Brazil, roleof the marketersin the licensingsystem. accountingfor 13percent and 12 percent of world productlon,respectively. In additionto the aboveissues regarding the new regime,there are strongextemal pressures which Between1980 and 1991, world banana production furtherincrease the uncertaintyit hasengendered. increasedby 19 percent This growvthhowever, Oppositionto the levelof protectionprovided to was uneven. For example,Central aid South traditionalEU and ACPsuppliers has come from America,induding Cuba and Mexico, increased by LatinAmerican producers, from (U.S.-based)large multinationaltrading corporations,and from
118 6 EXPORTPROSPECTS
Table6.1: CaribbeanBanana Production, 1980 and 1991 ('000metric tonnes)
19091 Perete 1980 t991 Growth
WndwahdMwa6d 126 313 148 Domnnica 32 67 109 Grenada 18 11 .39 St Luda SS 155 182 St.Vcntand theGenadine 21 80 281
olheeCemn.nnweaehCaubbean 133 188 41 aeoze 21 34 62 Guyana 7 20 186 amaica 100 128 28 Tridad andTobago S 6 20
esdtfCuIbbuem 717 1,008 41 DominicnRepudc 301 389 29 F rnchWen Indies 177 350 98 HOiI 200 220 10 Sudname 39 49 26
CwlIil aTotew 98S 1,517 54 Sowre:FA, FnoducVtonYeadbk*198091. about 7.9 percent The Caribbeancountfies Centraland SouthAmerica, production Is mostly exhibited54 percentgrowth, although, in absolute gearedto theworld market. numbers,their share of worldproduction was only 3.2percent in 1991.The Windward Islands output E.Vorts grewat 148percent and accounted for 0.7 percent of world production. In the rest of the world, World bananaexports increasedby over 30 productionhas continuedto increasein Asia percentduring 1980-91, while world production mainly due to expansionin China. Africa's grew by 19 percent. Exportsfrom Centraland productionincreased by 41 percent European SouthAmenica increased from 4.1 milliontonnes to productionis relativelyinsignificant to thetotal and 7.9 million tonnes,an Increaseof 93 percent. hasexhibited a dediningtrend. Themain impetus Duringthe same pefiod, Windward Islands exports for increasedproduction resulted from increased rosefrom 73,300 tonnes to 232,000tonnes, or by demandin the developedcountries and in the case 232 percent. Both area expansionand yield of the Caribbeancountries, because of the Increasescontributed to thistrend, although, by the protectedUK market. 1980s,the scopefor furher yield Increasesby mostCentral and SouthAmerican exporters had WorldBanana Trade beenreduced. Unlikeother tropical commodities entering wodld Thevolume of bananasentering international trade trade- rubber,cocoa, sugar and coffee - bananas reacheda peakof 10.2million tonnes in 1991.By are fragile,highly perishable and cannot be stored. far the most importantcontributors were the Theirskins are easilyblemished. When ripe they Central and South American exporters,also havea shelflife of lessthan a week. Theyhave, commonlyknown as 'dollar banana suppliers. therefore,to be cut green and preventedfrom Thesecountries accounted for around77 percent ripeningwhile travelinglong distances. The of worldexports. Among these countries, Ecuador, proportion of bananasentering world trade with exportsof 2.7 million tonnes,is the world's amountedto 21 percentof world productionin largestexporter, accounting for 27 percentof 1991or a liftleover 10 milliontonnes. However, world exports,and acts as a residualsupplier In somecountries, particularly the Caribbeanand whenevershortfalls occur. On the other hand,
119 COPINGWITIH CHANGES IN TllEEXTERNAL ENVIRONMENT
Table6.2: CaribbeanBanana Exports, 1980 and 1991 ('000metic tonnes) 1980 1991 Ifndwid tids 73.3 232.0 oonwilkaM 7.8 SS.6 Grenada 12.6 6.7 St Lucia '3.5 101.S St Vlicentand the Grenadines 19.6 682
Oewcameevwa_Cadbbesaa 48.1 94.0 Dean 13.0 la7 Jamaica 33.1 75.3 Redtof Caiabe 159.S 277.7 DorlronanRepublIc 11.1 16.5 Freh WestIndies 114.4 233.0 Sudname 34.0 28.2 calu ran'ow 281.0 603.7 a.Oomlnkcas exoxla wem unusually low In 1980relatfre to nmsuredproducloft Source:FAO. Trade Yc,jci 1980.91.
Caribbeanbanana exports accounted for only During1980-91, world bananaimports increased around 6 percent of world exports,and the by around48 percent Importsby the EU,other WindwardIslands only 2 percent During1980.91, WestemEurope and the U.S. increasedby 57 CaribbeanIslands' exports more than doubled, and percent,76 percentand 51 percent,respecively. thoseof the WindwardIslands, trebled. Although In contrast,the Japanesemarket grew by 216 their yieldshave improved, given the prevailing percent.although from a smallbase. In the EU smallholder production and ecological conditions, market,the averagegrowth per year was 4 theyremain significantly lower than those achieved percent,while In its open marketportion (mainly on Centraland South Amefican plantations. Germany),it was 7.2 percent. Imports EuropeanUnion Regime In 1991,world bananaimports reached a record Since1986 the EUhas become the largest banana levelof 9.5 milliontonnes, an 8 percentIncrease marketIn the wordd.In 1991,It accountedfor 37 overthe previousyears2 More than 90 percentis percentof worldimports. These reached a peakof destinedto the developedcountries. The largest 3.6 million tonnesfrom 2.5 million tonnesfive Importersare the EUand the US, with 37 percent yearsearlier. The growing share Is reflectedin the and 31 percentof the world total, respectively. increasingEU bananaper capita consumption, Japanis the third major importerwith around9 which in 1991 reacheda peak of 10.1kg as percentof total world Imports. Thecountries of comparedto 7 kg fiveyears earlier. The Gernan EastemEurope and the former USSRremain marketcontributed significantly to this growth. In insignificantas importers. Within the EU,Germany I"'1, Germanyimported 1.29 milliontonnes, or is the largestimport market, accounting for nearly 3 -nt of total EUimports. In the sameyear, 14 percentof the world total,followed by the UK the . imported489,300 (14 percent),France with 5 percent Some EU imports might be 454,300 (13 percent) and Italy 452,000 (13 regardedas homeproduction - trade between percent)tonnes. Together,these four countries Madeiraand Portugal,the CanaryIslands and Imported76 percent of total EUimports. Spain,and the FrenchWest Indies and France - are all countedas imports. Bananasupplies to the EU originatefrom three maingroups: EU domesticproducers, producers from ACP countriessignatories In the Lome andS 199, awor gapds be e s Convention,and 'dollar bananaeproducers. EU importsof 'dollarbananas' in 1991accounted for
120 6 EXPORTPROSPECTS about 64 percent of the total, domestically The main features of the new regime are: producedbananas contributed nearly 20 percent, (i) financialsupport and restructuringschemes for and African and Caribbean bananas about 18 bananas produced within EU territory percent. Of the EU countries,the UK was the (Guadeloupe,Martinique, Canary Islands, Madeira prindpal importer of Caribbean bananas and Greece); (ii} tariff-free entry for traditional (WindwardIslands, Jamaica, Belize and Suriname). quantitiesof ACP bananas;(iii) tarifffree entry for UK imports from this source rose from 274,000 non-traditionalquantities of ACP bananasInside tonnes in 1986 to 319,000 tonnes In 1991, the 2 million quota; (iv) tariff quota of 2 migion accountingfor 9 to 23 percentof total EUimports. tonnes (subjectto possibleupward adjustment as Exports from the Windward Islands have consumptionexpands) for other bananasat a tariff contributed from 7 to 10 percent of total EU of 100 ECU per tonne, roughlyequivalent to the Imports between 1986 and 1991, a significant former 20 percent tariff; (iv) a much higher tariff inrease from about 4 to 5 percent in the early (750 ECU per tonne) on any imports above the 1980s. quota; and (v) an allocationof the quotasamong importersIn sucha way that importersof the ACP The EU banana market,prior to the coming into bananaswould also have a sharein imports from force on July1, 1993 of the singlemarket banana elsewhere." regime,was governedby four distinct regulations: (i)duty free: Germanywas the only EU memberin It is important to note that the actual level of the this categorybecause of a specialprotocol to the tariff quota will be determinedin advanceof the Treaty of Rome. Germany is also the largest year to whichit appliesin the light of likely supplies importer, accoLiting for 36 percentof EU banana and market requirements. It can, therefore, be consumptionin 1991; (ii) duty paid: Belglum, adjustedupwards from the basic level of 2 million Denmark, Ireland, Luxembourg and the tonnes. For each individual ACP state, its Netherlandsapplied a 20 percent tariff on dollar 'traditional quantityor quotais set out in an annex bananas and accounted for 9 percent of EU to the regulation. The quota, however, is not consumption; (Hii)domestically produced: This transferableamong ACP statesnor can ACPstates category encompassedFrance, Greece, Portugal grow togetherfor quotapurposes. and Spain.In the caseof France,production of the French OverseasTerritories of Guadeloupeand Martinique was induded in .hisgroup. France imported from the ACP countries(Cameroon and Ivory Coast)nearly 37 percentof its total imports. It also imported, along with Greeceand PortugaL from dollar suppliersunder licenseand subject to the 20 percent duty. Spainrelied on its supplies from domesticsources. This group accountedfor 28 percent of EU consumption in 1991; and (iv)ACP supplies: The UK and Italywere induded in this category. The UK imported neary 65 53Asthis report was going Into pint the EU annowued th conclusonof anagreement with four of the fiv LatinAamerca percentof its importsfrom the Caribbeansources. countries(Colombia, Costa RickaNicaragua and Venezela) 'Dollar bananas,' if imported, were subject to involvedin the GATTpan on bananas. lhe fifth countly licensingand to the 20 percent common external Guatemala,had not acceptedthe agreement The agmemern whichruns until December 31. 2002. Involves an Increase in the tariff. Italy was also in this categoryand in recent Importtariff quotato 2.1 millionmetric tonnes in 1994.rIsing to years,due to shortfallsfrom suppliesfrom Somalia, 2.2 millionmetric tonnes in 1995. A shareof this quotawill be had been importing 'dollar bananas.' In 1991,the allocatedto eachof the biananaprodudngcountries ndiMdually on the basisof theirhistoric exports to the EU andthdir natona UK and Italy togetheraccounted for 26 percentof authoritieswill have the right to give export cens for 70 EUbanana consumption. percentof theseexports. Within the quota,the tariff will be reducedfrom 100 ECUper metrictonne to 75 ECU per metic tonneon the fuil tariffquota.
121 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
Table6.3: BananaExports to the UKMarket, 1980 and 1991 (OO0metric tonnes) 1980 1991
OdwCadbbean Seze 13.9 19.2 Jlamaica 35.0 69.5 Sudname 22.4 27.7
Wndwiawadtu1an1 75.9 202.S Dominica 7.3 49.4 Grenada 11.1 7.0 St tuda 31.2 85.1 SLVincen: and the Grenadines 26.3 61.0
Toa Cuibbean 147.2 31&9 TotalUK Ma*d 3285 489.3 Source: FAO.
Licenseallocation procedures for importerswithin operations,they can daim the total tonnage the tariff quota are complex. They are largely handled.If a traderIs simply the primaryimporter, basedon historictrade, but thereare two stagesto theweight is 0.57for eachtonne handled, and so consider. First,the 2 million tonnesare divided on. into three parts, that is: 66.5 percentto be allocatedaccording to third countrytrade ("dollar UKBanana Imports bananas'and non-traditionalACP bananas);30 percent accordingto trade in ACP, induding TheUK hastraditionally granted unrestricted duty- Caribbeanor EU fruit, and 3.5 percent for free access to higher cost Commonwealth newcomers,that Is, thosewith no recordof trade producerssuch as Belize,Dominica, Grenada, in non-ACPthird country fruit. Secondly,there is a Jamaica,St. Lucia and St. Vincent, and to Suriname. weighinggiven to eachstage of the operationsof Thesearrangements are, however, no longervalid. an importerthat qualifyfor licenseentitlement Althoughthe CommonwealthCaribbean countries Eachbanana, for thesepurposes, is consideredto will continueto maintaina dutyfree preferred have undergonethree marketingstages. The positionin the EU underthe new regime,their weighingsaccorded to eachstage are, respectively, export quantitieswill be fixed. Most of the 57:15:28. If a trader undertakesall three Caribbeanbananas will continueto be shippedto
Table6.4: TraditionalBanana Quantities from ACP states
MetricTonnes
carbeanm 477,W000 Bekze 40,000 Domnilca 71,000 Grenada 14,000 jaraica 105o000 St Luca 127,000 St Virncenand the Gmnadines 82,000 Sudnam 38,000
O0w ACPStxAts 38,700 Caeoon 155,000 CapeVesde 4,800 IvowyCoast 5SS,000 Mada5asca 5,900 Somanlia 60,000
TOTAL 857,700 Source: FAO.
122 6 EXPORTPROSPECTS
Table 6.53 Caribbean BananaExports, 1980,1991 and1992 (inpercent) Bana Expob asSham of ananaEoN asShae of BananaExorts asSlre of GOP Merndie xor AwIuhtual Exots 1980 1991 1992 1980 1991 192 1980 1991 192
Windwlaand! n. 14.6 15.1 n. S09 53.5 na. 7.8 na. Donlnlca 5.1 203 19.1 30.9 S5. S66 68.2 91.6 85.3 Gfenada 4.8 2.2 1.7 24.4 16.6 17.2 21.9 28,4 31.4 St.Luda 93 16.1 17.S 31.2 S4.0 60.1 7S.9 87.4 86.2 St Vlncenand the Crnadns 10.7 11.6 18.3 32.8 49.7 493 66.5 63.6 na
Ohe Co0mmwm_hUCaAIe Beile 1.8 0S 0.7 4.3 6.1 7.4 S.7 9.3 10.7 JamaiQca 04 1.3 1.2 1.1 4.3 3.8 13.0 260 22.7 n.a.= not avaiaible. Souce: WINBAN Annual Reportsand Wodd Bank the UK market under the new EU regulations. taxesin the WindwardIslands. Nevertheless,there Bananasfrom other sourceswill however,be able Is a relationship between fiscal revenue and to enterthe UK marketthrough other EUJmember producerincome from bananasbecause of indirect states. taxes. A rise in banana income leads to an increasein expenditureson goods and services Although the UK market is growing (import which are subject to Import duties and demandwill continueits upwardtrend because per consumption tax in the Windward Islands. capita consumption is relatively low) and the Estimatesfor 1989-91indicate that indirect taxes Caribbean exporters aim to capture their quota contributedbetween 27 percentand 45 percent of allocationsby expandingproduction in the short current revenue in Dominica, Grenada, St.Lucia term, other sourceswill continueto expandtheir and St.Vincent andthe Grenadineswhereas direct suppliesunless restricted by quota. One question taxes accountedfor less than 13 percent. It Is, is whether fast Caribbean banana growth is therefore,obvious that any fall in producerincome desirablein the expectationof remainingin the UK translatesinto significant reductions in current market while production costs are much higher revenuesand pressureson fiscalbalances. than those of Central and South America*dollar bananas. Althoughdata on employmentin the bananaand relatedsectors are ratherweak In these countries, In consideningthe implications of the single unoffidal estimatespoint to the fact that banana Europeanmarket for Caribbeanproducers, it must production,internal transportation and distribution be stressedthat thesecountres face an uphill task of inputsis probablya sourceof nearly 50 percent in the open market. of total employmentin the Windward Islandsand about 5 percent to 10 percent in Belize and Importance of Bananas in the Carbbean Jamaica. A decreasein banana export eamings Eoonomies would havean adverseimpact on employment
Notwithstandingrelatively higher production costs Impacton the Windwardislands bananasare vital to the Caribbean economies. They provide stable foreign exchange earnings, Prior to the introduction of the new banana significant employment opportunities, and regime,Windward Islandsproducers were hit by a contribute to nationalincome. The industry has sharpfall in pricesowing to the devaluationof the been a major source of economic growtl, PoundSterling in the fail of 1992. As a result,the achieved under S*1eumbrella of a preferential Industryis in a weak position financiallyto mount market arrangementin the EU. Table 6.5 above an effectiveresponse to the new bananaregime. demonstratesthe importanceof the Industryto the Caribbeaneconomies. It shouldbe noted that, as far as tax revenuesare concemed,banana farmers have been exemptedfrom the paymentof direct
123 6 EXPORTPROSPECTS
The new banana regime has resulted in only adverselyaffect the national economy but complicated production and marketingproblems would affect the living standardsof farmnersand for WindwardIsland producers. Quotashave been those associatedwith the banana industry. For set on an annualbasis: Dominica 71,000 metric example, it is estimated that 27,000 to 30,000
Box61: Diffleens In CompetiWveConditions Between Caribbean and Centraland South AmerkanBanana Producing Countries _...._,_-_,:___ ... CaribbeanCountries Centraland South Aherican Countries Growingareas hilly or mountainous.Umlited Largeflat plains. Almost limitless land availa'biity. landavailability. Poorsoil conditlons and low yi"ds (up to 10 Rich soil and high yields (18 to 24 tonnes per. tonnesper acre).Subject to hurricanes, acre).Frost and hurricanes-rare' Majorityare independent small fners. Largelyplantation agriculture often owned by nmultinationalsand vertically integrated ope n"atio. Higherwages but not ashigh as EU producers. Wagerates-can be fow. Unit costs.- of inputsmuch higher due to Lowerunit cost of 'inputsdue 'to''hgh- volume. raller volmes andvatying soil types. LowerFOB price due to lowerwages,l s.; benefitsand economies of .lage ca.- $hpping costs generallyhighe 'becauseLower shipping costs beause -,f,ho smallervolumes and more pors-. -_._,_.-___-:,._-_-.,______'BOelizehascharacterislkes simiar-to the Central American cutis tonnes,Grenada 14,000, St. Lucia 127,000and St farmersin the Windward Islandsproduce bananas. Vincentand the Grenadines82,00. However,the The averageage of these farmersis over 50 years new system sets quarterly quotas within these and hence their fungibility in the labor market es annual limits. A key problem is that countries limited to agriculture. A compression of the cannot transfer quotas amongst themselvesand industrycould deprive50 percent of thesefarmers reduce the risk of underproduction. As a result, of their livelihood. overproduction to reduce risk is a distinct possibility, once the countries have achieved a Scenarios production level consistent with their quotas. Failureto achievethese quota levelscould resultin Caribbeanbanana exporters to the EU under the their reductionin subsequentyears, adding to the new preferentialregime are being challengedby pressureto increaseproduction in the short run. competitorsfrom Central and South Americaand Thus,it would make sensefor the EU to allow the by major EU importers. The Caribbeanexporters Windward Islandsto transfertheir quotas among will, therefore, be operating in an uncertain themselves.This would enablethe industryin the environment. The uncertaintiessurrounding the Windward Islands to utilize its resourcesmore creation of the single EU banana market and the effidently. regulationsgoverning it pose a major problem to bananamarketing in the EU. The riftingof barriers The economic and social consequencesof the between EU member states should raise the compressionof the Caribbean banana industry demandfor cheaper'dollar bananas'and stimulate could be enormous. The Banana Growers re-export from Germany to other EU member Associationsof the Windward Islands are in states to the disadvantageof all other EU finandally difficult drcumstances. There is a traditional suppliers, induding the Caribbean danger that the governments,in coming to the exporters. assistanceof the assodations,will find themselves in similardifficulties. Apart from the farmers,the A possiblescenario is one where the Windward industry provides employmentand income to a Islandsand Belize,Jamaica and Surinamewill have large segmentof sodety. Compressionwould not to compete with the cheaper 'dollar bananas.
124 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
A 01 nth i Ofbnnsrdcswo ith.esubsid or econornicrent that the Windwar 'tslad havgane frm ellngIn ep.rote.edU.IC market Thiissubsidy has been of the order.of..14 pereno GP orDoninia*t uia andSti Vincent and the Grenadin.esin te recent pastk..-; 'thfllli.te pe of ba anareue h utput of bananas:a 30:percnt all woufldredc otubybot4pecn,sinZe eiatdsupply elastdte's.a're o, t*e' op'rderof 1.3. 'cfori losesocurto th eten th ..esure rel.easefrom ,ba.n.an.a:pro.ton.. oiv.e'to l.Xess
lneasthCaribean couinatres, esped allyn othea tordiexrsile int other6acenvtieo, this wouldavefa 'JmwaproidI deenylands! hereavil.on thenan0 row.erng adpversdcooi p olutMyitibananasocipal gviveaeuc thxedrad fqotrwohe nrelasiethe nwo erosrdtan roes A fndallIslteands bananas,ad terefore; i result Therosione oentullmarknent protrecItion sinte U nfir eamibseqwlWpll A ofrd wItpid ctonsein eth farctwll n adtmsrvenrselaffetthe wll emointstof fncwresanse g~export eapemitngsptol clacetheieCplibbeantepnrsti generatily fnosrecatdjstmetha eonoicfuturon jeprdy hsiecurenusenwl small;itpriesy fonrhCaribgean P banaa wlacof muchtlower scalefare n dwhis a c onstirtasinifidecant thanthoseouts aimedpaiot natovuly 1, 1993.Som proporffntoproediucers and do noreahavf fdrccasonrshaaetof toeavieer thc adt pwricededneof dedi tedionin omend term nortureable auto rovideen be duelaetown t thatetheoefc UKeveics wef mocha
UndlZsalfacmmes taves in dtherrlaeas a the ontce, wourdneth dthistrengteand assu ingav0erent, thfiriniom tendsrto remaIdinithin thge poldeineandte texpsoneaingres,Tbe 6.6 belowshow ecnm.antt ob thenntcuddeclineebufrtis texpton beamingsfrom thwould level. IQ b*SDPQ~e4bywae restslntaseltIf exportprscesan woerae to fllt te lvl nictd Aneteevrino hsseai ise that exdporvolumes world alo eafece. SneteCaribbeaneprsoanacontas, espedally fo the todvriynooheacvtestiswudaefr WindwardIslands, depende heably to sni banan recig deseeoo4pltia ndsca expothsetoutheEU mailterfindalztionofthissenario raincaios
willor thereducethe relaivelydemand costl 6 EXPORTPROSPECIS
Table 6.6: Cartbbean Countrie Banana Export Eamings (US$'00)
1991Eport e30 FalFivm Willow fPenemt 1991EamnW Oedin
Dokb*a 31,540 23,797 10,t12 Glenuk 3,704 2,S63 1,111 St Ludc 6,020 39,214 16,006 St Vicett Vndthe enad 35482 24,838 10,644
Senn 7,278 s,09s 2,183 amaIa 44,663 31,264 13,399 s*tnm 9,256 6,S79 2,m
S,9 Wodd Banke,m,
PolicyOptions use of boxes,a coordinatedprogram of aerial spraying,and so on. Thesesteps should indude The Caribbeanexporters of bananaswil haveto eliminationof tariffsand NTBsto importationof adjustIn the faceof an uncertaintransition and inputs induding padcagingmaterials. These future. Theissue is not one of adjustnentbut at protectlocal manufacturers, but impedethe efforts what speedit shouldtake place. In this context, to lowerbanana production costs and to diversify Caribbeangovernments should be encouragedto out of bananasinto otherfresh fruits. Beyondthe develop a strategy for speedy adjustment. farn level,costs of transportto the port,and from Governmentshave to face the questionof short- the port of Europe,need to be reduced.A recent termmaximization of benefitsor to adopta longer CDB consultant'sreport has recommen'.d a termnstrategy to evolvea moresecure and stable reorganizationof the industryin the Windward economy. Islandsto increasethe competitivenessof the industry,and acdon along these lines will be While producersin the WindwardIslands have necessaryto ensurethe survival of theindustry. receivedbenefits from past polices which provided a protectedmarket in the UK matet, their shareof the retailprice has been In the rangeof 15 to 20 Improvingeffidency and the Incentivestructure percent World Bank estimatesshow that an shouldbe the longterm objectiveof a banana Importantshare of the benefitfrom the pre-1993 developmentstrategy. Being a smallholderbased bananaregime accrued to preferredmarketers, economy,the level of farmngateprice relativeto andnot to farmnersin EUor ACPcountries. Faced productioncosts Is crucial to the industrys witha pricesqueeze as a resultof the devaluation sustainabitity.This farm value which approximates of the PoundSterling, and antidpatinga future 16 percentof the UK retailprice, is the residual liberalizationof the EU quota system,banana remainingafter all thecosts and margins associated producersmust become more productive or move with the post-farmgatestages have been covered. into othercrops. At present,yields per acrein the In an environmentwhere real prices for bananas WindwardIslands are less than half those in Latin arelikely to continuetheir slow dedine,savings in America,and labor costs are at least double. post4armgatecosts will be required if farm Quality is also more variable. Cost reductions incomesare to be maintained. must focus on all segmentsof the production. marketingchain from farm to supermarket Moreover,in orderto increaseproductivity in the agriculturalsector, it is of paramountimportance to At the farmlevel, a priorityobjective of policyis to developstrategies to improvethe effectivenessof encourageeffident producersand discourage agriculturalresearch, exension and training. ineffident ones. Cost curves for effident Efforts should be directed to improvingcost producersneed to be loweredby a varietyof effectivenessInthis area. Considerationshould be measures: common procurementof Inputs given to transferringgreater responsibilityfor (fertilizer,blue plastic),effident procurement and providingextension services to the privatesector.
126 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
Attentionneeds to be directedto rationalizingand anticipationof this,a labortraining fund should be eliminatingsome institutions and to providinga aeated. leanerframework to operateeffidently. Underthe new EU bananaregime, there is not Sincethe pricesreceived by the preferredsuppliers onlya countryquota but the importersare being are likely to fall substantially,some banana allocateda quarterlyquota for importationand producerswill becomeuncompetitive. The extent requirea license.Shipments wil therefore,have to whichthis will be so will differfrom countryto to be geared to quarterlyproduction and thiswill country,depending on changesIn theirREERs and requireaccurate forecasting. In view of this, as real wages,and their potentialfor productivity well as for overallproductivity, establishment of a gains.However, in the shortterm, It is necessary productionforecasting system to maximizethe for the Caribbeanbanana exporters to improve efficiencyof shippingand distribution operations is productivityand reliabilityof supplyin order to an urgent necessity. A mechanismshould be meettheir EU quota and maximize export earnings developedto ensurethat the rents are instead from this source. Not to do so riskslosing the capturedby the producingcountries during the quotaand foregoing the implidt Incometransfer. transition. One way to do this would be to eliminatethe import licensesadministered by the A safetynet needsto be providedto easethe EU and allow the Caribbeancountries that hold economicand social costs to countriesand those exportquotas to sell or auctionthe Importrights dependenton the industryin the transitionperiod. basedon theirexport allocation. A mechanismto providea safetynet mustbe cost effectiveand should be appliedto an identifiable Anotherarea of possiblehelp to the Windward target.Any safetynet programmust be gearedto islandsis in the levelof transportcosts incurred in providing training activitiesaimed at durable shippingbananas from the Caribbeanto the UK. solutionsto problems. Moreover,a safetynet Studieshave shown that ocean freight rates are the should also assistthose who can, with help, mostimportant single contract cost of exporting operate more efficiently. Thus, an effidency bananasfrom the Caribbean.A smallreduction in objectiveshould be factoredInto the program.In thatcost item will havea relativelylarge impact on this connection,the CDB/USAID-fundedBasic the landingcost of Caribbeanbananas. This may Needs Trust Fund Program,which assistsin help the WindwardIslands bananas to become providingshort-term employment and essential morecompetitive. services,could be built upon. However,in evolving transition measuresto support the The cost of marketingbananas In the U.IC is compressionof the bananaIndustry, safety net consideredto be thehighest In the EU. Farmprice measuresshould emerge as part of an overall andretail price spreads range from 80 percentto strategyrather than be consideredas separate 84 percent. Thus,marketing margins take the activities.In this context,correction of the relative largestshare. It is necessaryto find a mechanism pricesof variousfactors of productionneed to be to transferthe rent elementIn marketingin the considered.Moreover, these assistance programs shortterm to a fundwhich will assistthe removal shouldbe linkedto a dearlydefined mediumterm of marginalproducers from the Industry. In this economicstrategy In eachcountry. context,assistance of the EUshould be sought. Caribbeanbanana production is mostlyundertaken Thestrategy for diversificationaway from bananas by small farm holders,and It Is estimatedthat should indude a well planned and coherent around50 percentof theseare marginalfarmers. program. The countrieswill need technical Underthe pressureof lowerprices, these farmers assistanceto developtheir market Inteligence. In will not be ableto sustainproductive activity. This tis context,an examinationshould be undertaken will inevitablylead to a labor displacementThe of transportbotdenedcs to diversification. questionis how to absorbthese resourcesin altemativeactivities. It would be essentialto establishtraining facilties to train displaced workers to undertake diversification. In
127 6 EXPORTPROSPECTS
Sugar the adjustmentof the industryto the changing extemalenvironment. 8ackground As far as the Caribbeansugar exportersare concerned,the quotasavailable under the EU Since1980, some fundamental developments have SugarProtocol are muchmore stablethan those takenplace in the keyelements of the worldsugar from the U.S. It is generallyrecognized that the market which may adverselyaffect Caribbean SugarProtocol may not be directlyaffected by the countries'sugar exporters.5 The most significant internal harmonizationof the EU market. one has been the emergenceof the EU as the However,Indirect effects are possible. As the worid's largestfree market exporter. Another SugarProtocol relates only to quantities,sugar factorhas been the increasein sugarproduction in prices may be squeezedIn the EU by falling the developedcountries. Growth of highfructose domesticprices. com syrup(HFCS) and other types of sweeteners in the U.S.,Canada and Japan has been another Characteristicsof the WorldSugar Market structural development. In recent years, restructuringof the former USSRand Eastern Sugaris a worldwide.producedcommodity. About Europehas led to the releaseof Cubansugar from 60 percentof world productionis derivedfrom thesemarkets. Another change has been the rise caneand the remainderfrom sugarbeet. The in the shareof sugarimports by the developing structure of the world market is such that countries. developedand developing countries partidpate in its operation. One salientcharacteristic of this In 1991 Caribbeancountries, exduding the marketis thatglobal supply and demand are rarely DominicanRepublic and Haiti, exported539,000 in balance;world productionhas tended to keep tonnesof sugar. Of thisamount, 517,400 tonnes pace with, and more often to exceed, or nearly 96 percent were destinedto the consumption.Since 1979, there have been only preferentialU.S. and EU markets. Dominican two years(1979 and 1980)when production was Republicand Haiti exports,benefiting from quotas lowerthan consumption, mainly as a consequence In the U.S. marketonly, amountedto 280,000 of crop failuresin one or moremajor produdng tonnes. Prospectsfor most Caribbeansugar regions. These recurring supply/demand exports,therefore, depend on the continuationof imbalancesare, thus, reflectedin volatile free preferentialmarket arrangements. A keyaspect of marketprices. thesearrangements is their unilateralcharacter; their benefitscan be endedthrough a general Less than 30 percent of the world's sugar reductionof trade barriers In this respect,the productionenters intemational trade; the rest is 1993 UruguayRound trade agreements, together consumedwithin the produdngcountries. Total wth the harmnonizationof the EU market,could consumptionIn the developedcountries fell from impactnegatively on preferentialpremium prices 36 percentin 1980to 23 percentin 1991 and whichBarbados, Belize, Guyana, Jamaica, St. Kitts consumptionin the formerly central planned and Nevis,Suriname, and Trinidadand Tobago economiesfeU from 19 percentIn 1980 to 16 currentlyenjoy for their sugarexports Similarly, percentin 1991,while that in the developing NAFTAcould, in the longertem, adverselyaffect countriesrose from 50 percentto 57percent. The Caribbeansugar exports to the U.S. market Caribbeancountries' share is hardlysignificant. Moreover,food and agriculturelegislation in the U.S.has gradually reduced the U.S.quota. Further Theworld trade structure is dividedinto two major reductionsshould not be ruled out. In light of segments:(i) the preferentialmarkets of the EU thesedevelopments, the Caribbeansugar situation SugarProtocol, the U.S.sugar quota, the Cuba- is analyzedwith a view to suggestingoptions for formerUSSR agreement, and the AustraliaUJSSR agreement,and (ii)the world free market. As a result of these arrangements,only about 15 percentto 20 percentof worldsugar production is 5 Thimehnude Babado., BelaRDoinican RepUbkGuyana. tradedfreely in the world market.The latteris a Hatl amaaSKits and NeviwandTrinad and Tobaup. residual market after domestic needs and
128 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
Table6.7: WorldSugar Production, 1980 and 1991 a (millionmetric tonnes)
RewIon 1980 1991 Ded"p$ Coubi* 4.9 6&S Cuba 6.8 7.2 Ca_an 2.0 13 Babads 0.1 0.1 8dlize 0.1 0.1 Domw Repubac I.0 0.6 Guyaa 03 W1 aItiO 0.0 0.0 Jamaka 02 0.2 St Kitsand Nevl 0.0 Q0 Sudtnme Q0 0.0 Tuindadand Tobago Q1 01 DelpeC=*1*0 38 52.2 NotAnuka 3.4 .8 EU 13.5 160 OtheEurpe 19 144 ftomerCenrbalPhnned Economg 11.1 10.4 Austba 3.4 3.2 Jan0.8 1.0 WeddTate 843 112 a. Oleweencesdueto .uundlop bhindud SouthAMk Cenr Flam Ecoaie havebeen nu&dedbiths cateoy for stathal pupon0* Sowao InwoonaiSuswo tL_ _ preferentialand other contractualsales are met. out,then the Caribbean share fell from1.1 percent Consequently,far greatervolatility is exhibitedin to 0.7 percent. All countriesof the Caribbean the residualworld market price. regionexhibited an annual3.5 percentdedine in productionduring this period. In recentyears, the developmentof HFCSand otherlow-calorie sweeteners has impacted the U.S. sugarmarket It alsohas the potentialto impact Worldsugar trade peaked in 1982when exports othercountries. The U.S.accounts for about75 reached30.4 miUOontonnes but has sincethen percentof world HFCSproduction, folowed by decreasedto a rangeof 27 miDlionto 28 million Japan and Canada.Production in the EU is tonnes.In 1982,about 30 percentof worldsugar restrictedby quota. productionwas traded. In 1990, this share decinedto 24.5 percent,partly as a result of World sugar productionincreased from 84.5 countrypodicies aimed at self-ufficiency. milliontonnes in 1980to 112.2million tonnes In 1991 at 2.6 percentper annum. The developed In 1991,the top ten sugarexporters - Cubae3, EU, countries share remained relatively constant Australia,Brazil, Thailand, South Africa, Mauritius, between1998 to 1991 at around28 percent. hji, the DominicanRepublic and Colombia- However,individually, the U.S., EU and Japan accountedfor about80 percentof world exports exhibitedannual growth of 2.1 percent, 1.7 The Caribbein countriesshare of total world percentand 2.1 percent,respectvely, while the exportswas 3.2 percent. If the Dominican shareof the developingcountries rose from 52 Republicwere taken out of ttis category,then percentto 61 percent. The Caribbeancountries Caribbeanexports would account for 2 percentof sharedecined from 2.4 percentto 1.2percent of worldexports. the worldtotal. If the DomificanRepublic is taken "cu wasthe wo rd sar producerunt 1912.
129 6 EXPORTPROSPECTS
temptto selltheir surpluses, exerting downward Table6.& World SugarConsumption, 1980 pressureon prices.In additionto the worldprice and1991 e variability,there is a broadpattern of highprices (millionmetric tonnes) for one or two years,followed by a long period of low prices. Because of production shortfalls and, Region 1980 1991 hence,stock drawdowns,prices surgedto an rp"IOO89cMM-O 39.1 63.7 average of US$0.1 1 in October 1980. In Cuba 0S 1.0 response,production reached record levels; the Caibbean 0S 0.5 ensuingstock build-up lowered prices to US$0.084 TheBahamas 0.0 0.0 per poundin 1982and to US$0.04per poundin BaIacos 0.0 0.0 1985. Since 1985, stockshave dedined steadily Beanz 0.0 0.0 Bermuda 0.0 0.0 and prices have moved up. While sugar DoirdeanRepubl 0Q2 113 production respondsrapidly to high prices, it is K-11d 0.1 0.0 muchless elastic when pricesfall. Thishappens JamaIca 0.1 0.1 primarilybecause previously high prices provide a St Kim wW Nevb ~~~0.0 0.0 SLttKsandNes 00 0.0 reservoirof fundsfor producers;the true priceto Tnidad&andTobago 0.0 0.1 the produceris the resultof a blendbetween the NeedandskAntiles 0.0 0.0 *free* .narketand the higherpriced domestic and preferentialtrade markets;and govemments Dr__ Comulesh 47.3 47.1 intervenethrough price support and income Norh Amera 10.3 9.1 SS EC 11.0 13.2 programs. OtherEurope 4,9 4.1 FormerCentalyPlawed Economies 17.3 167 Japan 3.0 28 Ausnaa 0. 0.8 Caribbeansugar exporters depend heavily on the WoddTotal 866 1107 U.S. and the EU sugar quotas. Of the two preferentialmarkets, the U.S. sugar quota has h tndudesSoutheAfdk antecedentsin the 40 year old U.S. Sugar Act which lapsedin 1974, under which the U.S. sou_elnteftlOflsum oIlzatlfL imported nearly half of its total consumption. At the e,' iry of the U.S.Sugar Act, protectionto dorr tic producersfrom lowerworld sugarprices TheEU - the secondlargest exporter to the world was providedthrough country specific quotas in market,after Cuba - was, until 1974,one of the thelate 1970s. In the intermrediateyears, however, world'slargest importers. Under the influenceof when world priceswere high, the U.S. price its CommonAgricultural Policy, the EUemerged as supportprogram relied on variablerates of duty a majorexporter in the 1980s.In 1991,the EU's andimport fees for protection.Currently, only a sharein worldexports was 18 percent;In contrast, nominalduty is applicable,at the legalminimum of the U.S. movedfrom being the world'slargest US$0.625per pound. A fee is alsoimposed but it importerto fourthplace as imports dropped from 4 is not applicableto raw sugarimports. It applies millionmetric tonnes in the 1960sto around1.5 onlyto refinedsugar at US$0.01per pound. With millionmetric tonnes. the restrictivequota In place,the duty andfee do not affect the price of U.S. sugarbut serveto Becausethe world free marketis a small and capturesome of the price premiumof sugar residualmarket, world pricesof raw sugarare marketedin theU.S. amongthe most variable In international trade and, thus, respondto incrementalchanges in world Almostall developingcountry sugar exporters to productionor to changesin govemmentalpoldes. the U.S.market (induding the Caribbeancountries) Duringperiods of cropfailures, governments tend to restrictexports to meetdomestic needs, thereby adding pressure to the upward movement of 3 iord, R and Bany, R.D.: The Word Sugar Market - prices. On the other hand, when production Gowenmentintervendon and MultilateralPolcy Reform, USDA, exceeds domestic needs, exporting countries 1990,P 11.
130 COPINGWITH CHANGESIN THEEXtlERNAL ENVIRONMENT
receiveduty-free status under the GSPand the CDI. was maintained in the Food, Agriculture, Initially,their quota allocationwas bas-d on their Conservationand TradeAct of 1990 which covers 1975.81market share when imports were relatively the period up to 1936. The U.S. program free. Many changeshave taken place since then. maintains a high domestic price by restrictng Support of high domesticsugar prices not only supply with import quotas enforced by high contributed to the growth of the HFCSbut also imports tariffs in addition to the quota (US$0.16) encouraged the expansion of U.S. sugar per pound), and standby controls on sales of production. In the consequentreduction of import domesticsugar. Thisprogram supports sugar beet requirements,preferential sales opportunities were and cane prices through high consumer prices. cut significantly, particularly for the Dominican Benefitsof this policy accrue to sugar beet and Republic. Severalstudies indicate that increasesin caneproducers and producersof sugarsubstitutes. U.S. domesticproduction displacedan estimated 68 percent to 82 percent of imported sugar by The estimatedannual dollar value of support for 1988.57 In more recent years, the U.S. quota sugar producers resulting from government imports accounted for only 17 percent to 24 interventions over 1982.87 was about US$1.1 percent of the total consumption. It should be billion. As a consequenceof thesepolides of the noted, however,that the Caribbeanshare of the polides, the U.S. sugar import quota has been U.S. quota amounts to 22.5 percent, but if shrinking. NAFTA would largely preserve the Dominican Republicis exduded the sharefalls to current situation for the first six years but. around5 percent. thereafter,Mexico could gain inaeased accessot the U.S.market. All in all,the FarmAct, due to the In contrastto the U.S. quota variability, the EU theU.rketAllinall, theFrc ueot quotas under the Sugar Protocol are stable and passedprior to 1996will haveto tadde the issueof , sugarimports. Given the current attitude towards remainfor an idefinite peurod.The SugarProtocol liberalization,it seemsunlikely that the Caribbean ommitsthe EU to purchase1.3 million tonnesof counties wil continue to enjoy the fruits of the raw sugar from the ACP countries,of which 448,500tonnes originate from Caribbeancountries quota marketover the longertermn. (exduding Dominican Republic and Haiti). The Caribbeanshare is 34.5 percentof the total. In the Scenarios EU,a complexsystem of pricesprovides the basis of domestic industry support as weUlas import In the EU,the SugarProtocol undertakes to provide polides and export enhancementefforts. Theprice a quota for an indefiniteperiod of time. The Sugar paid for imports is the interventionprice, i.e., the Protocol requiresthe EU to negotiateannually to price at which EU agenciesare purchasersof last establisha guaranteedprice which is to be within resort. Over the years, however,very little sugar the rangeof Eupricesfor domesticsugar. Prices has been purchasedby the authorities because have and continue to have a downward trend. surplus sugar is exported with subsidies. For Moreover,due to the UruguayRound, all U.S.and example,in 1986-91,2.5 million metric tonnesof other OECD countries'quotas on sugarand other sugar exported per year benefited from price agriculturalproducts will be converted to tariffs, subsidiesat the rate of US$0.11per pound,which and these will be reduced 36 percent In stages. amountedto US$606million per year. Prospectsfor the Caribbean countries will not dependon their quota allocationsin the future,but At the time of passageof the 1985 Food Security on how competitivethey are. Thiswould adversely Act it was stipulatedthat the sugar programbe affect ACP quota holders. The Caribbeansugar operatedat no costto the FederalGovemment by quota holderswill, therefore,have to be prepared preventingthe accumulationof sugar acquiredby to competein a morecompetitive environment. In the Commodity Credit Corporation. This policy intemationalcost of productioncompafisons, most of the Caribbeanproducers would be dassifiedas "7Borret & ad DuncanRc: o. dt p.7. high costproducers. In a competitivemarket and
131 6 EXPORTPROSPECaS
Tabe6.9 WoddSugar Exporbs, 1980 md 1991 (000 metrictonnesi Reuon 1980 1990 Ciowdi Rate
O"V14"C_uld 17,439 17,811 0.2 Cua 6,191 6765 a8
Barbados 1,522 884 4.8 Ib.lm 122 55 *7.0 0on*mRpxIc 103 99 44 Guyana 793 336 .7.4 H.JU 263 154 .47 JamaIca 9 8 .1. St. Wt andNsfs134 154 1.2 Surinarn 33 19 .48 Tdnlda andTobao 64 S8 40.9
NodhAmeIka 3,7 9,7m .9 EC 601 664 Q9 Od Epe 4,32S 4,892 1.1 Form Ces*alyFPhnnedEonoeulu 12,537 321 -11.5 Austal 685 542 Japn 2,410 2,456 0.2 WaddTed 26,832 27,591 0.2 a. IrnbodngSouthAfilea. Sore: nlmnatlonaSugaOn0at Suar Yeabook1986 and 1991.
Table6.10: World Sugar Imporb, 1980 md 1991w In the absenceof a premiumon the world free (millionmetric tonnes) marketprice, most of themwould not be able to Resdon 1980 1991 sustaintheir industriesfor long in the absenceof DhpinCaguul 11.1 119 major improvementsIn productivity and reductions C41060411 Q1 0.2 In cost. Sadibea 0.0 0.0 Sermuda 0.0 0.0 Apartfrom the DominicanRepubic whose average GA 0. 0.0 costwas lower thanbeet sugarexports, data on jamia 0 0.0 otherCaribbean sugar exporters are not available. Sut OOD QO0 Nevertheless,industry sources indicate that the Tidadard Toba 0.0 0.0 Cafibbeansugar exporters can be rankedfrom Wlndwaadkand 0.0 0. Nad w_Aa 0.0 °° highto low costproducers in the followingorder. Trinidadand Tobago, Barbados, Guyana, Jamaica, NePhAeCbca 15.6 12.6 Belizeand St. Klttsand Nevis. Sincethis rakidng A1.4 1.7 was accorded in 1989, Barbados,Guyana and FbOnweCoUetyniftonoed 1.8 Q.3 Jamaicalaunched their industriesin a direction aaM 2.3 1.9 supportedby private sector managementthat W.M Toad 26.7 2_ showsthat these countries may be on theverge of a DhiIrencesdueto mundftandsaidsa-panclei movinginto a more effident productionsystem. b. Incig SoudtAfiick AARand SNewZeand Jamaicahas since then privatized the industryand Sowe Ilffnational uSarO.anlal SuwYeabok 1986an 1991. St.Kitts and Nevis and Guyana are movingIn that direction.However, given the currentworld sugar prices,none of these countrieswould be in a
132 COPINGWITH CHANGES IN THEEXrERNAL ENVIRONMENT
Table6.11: Caribbean,U.S. and EU Preferentfal Sugar Quotas and Exports ('000metric tonnes)
Country 1986488Av e 1991
Quota Quota/ Quota Quota/ Tota Total Total Total Sugar Suga Sugar Sugar Exspor Expors Expors rport U.S. VU Total U.S. EU Total Baibados 8.3 S3.8 62.1 77.5 80.0 6.9 49.4 86.3 54.6 100.0 aeone 13.8 43.2 57.0 91.4 62.0 10.8 47.9 S&.7 98.8 59.0 Donican Republic 190.7 n.a. 190.7 531.8 36.0 272.8 n 272.8 377.4 72.3 Guyana 10.6 170.6 181.2 185.7 95.0 15.9 1S4.5 170.4 1543S 100.0 Haiti 8.3 na. 8.3 4.0 100.0 7.3 na. 7.3 52.0 14.0 JamaiCa 13.7 127.0 140.7 144.8 97.0 14.5 131.8 146.3 1S4.2 94.9 St KlMsandNevis 8S 16.7 25.2 22.5 100.0 7.3 19.2 26.5 19.2 100.0 Tdinkdadand Tobago 8.6 46.8 55WS 59.3 93.0 9.2 50.8 60.0 56.2 100.0 TOTAL 262.5 45&1 720.7 117.0 645 344.7 453.6 797.5 96&9 82.3
n.a. notapplcal Source:USDA and Intemational SutarOmanizadon positionto competein the world free market resourcesto move more effidentlyinto other Whate' -r may have been the reasonfor the activities. Ca ibbeanbecoming high costproducers, it is dear thatthe erosionof the sugarquota in the U.S.and Thedisappearance of the preferentialmarkets will diminutionof pricesin the EUare likely to occurin mean that the Caribbeancountries will suffer the next five years;thus, the high costCaribbean revenuelosses. Currentlypreferential prices are sugar exportersshould readily develop and aroundUS$0.22 per poundwhile the free market implementa strategyto diversifyaway from sugar. price is around US$0.09per pound. If the preferentialprice disappears and all salesoccur at thefree market price, these countries could lose 50 Another scenarioenvisioned is that the 1993 percentto 59 percentof theirsales value. UruguayRound agreement will furtherimpact on In the transition period, human resource sugar. In the short to merium term, Caribbean developmentprograms will haveto be undertaken exporterswould lose from a liberalizedtrading to retrainthe sugar Industry workers in newerskldls. regimein sugar,owing to the loss of the high In pursuitof diversificationaway from sugar,a pricesprovided under the protectedmarkets. In diversificationassistance program needs to be the longerterm, however, efficient sugar producers established.In the shortand medium term, it will mightgain from an expansionin producton. In be necessaryto examinethe possibilitiesand to this context,more Caribbeancountries (Guyana identifythe avenuesfor diversificationwithin and and St. Kitts and Nevis)are attemptingto revive outsidethe agriculturesector. In the transition sugarproductivity through arrangements with a period,and prior to a sugarshock inflicting damage privatemanagement company. to the sodalstructure of thesesocdeties, a review shouldbe undertakento identifyways and means While It Is impossibleto predict the future,a to mitigatethe adverseimpact of the erosionof reasonablescenario for sugaris that, in the long preferentialmarkets. Also, In high-costeconomies term, preferentialarrangements are likely to which still provideimplicit subsidiesto producer, disappear.This will placeincreasing pressure on theseshould be phasedouL the industryto improveits productivity.Given the significanceof the preferentialmarkets, it is importantthat anyreduction in accessbe phased in graduallyto reduceits shockeffect and to allow
133 l ANNEX1
COUNTRY PROFILES
135 ANNEX1
ANTIGUAAND BARBUDA
Popu~alion: 81,000(mfdd-1992) IBRD/1DALending: Seebelow
GNPPer Capita US$4,870(1992 Atlas MostRecent methodology) EconomicMisson: January1992
TheEconomy redudngimport tariffs to the 5-20percent range and eliminatngquantitative restrctions. Given During 1988.92,real GDP grew at about 5 percent the country's membership in the Eastem per annumcompared to 8 percentper annumduring Caribbean Monetary Union, increasing the early 1980s.Economic growth has moderated as competitvenesscals for wage disdpline. Trade a resultof both weakenedtourism activity originating liberalizationneeds to be accompaniedby from North America and Europe and private strengtheningthe public finances. irvestment flows folowing lax finandal poldes. Tourism continuesto be the engine of growth. 3. EnvironmentalManagement Increasingreliance Folloing a sharpdecrease in public investment,the on tourism will require increasedefforts to constructionindustry, whidh had experiencedrapid conservethe environment Up-markettourists growthin the early 1980s,slowed down duringthe will reactfaster to perceptionsof environmental past five years. During 1988-92,the central degradation. Investmentsin sewagefadlities, governmentand the consolidatedpublic sector wastemanagement, water treatmentand coastal balancesrecorded large defidts. These,together with zone protection,which are assignedthe highest persistentbalance of paymentsdefidts, were financed priority,need to be continued by the accumulationof externalarrears. By end-1993, extmal arrearsreadied US$297 million or 65 percent GovenmmentPolcy of GDPand the stockof externaldebt was around 83 percentof GDP. The governmentrecognizes the need for strong measuresto improvefiscal performance. This implies PoricyIssues fiscalrevenue measures, and expenditurereduction and controlwith particularemphasis on dvil service Themain poicy issuesare retrenchment.
1. Debt Managemetand Fisal Stabilization.Over ProjectPtiorities the medium-termnthe economyis likelyto remain in difficultyas investmentspending remains low. Antgua and Barbudadoes not currentlyhave a PSIP. To regain investors'confidence and turn the A core programof new public investmentprojects situationaround, the governmentmust act swiftly whichare economically viable and consistent with the to restorethe country'screditworthiness as well objectivesof supportingprivate sector activity needs as to improveits fiscalperformance through far to be carefullyformulated, in tandemwith measures reaciing fiscalrevenue measures, privatization, to bringfiscal and external balances under controL current expenditurereductions, and improved debt managementand expenditurecontrols. Creditwortiness Otherwise,internal and externalimbalances will becomedestabilizing. Antiguaand Barbudais not creditworthyfor IBRD lending. 2. CDmpetiiv Compettivenessas a tourist destinationneeds to be improvedas Antigua and BankGroup Strategy Barbudais rapidlybecoming one of the more expensivedestnations in the Caribbean.Trade TheBank would supportCD8's assistance to Antigua liberalizationneeds to be rapidly advancedby and Barbudaif the govemmentwere to rescheduleits
137 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT aneu underthe aegisof d7ePadls aub, dearhs an'earswith COB, andpusue the policyobjecives set forthabove. libs woutdreqidr however,the adoptonof a faread-ingajustment progmm.
138 ANNEXI
THEBAHAMAS
Popuitaiow 263,000(rid-1 992) IBRDLeding Seebelow
GNPPer Capha: US$12,020(1992 Atlas Most Recent methodology) EconomicMtssion: January1990 lhe Economy improved. This requirescontaining wage inaeases,enhandng private sector participation TheBahamas exhibited strong growth during the first in thetounsm sector through cdvestment of state. halfof the 1980s.Growth has originated historically owned facilities,and upgracingthe tourism from a buoyanttourist industry which accounts for Infrastructure.Moreover, The Bahamas needs to about40 percentof GDP. However,a dedinein reformthe traderegime which is highydistorted touristarrivals reduced growth in the late1980s, with andnontranspareni, and is diaracterizedby NTBs realGDP decreasing by about3 percentagepoints in as weli as mtdtipletaxes, tax rates, and 1991. Thisdevelopment also affected the extemal exemptions. currentaccount defidt which widened from 5 percent of GDPin 1988to 7 percentin 1991.At the same 2. fscalDiscipline Fiscal performance needs to be time,inflation increased from 5 percentto 7 percent strengthenedto mobilizeincreased savings for Dudng 1992-93,tourist expendituresrecovered publicinvestment On the revenueside, this somewhatalbeit at a slowerpace than in other requiresexpanding the tax baseand reforming Caribbeantourist destinations. Neverd1dess, real thetax system to makeit uniformn,equitable, and GDPis estimatedto haveinaeased by about 1 lessdiscretionafy, and also strerngheningtax percentin 1992and by2 percentIn 1993.Also, the administration,especially in customs.On the exteralacrrent account defidt narrowed to 4 percent expenditureside, this requirescontaining the In 1992,and is estimatedat about2 percentin 1993, wage bill and reducingtransfers to public lately becauseof an improvementin travel receipts. enterprisesthrough privatization, monitoring of At the sametime, inftion decreasedto 6 percentin expendituresand adequatepridng of public 1992and an estimated 3 percentin 1993. goodsand services. In Auust 1992,a newadministration took office and 3. Prvatization. State enterpriseshave been expressedits conmitmrentto improve fiscal managedineffidently and have become a dr3in pefofrance. The governmentraised import taxes on publicfinances. They need to be restructured andstamp duties among oher thngs. However,the and privatized Thoseenterprises that are to overalldefidt of the centralgovemmen which remainin the publicsector need to be made averagedabout 3 percentof GDPdunng 1992, is more accountable,matket oriented, and any estimatedto haversen to 3.8 percentin 1993. subsidiesprovided need to be shownexplicity in However,the financesof the public enterprises thebudget improvedin 1993. Thesehad a deficit of 5 percentagepoints of theGDP In 1991and a surplus 4. Stucturalssues. Dismantling of pricecontrods is of 1.2percent of GDP in 1993. neededto inceasethe effidencyof resource allocation.Moreover, The Bahamasneeds to Poliy bales address some major stnctural problerns, particuladyin tourism,by adoptinga more Themain policy issues relate to: consistentand comprehensive policy stance to improveproductivity, and encourageincreased 1. CbmpeWirvnsAs The Bahamasis one of the domesticsavings and investment more expersivetourist destinationsin the Caribbean,compettiveness needs to be
139 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
S. Environet Management.Increasing reliance ProjectPtorWes on tou,ism will requireinaeased efforts to cornsevethe ernironent Up.makettoudsts Themain objective of the govemmentsPSIP should wil reactfaster to perceptionsof envronmental be theupgrading of thetouism infrastructure. degradation.Investments in sewagefadiities, wastemanagement water treatment and coastal zone protectior whch are assignedthe highest Creditworthness priority,need to becontinued. The Bahamasis aeditworthyfor bomrwingon Gowm ent Pocy cornventonalterms. The countryhas accessto internatonalfinandal markets. Thegovemment recognizes the needfor increased fiscalDsciplne, and for improvedcompetitiveness. Bank Group Stategy To adleve these objectives,it has suggested initiativesto balancethe budget, to furtherOberalize TheBahamas has graduated from IBRD lending. trade and to generallyimprove the enablng environmentfor pnvatesector development, induding pevatizationand the dismantling of pfice controls.
140 ANNEX1
BARBADOS Population 258,900(mid-1992) IBROLendn: Seebelow GNPPer Capia: US$6,530(1992 Atlas MostRecent methodology) Econmic Mbsion: November1992
TheEconomy PoI;GyIssues Since Independencefrom Great Brtain in 1966, Themain policy issues relate to: Barbadosestablished an impressive record of economicand socialdevelopment Associatedwith a 1. FisalDisdpline Consolidation of the stabilization rapidincome growth was a steadyand significant programthrough continued fiscal and monetaly improvementin the distribution of incomeand social restraintis necessary. welfare- In educationalattainment, housing, and healthand nutrition standards; the establishment of a 2. StructuralReform Program. Barbados needs to solidsocial and economic institutional frarneworik and rapidtyaddress aiticai structura issues in orderto diversificationof the country's economic base, from a improveits competitiveness and set the stage for monoultureexporting sugar, to a serviceaoented sustainedgrowth through a program that economybased on tounismand businessservices. indudes:(i) tradeand tax reforrq particularly by However,Barbados' macroeconomic performance rapidlyachieving a 5-20percent import tariff deteioratedshaiply during 1990.91 and the country band,eliminating stamp and other import duties, witnesseda deep recession. GDP dedined by about andintrodudng a VAT in orderto reducethe anti- 12 percentover 1990.92 and unemployment rose to exportbias, and improve the transparencyand about25 percent neutralityof the tax system;(ii) restructuringof the sugar industry;(1i) adherenceto a strict Whrle the weak world economy influenced Incomepolicy, in orderto effectan improvement developmentsin Barbados,the countryssevere in the realexchange rate of thecountry; and (iv) economicdifficudties are also assodated with the loss publicsector reform, induding a reviewof public of extemalcompetitiveness. Barbados' cost structure sectorfunctions and stepped-updivestment of for tradeablesis high especiallywith regard to maor public enterprises;(v) sodal sectorreform to Caribbeancompetitors, while protective trade and tax rationalizeand improve targetingof sodal polidesexert a strongantimexport bias. In late1991, serces;and (vi) improvements in environmental the govemmentintroduced a stabilization program to resourcemanagement, espedaly in coastalareas. addressdomestic and extemalimbalnces and improvethe conditionsfor sustainedgrowth. In 3. fnironmnentalManrageent Increasingreliance addition,a structuralreform program was to be on tourismwiUl require increased efforts to developedto imnproveextemal competitiveness, conservethe environmentUp4narket tourists removedisincentives to exportsand encourage an will reactfaster to perceptionsof environmental efficient allocationof resources. Mile the degradatiorLInvestments in sewagefadclites, stabilizationprogram was implementeddedsively, wastemanagemer4 water treatrment and coastal progressin designingand implernenting the structural zoneprotecffon, which are assignedthe highest reformshas been slower. priority,need to becontinued.
141 COPINGWITH CHANGESIN THEEXrERNAL ENVIRONMENT
Gowueat Poicy Creditwdhess The govemnent'spolicy Is to consolidateIts stabilzationprogram and underae stnral Bafbados Is creditworthyfor bonowing on adjustmentsto resume sustained growd conventionaltems The countryhas accessto intemationalfinandal madkets. P flenRbdi BankGroup Sbatgy Maintenanceand rehabilitationof roads and envronmentalpreservation constitute the mainfocus Barbadoshas graduated from IBRD lendin% of the'core' PSIP.
142 ANNEX1
BEUZE Popuation: 199,371(mid-1992) IBRDLending: Seebelow GNPPer CatA US$Z210(1992 Atlas MostRecent methodology) EconomicMision: December1993
TheEconomy 2. hcentveftamework Belizeneeds to rapidly eliminateNTBs, introduce CARICOM's CET of 5- Durng 1986-90,Belizes economy grew over 9 20percent and phase out stamp duties to reduce percentper year and inflation averaged 2 percent in the anti-exportbias and diversify its exportbase. responseto a favorableextenal environment and goodeconomic management. Strong export growth 3. Infrastrure Devel'pment Infrastructure andprudent fiscal polides stegtened domesticand developmentneeds continued emphasis, both on extemalbalances significantly during this period, ruralareas and on electricalpower generation and However,in 1991-92.growth slowed to about5 &istribution. percentper year, and inflation averaged 4 perent as domesticand extenal imbalancesemerged as a 4. HumanResource DevelopmenL The quality and consequenceof large increasesin public sector effidencyof pdimaryeducation needs to be currentand capital expenditures. The overall public improved;secondary education and vocational sector defidt (after extemal financng) rose trairvngservices need to be expanded;and the significantly,eading 5 percentof GDPIn 1992.In effidencyof healthserices provision and health 1993,the overallpublic sector defidt is estimatedto servicescoverage in rural areasneed to be haveexceeded 8 percent of GDP.The erosion in the improvedand expanded. pubficsector's balances was inwoedby an increase in the defidt in the exteral curentaccount whidi 5. Enironental Protection. Consolidationand exceeded8 percent of GDP. deepeningof environmentalprotection efforts are needed,especially to addressdeforestation, over- Thenew government that came to officein June1993 fishingand waste management issues. hasdedared that its immediatepriofity will be to reestablisha sound fiscal position. In November 1993, GovemmentPolcy It introduceda supplementarybudget for the remainderof FY93/94in orderto containthe overall Thegovernment is committed to soundfiscal polides, publicsector defidt and redress the growingextemal andto pursuingoutwardJookdng polides, particularly imbalances. by liberalizingtrade and improvingthe incentive frameworkfor pnvatesectorled growth. The Poliy su govemmentalso places equal emphasis on human resource development and environmental Themain policy issues retate to: preservation. 1. FiscalDisdpline. Restorationof a soundfiscal ProjectPuorites position is aiticaL This will require stnct expenkiturecontols, induding wages, and the The PSIPemphasizes Infrastructure development in ptioxitzationof investmentoutlays. On the supportof private investment revenueside, this will requireimplementation of a VAT and improvementsin tax administration. C0edit_wrIn Further,the effidency of the publicservice needs to be inaeasedthrough improved management Thecountry is credi' orthyfor limitedborrowing on andrationalization of activities, conventionalterms
143 COPINGWITH CHANGES IN THEEXrERNAL ENVIRONMENT
BankGroup Staten The BankGroup's assistanoe sta is aimedat suppordngthe government'sefforts to developthe cOunttYs basic infastuure, assisting in the develpmentof human resources,fostenng prvate sectordevelopmern and assisting in natua resources nanagement.
BankGroup Lendg Since1992 (USSmillibn)
Loan Year Pum= mD_oun 36674BEL 1993 BelizeCity Infasucure US$20.0
144 ANNEX1
DOMINICA
Popello 72,000(mid-1 992) IBRDfIDALend-ng: Seebelow GNPPer Capib: US$2,520(1992 Atls MostRecent ogmethogy) EwnomicMbuiou January1993
TheEWonomy 2. BananaIndustry. During 198892, the Industry accountedfor morethan 90 percentof primary During1988.93, real GDP, whidh grew by only2 export, about61 percentof ad exports,25 percentper yearon average,was affectedby the percentof GDPand 60 percentof agricultural devastationof HurrcaneHugo in 1989,the fal in workersmConsequendy, adverse duanges in the bananaproducion In 1991-93caused by lower extemalenvironment wil havea majorimpact on pdces,and weak regional demand for manufacduring theeconomy. The new EU banana regime, has products Initially,the publicfinances strengteed engenderedsignificant uncertainty on banana under the govemment'sstutural ad9ustment pricesand volumes. The uncertainexteral programbut durng the outeryears, however, the environmenthas already resulted in anestimated verall public sector defidt widened. Central 20percent dedine In unitbanana earnings. The governmentoperations weakened as wage inaeases resultingongoing shakeout in the industryhas weregranted, and government revenues from Income had a numberof effects,partidculay major taxesand banana export taxes fell; arrent surpluses financialdifficulties, for the BananaProducers dwindedto marinalleves by 1993.During 1988-92, Assodation, which converted substantial with the exceptionof 1989-90,when both export accumulatedreserves into anoverdraft postion in andimports were significandy affected by Hunicane an attemptto sustainpices to growers.The Hugo,Dominica's nal currentacoount defidt banana industry must undergo significant averaged11 percent of GDP.With theexception of restructuringIn orderto Increaseefficdency and 1992,when foreignexdiange reserves deaeased, productquality if producersare to comfpete private and offidal capital flows more than effectvelyin an increasinglyliberalized wold wmpemat for the defidt. The extemaldebt tradeenvironment Inceasedfrom US$65 mrllion or 44 percentof GDP In 1988to US$105murion or 56 percentof GDPin 3. Dhesftio Developmentof tourisnrexport 1992.Because of thehig concessionarynature of servicesand fisheries, aquaculture and floriclture, its ernaldebt Dorinicahas been able to maintain are potentialsources of longterrmgrowth. a debtserice ratio below 10 percen Diversificationefforts should be acceleratedby improvingthe countrsincentiveand reguatory POlcyIsse frameworks.This indudesspeeding up of processingof investors' application, implementing Themain policy issues are the remainingphases of the revisedCEI, eliminatingbanrers to privatesector investmn, 1. PublicFances. Ihe fiscalsituation continued to andincreasing export promotion. deteriorateIn 1993. Revenueenhandng measures,such as improving the effidency of tax 4. Capial knflos.The current banana aisis Is being collectionsIn the Customsand Inland Revenue exacerbatedby the dedinein offidaland private Depatrnentseliminating duty aoncessionsand capitalInflows. This sty suggeststhe need to exernptions,need to be undertakenIn addition, increasedomestic savings and furher encourage continuingthe ongoingadrninistrative reforr directforeign investmenL strehening eqedtre contols and contractingout of publc services are requiredL
145 COPINGWITH CHANGESIN THEEXTERNAL ENVIRONMENT
5. Enwonentdl Managerent Developmentof BankGroup Statey eco.toutismwill require inceased efforts to conserve the erwironment Irwestmentsin TheBank Group plans to: sewage fadcties, waste management,water treatmentand coastalzone protedion, which are * maintain a poicy dialogueon maacrecononic assignedthe highest priority, need to be and sectoralissues and assistthe governmentin continued, designingadjustment measures and soaalsafety nets for the transitlorwudnerablegroups and In Governent Polcy mobilzingextemal finandng; and
The govemment'sMedium-Teffn Economic Strategy * collaboratewith the CDB in its lendingprogram focuseson fiscaladjustment, economic diversification, andother efforts to assistDominica in attainingits and environmentalprotecon. The government development objectives. Domirica is actively encouragesdomestic and foreign private partdpating in the proposedOECS Regional investmentin tourism, fisheries,information and SolidWaste Managementand BasicEducation exportserices. Projects.
Proect Puoti BankGroup Lendnmg
Thekey priorities of the FY93/94-FY96/97PSIP are the Banklending to Dominicais dcanneledthrough CDB expansion,upgrading and maintenanceof economic andOECS regional projects. andsocial infrastructure.
Cedkwones
Dominica Is creditwordth for blend IDA/IBRD assistance.The countty shouldcontinue to rely on concessionalfinancing and grants for its PSIPin order to avoidfurther burdening of Itsfiscal accounts.
146 ANNEX1
DOMINICANREPUBLIC Populaton: 73minfion (midd1 992) IBRDLending: Seebelow GNPPer Capitic US$1,040(1992 Adas MostRecent methodology) EconomicMission: March1994
TheEconomy ashigh as 88 out of every1000 children who survive the first year of life. Overal,the government's SinceAugust 1990, the DominicanRepublic has capadty to provide sodal sevices is limited implementeda stabilization progam and has initiated However,during the lastyear, the governmenthas importantstnrctural reforms. From 1991through begunsuccessfully to implementa reformof the 1993, the primary fiscal balancehas been in educationsystem. substantialsurplus, and the overallbalance in a modestsuiplus, due to inaeasedcolleclion of taxes PolcyIssues on kmportsand petroleum products and constrained expendituresInflation has fallen from 100 percent at Themain policy issues are: theend of 1990to under10 percent in thelast three yeam. Economicgrowth has recoveredfrom -0.9 1. FiscalManageme In order to maintainfiscal percentin1991 to 7.6percent in 1992and about 3 disdpline while filly Implementingtrade percentin 1993. The resultinggrowth in imports, liberalization,the government needs to togeer with unfavorableprices for keyexports, led substantiallyImprove tax adrrinistrationand to lrge currentaccount defidt In 1992and 1993. increasedomestic tax collecions.As revenue However,following interest rate liberalization,high collectionsimprove, the governmentwil be domesticinterest rates have attracted capital inflows, betterpositioned to increaseinvestment in basic and allowedthe acamulationof foreignexchange infrastructureand the sodalsectos in orderto reseves,the maintenance of a stableexchange rate, supportprivate sector growth and poverty and the eliminationof most anearsto offical reduction. crditos In addition,on February14, 1994,the Dominicanauthorities signed with conmerdalbank Z DomestricDeregulation. Despite the new law creditorsan agreementfor debt and debt service redudngand simplifyingthe tariff regime, reduction. The implementationof the agreement domesticprices remain severely distorted by nowwaits for ratification by the Domirican Congress. discretionarybehavior of the customs administationand other nonrtariff interventions in Duringthis period, the governmentapproved a new trade. Thesedistortions need to be reducedIn tax law which increasedthe VAT and simplified order to providean incentiveframewodc for incometaxes. It alsoapproved a substantial reform of effidentgrowth the taff regimeand is implementingfinandal sector refornrsIntended to improveprudential regulations 3. KeyReform Progams The government needs to and reducesegmentation in the bankingsector. follow throughon the implementationof key Substantialpreparation has also been madefor a reformprogramrs, espedally (i) to developthe majorrestructuring and reform of thepower sector. regulationsregarding the impleentationof the tax refomi;(ii) to createand enforce prudential Despite these improvementsIn macroeconomic regulationsin the bankingsector, (iii) to management,socal indicators remain weak. restructurethe powersector so as to attract Malnutritionaffects somewhere between 29 percent privateinvestors In power generation;and (iv) to and43 percentof childrenunder six yeatsof age. broadenthe impactof the educationreform Childand materal mortaty rates are high compared programso as to improvethe qualityand to other countiesIn the Region. Recentsample coverageof primaryeducation. suveyssuggest that the infantmortality rate may be
147 COPINGWITH CHANGESIN THEEXTERNAL ENVIRONMENT
4. Envnta Protectn. Consolidationand BankGroup Staegy deepeningof environmental protectionefforts are needed,espedaly to addressdeforestation The pace and scaleof additionalBark lendingwill andwaste management issues. dependon the govemment'scapadty to Implement edstingprojects and to follow throughon stuctr Govmfent Policy reforns.
The govemnt seeksto consobidatethe gainsfrom BankGroup LendingSince 1992 stabiSizationwhie pursuingthe structual reforms alreadyinitiated. TheBank has prepared lending operations to support the reformsin the finandaland power sectorsand to ProwectPorities assistin irigation improvernents.In addtiorr new lendingoperations in primary educationand road Prioritiesfor foreignfinandng have not beenupdated. rehabiiitation and maintenance are under Previoulythe govemrnmenthad assignedpnority to consideration projectsin the powerand irrgation sectoms
The DominicanRepublc is consideredaedctworthy for IBRDlending
148 ANNEX1
GRENADA Populalow. 91,000(mid-1992) IBRQ/IDALending: Seebelow GNPPer Cqilta US$2,310(1992 Atlas MostRecent methodology) EconomkMission: February1994
TheEconomy recentlyoutined. Private irwestment needs to be restoredwhile greatereffidency needs to be FoUowingthe introduction of market.odentedpolides achievedInthe public sector. In addition,capital In 1984,Grenada showed strong private sectorJed expeditures should be inceased with growthaveraging 5.5 percent per year durng 1985- simultaneousinaease in recurrentouays for 89. Inthe recent years, however, growth has receded maintenance. underthe mounting pressures of deterioratingpublic financesand worsening agricdtural terms of trade, Z GenerawtgAdequate Public Saving. Aiieving partaarulywith the cogapse of thenutmeg trade. In centralgovernment savings of about3-4 percent 1990,internal and external imbalances widened and of GDPper yearwould require: (i) exrdture externalarears acacmulated. With theassistance of reductons by continuing the onoing regionalorganizations, the governmentdesigned and retrenchmentprogram beyond its sdceduled implementeda 'hbmgrown' struturalacdustment completionin mid-i994, lowering domestic debt program(SAP). Between 1990 and 1993,central serviceby swappingpublic lands for domestic governmentoperations turned around Theymoved debt,divesting the Electrioty Company and oter from a defidtof 11 percentof GDPIn 1990to a publicenterprises, contacting out public servIces, surplusoi l percentof GDPby end-1993.This and avoidinggeneral wage Increases;and (ii) improvementwas adlievedthrough reducdons in introdudnga TaxReform Bill, simplOing the tax recarent perditures,in partialaron goodsand structure;(iii) broadening the base of theproperty services and wages, and through revenue taxand indirect taxes, induding the reductionof enhancemt measues In addition!pnivatization concessionsand exemptions of trade proceedssupported the fiscal effort. TiYs alowed the taxes/surcharges;and(iv) pursuing divestnent of governmentto servicebetter its extemalobligations. theremaining public enterpnses. xernalarrears were reducedfrom 11 percentof GDP(US$22 million) to 5 percentof GDP (US$12 3. PrWateSector Development A re-orentationof million)during the sameperuocL Domestic debt the PSIPto addressimmediate water and power nanagementhas also Improved. However, capital shortagesand further lberalization (I.e., expenditreswere reduced frorn 10 percent of GDP implementationof the CEr,phas=out of stamp In 1990to 3 percentin 1993. RealGDP growth duties,and elimination of the icensingsystem remainedlow averagngabout 1 percentper year andpdre controls) is required during1991-93 as tourismkrapid growth was wiped out by dedinhngrnanufactudng and agriculral 4. EnvironmentalManageme Increasingreliance output. on touism will requlreinreased effortsto conservethe environmenLUpmaaret touists PolcyIssues will reactfaster to perceptionsof enviromnent degradation.Irwestments In sewagefadlities, Themain policy Issues are wastemanagement water treatment and coatal zoneprotecton, which are assigned the highest 1. onliat Rscal Progrs and nhancing pionty,need to becontinued. Growth. Recenteconomic gains need to be consoidatecLA growtcrientedgovernment economicprogram for 1994-96 enomipassing an actionplan to dear the remaininganears was
149 COPINGWITH CHANGESIN THEEXTERNAL ENVIRONMENT
Govemme. tPoNky BankGroup Straegy The govemment'sMedium-Termn Economic Strategy TheBank Group plans to: for sustaineddevelopment and economic growth Is basedon implementing the above reform agenda and * maintain a policy dialogue on a througha PSIPwhidc supportsinfrastructure and macroeconomicand sectoral issues and assist humanresource development Tourism and export thegovernment in thepreparation of a policy services,induding infonmatics, are considered future agendaas mentioned above, and in mobilizing sourcesof growth Diversificationinto non.traditional extemalfinandng; and export crops and productivityimprovements of traditionalexport acops are to bevigorously pumued. * collaboratewith the CDOBIn its lending programand other efforts to assistGrenada in ProjectPritles attainingits development objectives. Grenada is paridpatingin theproposed OECS Regional Themajor objective of the 1994.96PSIP is to fadlitate SolidWaste Management and Basic Education the expansionof the pnvatesector through public Projects. investmentin water, sewerage, power and roads, and humanresource development In addition,prvate BankGroup Leing sectorinvestments are antidpated in electricityand In a portfor auise ships. Banklending to Grenadais dcanneledthrough CDB andthe OECS regional projects. creuwodkness Followingits recentfiscal improvements, Grenada is creditworthy for blend IDA/IBRD finandng. Implementationof the governme's SAP is, however, neededto consolidaterecent improvments. In the meantime,the countryshold primanlyrely on concessionalextemal assistance and grants to finance its PSIP.
150 ANNEX1
GUYANA
Populaon: 806,000(Mld.1992) IDALending: Seebelow GNPPer Capbta US$330(1992 Atlas MostRecent methodxagy) Ecr.omicMissbon: Mardc1994 lhe Eoonomy utiites. This requresa stengthnng of the institutonalframework and steppedupacdons In1988, Guyana embarked on an Economnic Recovery regardingthe key sugar and bauxdte industries. Program(ERP) to providea basisfor sustainable growthafter a protractedpedod of economicand 2. PublicSector Reform. The scope of the public soczaldedine caused by .ncreasingstate intervention sectorneeds to be reduced,and its abilty to in the economy. The ERPconsisted of broad deliveressential services strengthned. This adjustnentmeasures andstructural reforms to realign requiresstreamlining the public administratiot% relativepdces, dssmande state controLs, and estabbsh a providingincentives to fill the vacandesat marketorlentedeconomy. The ERP was carled out tedmical levels, and eliminating lbor with a pacematkded by few othernations, despite redundandesamong the low4evel positions. receivinglimited extemal assistance. Within two years,the economyresponded strongy to the 3. FIcalDSplie Continuedfiscal discipline is improvedincentive framework Real GDP rose by 6 caitical to maintaininga souid mac percentand 8 percentin 1991and 1992, propelled andIncentive fianework. lThs can be achieved by by dramaticgrowth in sugarand rice output Inflation (i) strengtheningtax colecton and further decdnedfrom 83 percentin 1991 to below 14 broadeningthe taxbase, induding integration of percentin 1992,while the nominalexduange rate, the personaland corporateincome taxes, whichinitialy depredated coniderably, has remained simplificationof the consumptiontaxes, and faily stable.Public and private savings strengted rducion of thewidespread fiscal incetves; and considerably.The resourcebalance turned positive, (ii) restrainingthe growth In experdiurf for the exteral currentaccount defidt decdned,and wagesand for goods and services. grossinmternaonal reserves inceased. 4. financialSector Refom rnancialsector effidenqx Thegovernment that was elected to officein OCtober needsto be increased This requiresnew 1992 has been followingthrough with the basic legislationand phasing out the dominantrole of polidesunderlying the ERP. As a result;1993 showed thestate in thefinancdal sector. sronggrw, withreal GDP increasing by 7 percent, andwth a furtherslowing down of Inflationto about 5. PovertyAiewiatin About 43 percentof the 10 percent While the perfomnce of public populationfalls below the povertyGne. Poverty enterprisesdeteriorated somewhat, public savings allevi,donprograms not only need to continuebut improvedLProspects for 1994point to continued alsoneed to be better targeted stronggrowth and a furtierreduction In Inflation.The governmentneeds, however, to acelerateits reform 6. EIronmrntal fteon Consoidationand programto improveprivate capital flows to the deepeningof erironmentalprotecion efforts are count. needed, especially to address forestry managemeflmining, and waste managenent Polky Issues issues. Themain pofiyissues relate to: GovemmentPolicy
1.- v^atization.Privatization needs to beacceerated, Thegovemment is committedto the continuationof indudingprvate management contracts for public manket-orientedpoides under the ERP. A keypriorit
151 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT is human resourcedevelopment and poverty Creditworiness aileviatiort The govemmenihas also intiated measuresto addressthe policy issues iisted above. Guyanaisan IDA-only country and is notcreditworty fornon.concessional finandng. Projec Pulorites IDAAssistance Strategy Themajor objective of the 199496PSIP is to provide the basicinfrastructure for privatesector-ed growh Themain objective of IDA'sassistnce strategy Is to The PSIPemphasizes, first the rehabilitationof assist the govemment in elaborating and economicinfastucture, anc, second,sodal sector implementinga developmentstrategy to adcieve investments. sustainablegrowth and poverty alleviation.
IDA Fancng SIne 1992 fUSSmillion) LoanL/Credi Y Purose Amount 21684.GUA 1992 Amrendmentto SAC (IDA Reflows) US$3.1 2358.GUA 1992 SIMAP US$10.3 2168.5.GUA 1993 Amendmentto SAC(IDAReflows) US$3.5 2477-GUA 1993 InfrastructureRehabilitation US$26.0 2480.GUA 1993 PublicAdmrinistration US$12.0 2545-GUA 1993 Sugarridustry US$15.0 2559GUA 1993 WaterSuDDw US$17.5
152 ANNEX1
HAM Population: 6.7million (mid-1992) IDALending: Seebelow GNPPer Cap:it US$380(1991 Atlas MostRecent methodology) EoonomkMission: October1993 lhe Economy PolicyIssues Durng 1980.1991,Haiti's populationsuffered a Themain policy issues relate to: continuingdedine in its standardof iving,with GNP per capitafalling by about2 percentper yearon Govemance Good govemanceneeds to be average.Following a coup d'etat in September1991, establishedin Haiti. Thisrequires the restoration Haiti'seconomic dedine accelerated. After more than of a legibmategovemment which will be ableto two yearsof militarydictatorship and an embargo by Implementa strong structu.al adjustment program theinternatonal community, the countlyis fadngan andto reducepublic sector corruption. acute cisis and urgently requires a major reconstructioneffort There are severe ComprehensveRecostuction Pfgwm A macroeconomicimbalances, the sodal and economic comprehensivereconstruction program (EERP) Infrastructureis severely dtlapidated, producdtve assets shouldindude the rehabilitationof mostsectofs, havebeen depleted, sodal indicators are alarming, addressthe crisis of employmentand poverty, and andpoverty is pervasive. developservices delvefy within a comprehensive macroeconomic framework, emphasizing Preliminarydata indicate that realGDP fel by 15 resumptionof fiscaldisdpline, privatizatibo and percentduting 1992-93. Al sectorswere affected by Incentiveframework for private sector inwestment this dedine. Agriculdturalproduction and exports Tobe viable,sudh a recoveryneeds, however, to decreasedconsiderably, and the sectoris heavily be precededby a prompt resolutionof the decapitalizecL The export oriented assembly politicalaisis paralyzing the country. operationshave been dedmated under the entargo. Inflationinaeased rapidly, from 8 percentat the end Pvtiation Public enterpriseshave become of 1991to anestimated 30 percentin 1993.During inoperativeand a drainon the public finances and te same period, the nominal exchangerate needto privatizedor liquidated.Similarly, public depredatedby about40 percentFiscal pefomance utiities need to benefit from privatesector deterioratedconsiderably. The overal public sector managementand also be privatized defidtafter grants increased from less than 1 percent of GDPin 1991to over5 percentof GDPIn 1993, PovertyAlklWation. Effective support to alleviate financedprimarily through central bank credit and povertyneeds to be provided This requhes accumulabonof arreas Publicsector revenues continuationof ongoing humantrian aid decdinedfrom about 9 percentof GDPin 1991to an programsand restructuring of sduled projects, estimated4 percentin 1993,mainly due to tax Indudingthe Emergency Sodal Fund evasiorleniency in collection,and a weakeningof the financesof the publcenterptises. The wage bil has Ceatanceof Anearsand liemal Aid Haiti'sanears increasedconsiderably, and pubOc enterprises have need to be deared,and a comprehensive becore an increasingdrain on the publicsector EmergencyEconomic Recovery Program (EERP) finandalresources. At the sametime, almost no needsto be implementedbased on. the multi- fundshave been aRocated to publcinvestments and agencyefforts under the Malval administration. to maintenanceof the sodal and economic infrastructurLresulting In a visibledeteioration over EvronmentalProtection. Measures to protectthe thelast two years. ervitonmentshould receive the audtibes highest
153 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT
priotrty,espedagly to addressdeforestation and Credwordhiness wastemanagement issues. Haitiis an IDAonlycountty and not aeditworthyfor ProjectPlodties non.concessionalfinandng It is presentlyin arrearsto IDAand other donor agendes The EERPemphasizes rehabilitation of the basic economicand sodal infrastructure, humanitanan aid IDAAssistance Strategy andpaorty agIeviatiorThis program would need to be complementedby the rapid restructuringand IDAis not activein the countrydue to the aamnt subsequentreactivation of the existing project constitutUonalaisis andthe a:rearsaccumulated on pipeline. IDArepayments.
154 ANNEX1
JAMMCA Population: 2.4ni4ion (mid-I 992) IBRDLendig: Seebelow GNPPer Caplta: US$1,340(1992 Atlas MostRscent methodology) EconomicMsdon: Mard 1994 li Economy 3. Mediuwmtermhamework ibr Growth. In the mediumrterm,aneconomic program needs to be Economicperfornance improved substantially in implementedthat emphasizes: (i)maintenance of FY92/93, after macroeconomicinstabilty and theOberalized foreign exdiange systenm, stepped- recessionin 1990and 1991. Growthrecovered to up liberaizationof the trademgime to a 5-20 about2 percent In FY92/93the Governmentof percent import tariff range; and further Jamaica(GOJ) achieved its targetof an overalpublic deregulationof the economy; (ii) consoidation of sectorsurplus of 2.2 percentof GDP. Partof this measures,induding strengthening of the public camefrom the strongrevenue inaease onginating sectorand continueddivestment; to ensurea fromthe new general consumption tax, but spending sustainablefiscal balancethat wil allow for reducdonswere also imponan4 with large layoffs and essentialinfrastcture irvestmentsand the reductionsInreal wages. The largest cut took place in developmentof sodalservices, while providing urent expenditure(notably wages and salaries scopefor an expandedprvate sectorin an throughthe retrendcnentof over7,000 public sector improvedbusiness environment; (ii) an effective employees).Large rnomna wage Increases were implementationof the PSIPto improvethe agreedupon neartheend of FY92/93,wAthpayment effidencyin the use of resources;and (Iv) a deferreduntil FY93/94,and GOJ has taken strong gradualreduction of the extemaldebt burder% fiscalmeasures to meet the targetpublic sector throughmoderation in foreignborrwing and surplusof 1.9 percentof GDP. Containmentof furtier effortstowards debt resdiedullngand extemalcurrent account defidts, inareasing direct relief. foreigninvestment flows and rising grant receipts has helpedbring total external debt down from a highof 4. nironme AotectionmConsolidation and US$4.7bilion in 1987to US$4.3biion at theend of deepeningof environmentalprotection efforts are 1992. Thelatter was about 135 percentof GDP. needed,espedally to improvecoastal zone Interestpayments in FY92/93were 9.5 percentof management,sewage treatnent and aonrod and GDP, and the total debt serviceratio, after addresswaste management issues. rescheduling,was 31 percent of exports. GovenmenfPolcy Polky sues Thegovermnent Is strongly comritted to sustaining The mainpolcy issuesrelate to: theachievements of theadjustment process on which moresustained economic growth wil depenrand to 1. MaaoeconomcFramronk In the short-tetm, the maintenanceof its internationalcompetitiveness and as a precondition for growt1 in orderto increaseits export share in globalmafkets. macroeconomicstability needs to be maintained through tight fiscal and monetarypolides, Proec Priouts indudingan overalsurplus in the publicsector operationsr TheFY94/95-96/97 PSIP emphasizes the development of economicinfrastrctu to eliminatebotenedcs 2. IncomeDistibution. Equityof incomedistnibution whichconstrain private sector development except in needs to be improvedthrough inreased thoseareas in whidchnew private investnent activity is producvityof anddemand for labor. envisagedSodal development, concentrated In the
155 COPINGWMITI CHANGES IN THEEXrERNAL ENVIRONMENT educatol,health and housingsectous, Is the other economic and sodal Infrastuct foaus. environmentallysensitive areas, public sector moderization,and the promoton of private Oedltwouthlnes sectorinvestment and
Jamaica'seditworthness has improvedsince the * assistthe governmentto mobiizeother extemal mid-i980s,although Its etenal debt burdenis still supportfor these efforts. heavy.The counrV is eligible for IBRD finandng.
Bak Group Sbategy TheBank Group strategy is to: * continueto supportthe later stagesof the structuraladjustment program and sectoral and spedal programs of sodal developmenK
Bnk GroupLending Sice 192 iUS$millbin) La Year uAmot 35024M 1992 EneWSector Development US$60.0 3580.JM 1993 Reformof SecondatyEducation US$32.0 3622-JM 1993 PrivateSector Development Adjustment US$75.0 3720-IM 1994 PdivatelnvestrmentExnortDevelopmentUSS35.0
156 ANNEX1
ST.KffrS AND NEVIS Poptdation: 42,000(mfd.1992) IBRD/IDAlendIng: Seebelow GNPPer Capit US$3,990(1992 Atlas MostRecent methodology) EoonomicMison: October1993 lheEonomy 2. Accelerat Ecmck Growth. To sustainrapid economicgrowth pdvate sector expansion is RealGDP growth averaged about 5 percentduring required.To thisen4 divestmentof the sugar 1988.1992,mainly refecding the strengthof toudsm industry,further trade riberalization through the and relatedconstuction and senivcesacffvities phasedimplementation of the revisedCEI, Diversificationinto assemblymfanufactuing is also eliminationof Oicensingsystem and price controls ocaurmng.Suga&Is contribution has been decdning. andthe monopolyof the markefingboards In However,the sector remainsimportant to the importation of certain commodites,and economyas sugarexports account for about45 supportinginvestments In inrastuctureand percert of merdiandiseexport earnings and the humanresource development are requitred This industryprovides appraximately 500 jobs. At wiUaccelerate economic diversification in non- cunt productionlevels of 20,000tonnes, the traditionalagniLdtuwe manufacuing, agro- industryis just aboutbrealdng even. While the products,upmaket touisni, and informatics. ountywil aconinueto haveaccess to theEW market for its exportsof about16,500 tons of sugar,the 3. EnvironmentalManagenent lnaeasing relance pricesin realterms are projected to dedineover the on toufisrnwil requireincreased efforts to longtermas would sugar supply exceeds demand. St. conservethe environmenSUp.rarket touists iltts andNevW' consolidated public sector balances wil reactfaster to perceptionsof environmental havebeen Improving as a resudtof the strergening degradation.Investments in sewagefakdlifes, of the sugarindustry's finances However,central wastemanagent watertreatment and coastl govemrmentcurrent suipluses have amounted to less zoneprotedior, whld areassigned the highest than3 percentof GDPduing 1990.93.The wage priouity,need to be continued. awardof 15-20percent to dvil servantsapproved in September1993, reactve fron May1993, will add GovenmenPoliy morepressure to fiscalbaances Thegovernment recogndzes the needfor inceased Polkyisues fiscaldisdpline, and for measuresto expandthe country'sproduction frontiers through economfic Themain pocy suesare diversification.To adclevethese objeives, it has suggestedmeasures to Iberalizetrade and to 1. fiscalPbLy. Themain issue Is to generatepublAc generallyimprove the enablingernironment for savingsof at least5 percentof GDP on a private sector developmentinduding through consistentbasis by reinstatingexpendture pdivatization. restraint and Improvingrecurent revenue perfmance throu tax admdnisatiorV PftojectP^do eliminationof dutyexemptions, broadening of tax baseand cost recovery. Sudi savings are needed The 1994-96PSIP is concentratedon large to helpprovAde outerpar fundingand finance infastructureprojects geared to supporttoudrsm and the capitalIvNesment program and reduce the servicesexpansion, agricultural diversification and needfor bonwing. In paniaclar,measures to humanresource development restraingrowth in the domesticwage bil should beconsideretL
157 COPINGWITH CHANGES IN THE ENAL ENViRONMENT
COedihwdd * collaboratewith the CDOBin its lendngpfogram andother efforls to assistSt. Itts andNevis In St Klttsand Nevis is aedtwoithyfor limdtedIBRD attaining its development obJecdIve finandngand for limitedbonrowing on convertional ParfidpatlonIn the proposedOECS Regionia terms SoidWaste Management and BasicEducatin Projectsisexpected Ban ropStsk TheBank Group plans toS Bankknding to St. KIts and Nevisis danee * maintaina poicy dialogueon u c throug COBand the OECS regional projectL andsectoral issues and asskt the government in thepreparaian of a policyagenda as mentoned aboveand In mobilizingextral lnandngand
158 ANNEX1
ST.LUCIA Popublion: 156,000(fid-i 992) IDA/1BRDLending: Seebelow GNPPer Capit: US$2,900(1992 Atlas MostRecent methodology) EconomkMission: August1993
TheEconomy be addressedimmediately in orderto makeIt morecompetitive. The authonties will needto St. Luda has benefittedfrom exceflenteconomic designsafety nets for the transitionvunerable management While therehas been continuing groupswithout undue fiscal burden or rapid expansionin economicactivity in St.Lucia over the increasein publicsector borrowing domestic or five yearsto 1992,annual growth rates have been external,while dcversifying theeconomic base. stronglyinfluenced by theperformance of the banana industry,whidch contuibuted about 10 percent of GDP. 2. HumanResources Developmert St Luda's At the sametime, sustained growth In tourismhas dversifyingand growing economyrequires madethis sectora majorcontibutor to econonic stepped up human resourcedevelopment activity.The public finances have been well managed Increasingdemand for skilledworkers in tourism andpubiic savings have exceeded 10 percentof GDP andrelated activities requires that the qualityand in recentyears. The public and publicdy guaranteed accessto pnmalyand secondaryeducation be extenaldebt has remained below 23 percent of GDP improvedthrough sdiool construction, curiculurm andSt Lucia'sdebt service has remained manwageable. developmentand teacher training. The depredationof the PoundStering (in whidh bananaprices are quoted) beginning In thelatter part 3. EironmentalMaagement Increasingreliance of 1992has affected domestic-currency unit banana on touuismwil requireincreased efforts to exportearings. As the economyadjusts to lower consenvethe environmentUprnarket toursts unit bananaearnings as a result of Increased will reactfaster to perceptionsof environmnental competitonfrom cheaper fruit fromn Latin Amnerica, St degradation.Investrnents in sewagefadUties, Luda'sgrwth ratecould be affed, andthis, in turn wastemanagement, water treatment and coastal couldbe reflectedin lowerfiscal revenues. zoneprotection, wich areassigned the highest pnrodty,need to be continuecL PolicyIssues GovefnmentPolicy Themain policy issues are The governmentrecognizes in Its Mediur-Term 1. BananaIndusty Restrctunng The uncertain EconomicStrategy the needfor continuationof fiscal externalenvironment has already resulted in an restraint and for measures to inarease estimated20 percentdedine In unit banana competitivenessand prvate sectorexpansion. In eamings.The resulting ongoing shakeout in the addifton,environmental protection to safeguard industryhas had a numberof effects,particady tourismbase is consideredvitaL majorfinancdal difficulties for the Banana Growers Association,whidi converted substantial ProJectPdorti accumulatedreserves into an overdraft position in an attemptto sustainprces to growers.The An importantobjective of the 1993-96PSIP Is to bananaindustry is the mostimportant activity in imnprovethe qualityof bananasand inmeasethe the agdculturalsector. The countuy wil continue productivityof operations.In addition,supporting to haveaccess to exportmadrets but the quaW infrastructureand human resource development for of bananashas to Improve.Ongoing quality and toudrsmand services expansion is alsoconsidered an productivityenhancing measures need to be importantprority. InvestmentsIn environmental continued. Restructuringthe lndustryneeds to projectsare underway.
159 COPINGWIrHI CHANGES IN THEEXTERNAL ENVIRONMENT
Crediwordnm * collaboratewith the CDB in its lendingprogram and otherefforts to assistSt Luda in attainingits St LudaIs aeditworthyfor blendIDAABRD finandng developmentobjectives. St LuciaIs partidpating andfor Irrtedborrowng on conventionaltenms in the proposed OECSRegional Solid Waste Managementand Basic Education Projects. Bank GroupStrategy Ban GroupLeding The BankGroup plans to: Banklending to St.Luda is channeledthrough CDB maintaina policydialogue on a ma nomic andthe OECS regional projects. and sectoralissues and assistthe govemmentIn the preparationof a policyagenda as mentioned above, In designingsodal safety nets for the transitionunewrablegroups and in mobilizing extemalfinandng; and
160 ANNEX 1 _ - , .
ST.VINCENT AND THEGRENADINES
FloPutalw 109,000(midi1992) lORD/IDAInmw Seebelow GNPPefr Cait: US$1,990(1992 Adas MostReaet methodology) EoonomicMissn March1993 lhe Ec6nomy Assodatiort whid wonvertedsubstantal acumulatedreserves into an overdraft podtion in St Vincentand the Grenacineshas benefitted from anattempt to sustainpnces to grwes excelenteconomic management Over the five years to 1992,GDP grwth averagedabout 6 percnt per 2. EQOmt D osficatkx The dkangedmarket yea, pdmarlyrefleaing the expansionin banana prospectsfor bananaswil encourageand productionand toufisrm Alugh bananaouut supportongong dversfication effors Sigrnficant evdswere 18 percet higherIn 1992than in 1991, resouras have been put into land reform eafmngsleves in domesticamrencV lneased by only prograrr4under whidc statowned land (mosdy 6 percentin 1992folowig It depredationof the aaupiredfron pvous owners)have been made PoundSterling. Pubc finanoeshave been prudently availablefor familylfans. Productonof root managedand govemnmentrent spluses have aops andvegetables has some potentiaL The eagedabout 4 pementof GDPin recentyears govemmenthas beenencouraging agrcultural Theatoties havebeen seeldng ways to inrease diversificationsupponrted by the lORD/IDA pulc sectoreffideny funther. A nurber of thelokss finanoed Agdiadture Rehabliton and maidngpublic enepdses have been pdvadized DiversificaonProjec Toutismand eqmort (easedor sold),and/or their operabions disconinued senfiesconinue to be the main sourcesof In thisoxoecdiorv the governt Isin theprocess of growwt In supportof theseawangements, and puivatfzingboth the DiamondDairy and the SL alsoto boosttouist industrydevpmert, the VincentDistler A tax refom and institonal audoities have commissonedan airpors srnhening programis current underw in the deveopmentsud to assessthe feasit of najor revenueearnin agendes,and eqecture providing o ai ai trffca rport fadlies,and cmnts have been tightnecL In adcdWonan are expwndigcaugo storage facilites at the a rdnsativereform progran has already resuled in airportIn St Vinnt. Thegoment is also on-iderable sdagesIn syslem opeon, and actvy promotingthe Diamond industrial Pak to furhxerwodc Is continuing.Outsdng debt has foreigninves, particaarlyin the areasof roeainedbelow 30 percent of GDP,and debt serice manufacturingand W#lghedi' information hasremained manageab_ l sevces. Polc bsues 3. Hman Reoues DewdpmentThere has been a continui issue of wuncetbhigh Themain poly issuesare: u in St Vent andthe GrenaCines side by sidewfih shorages of quiredtd 1. Banna kdmAnyReoucir& The unctain and managerialskills dhought the econoam extea enwirorwuenthas already resuAed in an andpaclladay in thepublic sector. These issues esimated20 pecet dedinein urit banana shouldbe addressedthough major investments erninpL Theruing ongoingshakeout in the in tranng and educatr indudng an idsty hashad a numberof efects,in g app ceship sdme to be opeated in somemarginal bnds going out of productiona conjnon withthe pnvate sector. dedne in dte rental gwvemwenIsrve grwt a Owdownin thepace of dmestaly. 4. r*ormencj Managent Increasingreliance financedwNestment; a dse In NMI m and on tourismwil reqire inaeased effors to majorfndal difficties forthe Banana Growers conservethe envidromentUpmaraket toaist
161 COPINGWITH CHANGES IN THEEXrERNAL ENVIRONMENT
will reactfaster to perceptionsof environmental BankGroup Sbategy degradation.Investments in sewagefadlities, wastemanagement, water treatment and coastal TheBank Group plans to: zoneprotection, whidi areassigned the highest pdionty,need to becontinued. * maintaina policydialogue on a maoeconomic andsectoral issues and assist the governmentin GovernmentPo3CY thepreparation of a policyagenda as mentioned above,in designingsocial safety nets for the The governmentIn its Medium-TermEconomic transitionwvulnerablegroups and in mobilizing Strategyemphasizes fiscal restraint,economic externalfinandng; and diversification,improvements in incentiveand regulatoryframewoik and ernvironmental protectionm * collaboratewith the COBin its tendingprogwra andother efforts to assistSt Vincentand the ProjectPdoris Grenadinesin attaining its development objectives.St Vincentand the Grenadinesis The 1993-96PSIP has as its main objecdives assignedpnioiy in the proposedOECS Solid implementationof pmvate sector supporting Waste Managementand Basic Education infrastructurein ports, roads and airpot In addition, Projects. humanresource development and environmental projectsare pnouitized. BankGroup Lendnmg Credibworthness Banklending to St Vincentand the Grenadinesis dhannelledthrough COB and the OECSregional St Vincentand the Grenadinesis aeditworthy for a projecs blend of IDA,IBRDfinandng and for limited borrowingon conventionalterms
162 ANNEX1
SURINAME
PopuIaUon: 467,000(mid.1 992) IBRDLending: Seebelow
GNPPer CapWl1i US$3,700(1992 Atlas Most Recent met logy) EconomicMission: January990 lhe Economy systen,with rates ranging from Sf1.79 per USdolar to about Sfl00 per US dollarby end1993. At the Sunnarme'seconomic performance has detencrated sametime, the parallelmarket rate reachedabout markedlysince the eatry 1980sas a result of Sfl30perUSdollar. sbstantial dedines in export earnings and govemnmentrevenues caused by fallingworid prices PolicyIssues for bauxdteand its denivatives,the mainstayof Suniname'seconomy. The econonic detenoration has Themain poicy issues relate to: beenaggravated by a ladcof correctivemeasures, especiallyin the fiscaland exchange rate areas, and 1. ComprehensiveStructural Adustmen and the economyis now on the brinkof hypetinflation. StabilizationA comprehensivestabilization and Facedwith thesedevelopments, and with the near structuraladjustment program is neededIf depletion of gross internationalreseives, the Surnameis to avoida furtherdeterioration in governmentresorted increasingly to trade and economicperformance and hypennfiation. Such a exchangerestrictons, and to pervasiveadministrative programwould requiremeasures to transform controlson econoric activity. Surname into a market-odentedeconomy, induding tax reform exenditure controL RealGDP dedined by a cumltative25 percentsince elirinationof subsidiesfor public goodsand 1982. Outputfel everyyear, except for a brief servicesand consumergoods, prvatization, recoveryin 198889,supported by increasedworid dismantlingof price controls, deregulation of labor demandfor bauxiteproducts. During 1991-92, real markets,finandal sector reform, and tradeand GDPfell by 1.5 percentper yearon average,and exchangerate liberalization. estmatesfor 1993point to a furtherdecine. At the same time, inflation increased steadily, and is 2. Clearanceof Eenal Arreas In the contextof an estimatedto havereached over 220 percent by end- adjustmentprogram, Surname would also need to 1993. Notwithstandingcutbacks in public reachagreement with its exteral ceditorson investrents,the overal defidt of the central dearingits arrears. governmentbefore grants increased substantially in the 1980s,and averaged about 19 percent per year 3. EnironmentalProtecon. Strongernironmental dtuing1991-92, and is estimatedto havedecreased protectionefforts are urgently needed, especially onlyslightly to 18percent In 1993,financed largely by to addressdeforestation and waste management centralbank credit Thereare a largenumber of issues. public enterpriseswhich run operationaldefidts. Despiteintensified trade and exchangerestrictions, GovemmentPogcy thebalance of paymentscontinued to recorddefidts in recentyears, with the exceptionof 1990,which Thegovemment recognizes the needfor adjustment, werefinanced by a reductionin internationalreserves but insiststhat it needsto be gradualowing to and an accunulationof externalarreas By end- politicaland sodal considerations. It also regards the 1992,international reserves were down to US$11 resumptionof developmentassistance from the rnllior equivalentto one week of imports,and Netherandsas a crucialfactor for the successof any extenalarrears reached US$147 milion, or 6 percent adjustmenteffort In November1992, the National of GDP. In the wakeof thesedevelopments, the Assemblyapproved a policy frameworkfor a govemmentintroduced a multipleexdhnge rate structuraladjustment program (SAP), based largely on
163 COPINGWITH CHANGES IN THEEXTERNAL ENVIRONMENT a proposalsponsored by the EU. However,this BankGroup Sbtaegy. framewo&does not quantifythe SAP,and does not indude any upfront measureswhid& would be TheBank intends to continueits economicdialogue neededto ensureits success. with the Governmentof Surname. Tedcnical assistanceor lending wotud be consideredonly if the ProjectProio s govemmentIntroduces a comprehensvestructural adjustmentprogram to addressthe countys The PSIPhas been negiigiblein recent years, adjustmentneeds and resdcedulesits arrearsunder amountingto about1 percentin 1993,on accountof theaegis of thePadis Club. the drop in extemalassistance and publicsavings sincethe 1980s. CfdtdhmrUdness Surinamehas external arrears of about6 percentof GDP and is not creditworthyfor borrowingon corventionaltems
164 ANNEX1
TRINIDADAND TOBAGO PopuLaion: 1.3ndllion (rnd.1992) IBRDLending: Seebelow GNPPer Capta US$3,940(1992 Atlas MostRecent methodology) EconomkMission: June1993
TlheEconomy Poricy sses Trindadand Tobagois going througha diffiault transition from an overregulatedeconomy, Themain policy issues relate to dependenton dedmiringoil revenues,to a more maflketorientedeconomy. The economic contraction 1. lPniateSector Development To createa more whichbegan in 1983,following the failin oil prces, diversifiedeconomy in anenvironment where the hascontinued almost unintemipted. An adjustment pivatesector Is to be the engineof growththe programwas initiated In 1988with support from the govemmentwill needto: (i) acceleratethe reformn IMF and the World Bankr The govermnenthas of the publicsector adidnistration; (i) inaease acceleratedthe paceof reformin thelast two years. publicsaving to financean enhanced public sector Theongoing program indudes: (i) a farreachingtrade investmentprogram which will concentrateon reforrn;(i) investmentsector reforms and the opening physicaland sodal infrastructure; (ifi) ensure the of the oil andgas sectors to foreigncompanies; (iii) quality of primary and secondarysdxol taxrefom, Induding the introductionof a VAT;(iv) education;and (iv) improvethe targetingand the elirination of price controls;(v) extensive effidencyin theprovision of sodal serivces. divestmentof publicenterpdises, induding major gas- basedindustries - one third of thewholy or partially 2. Maaoeconomc Framework for Growth. state-ownedenterprises have already been liquidated Continuationof both sound macroeconomic or solq;(vi) andreform of the publicutilities. The managementand the restructuringof the govemrnmetalso recently floated the exdhangerate economyIn order to reduceits dependence on dl and elirinated restrctionson foreignexdcange and,thus, its vulnerabiltyto adversedhanges in transacons. the termsof tradeare aitical for Trinidadand Tobagoduring the 1 990s. Stabit hasbeen adcieved by sharplyredudng the overallfiscal defidt from 87 percentof GDPin 1986 3. vimronentalPlotecUo Consoldationand to a smaUlsurplus (0.4 percent) in 1993.The current deepeningof theenvironmental protection efforts acoountof thebalnce of paymentshas moved into areneeded, espedally to addressdeforestatioRn dl surplus(1.5 percent of GDP)and infiation has fallen and gas industial polludon and waste from about 11 percent during 1989.90 to managementissues. approximately7 percent in 1992. Thebrunt of the fiscalcontracion has been bome by government GovernmentPolicy investmentwhich in nowbarely 2 percentof GDP. Economicperformance has remained sluggish (real Thegovernment's mediumrterm policy is spelledkoutIn GDPfell by 1 percentIn 1993)and unemployment its MediumTermn Policy Framework (MTPf). The hasremained high (around 20 percent).The outlook MTPFemphasizes that the achievement of sustainable for the shortterm remains difficult as the priceof oil growthwll require:(i) efiminationof fiscaldefidts, (ii) continuesto fall. The impactof large foreign an exchangerate policy that stimulatesnonoil investmentin gasbasedindustries (induding the exports;(ii) an incentiveframework condudve to constructionof a state.oftheartmini steel mill totalling effident resourceallocation; (iv) elirminationof US$300milion and a US$1billion project to export regulatoryimpediments to the developmentof an liquidnatural gas) will only be evident in late1995 and effident privatesector, (v) a public investment 1996. programof appropriatesize and composition
185 COPINGWITH CHANGES IN THEEXrERNAL ENVIRONMENT
financedwithout recourse to netbonowing from the BankGroup Stategy centralbank whidh focuses on an effidentuse of resources;and (vi) the strengItening of sodalpoides TheBank Group strategy is to assistthe government bytargeting vdnerable groups. in constructinga more effident and market4nendly economy,redudng the size of the public sector, Ckeltiworthiness makingthe public sector more efficent, and creating conditionsfor the emergenceof new sourcesof Trinidad and Tobago has followed prudent privatesector4ed growth maaoeconormicmanagement and a sound debt managementstategy. The country is aedtworthyfor BankGroup Lending since 1992 bonrrwngon conventionaltenms A numberof proposedprojects are currently being prepared.
166 ANNEX2
ExternalFinancing Requirements ForThe PublicSector InvesmentProgram
107 Ann H Table 1: xRnal liana Requfr.muid hw the PN& Sdw Invesit Irgwam and Salaam of Peyaet Suppa, 1994
Odher -mbpv
iManingof PSIP Rq! (Balane of re
(A) (B) (C) (D) (E) (F) (G) () Publc Of Which Of Whih Of Seooor Extrna Disbunents Not Yet Totl Which Investment Lecal FiPning F ExisPtng Cap kIdifed Requird Not Yet Program Contibution Requimt Commbrment (C)}(D) TOTAL (Gap) (C)+4F) Idnif d +(@
Bdei n.ka. nCa. n.a. n.a. n.a. n.a n.a. na. na. Guyan 77.3 4.0 73.3 58.0 15.3 23.5 8.0 96.8 23.3 Jamaica n.a n.a. n.a. n.a. n.a.. n.a n. a.a. n..
OFCS Dominica 10.6 4.6 6.0 6.0 0.0 0.0 0.0 6.0 0.0 Gr=ada 37.2 5.4 31.8 13.9 17.9 0.0 0.0 31.8 17.9 SLKt.ts and Nevis 26.3 2.9 23.4 20.3 3., 0.0 0.0 23.4 3.1 St. Luc 74.2 34.2 40.0 40.0 0.0 0.0 0.0 40.0 0.0 St. Vicent and tde Grnadine. 29.4 14.2 15.2 12.9 2.3 0.0 0.0 15.2 2.3
TOTAL 255.0 65.3 189.7 151.1 38.6 23.5 8.0 213.2 46.6 n.a. = not availabkl. Sowc. Wor Bank saff emtes. -a
Annex 1 Ta 2: Exal Fian Rdng for the Publi Seco Jvettaa PFtngrmanid Duance of PFaeinas Support,1995
Odier Dervs 1m Amistancc Fianing of PSIP RFaquiets (aance of Payments Swrt (A) (B) (C) (D) (H) (F) (G) (H) ( Public Of Which Of Wbich Of Which Sector External DibuwrseatB Not Yet TOa Not Yet hnestment Lo:a Fianing Fom Existing Gap Idenified RePired Idand Progam, Contibution Requra_nts Commitments (C)-(D) TOTAL (Gap) (C)+(F) (E)+(G)
BdCi n.a. n.a. n.a. n.a. n.a. n.a. na.. na. n.a. Guyana 108.9 10.0 98.9 60.0 38.9 36.4 16.8 13S.3 SS.7 Jamaica n.a. n.a. na. n.a. n.a. n.a. n.s. n.a. n.a.
OECS Dominica 8.8 3.5 5.3 5.3 0.0 0.0 0.0 5.3 0.0 Grenada 26.9 0.0 26.9 0.0 26.9 0.0 0.0 26.9 26.9 St. KIlts and Nevis 21.5 3.8 17.7 14.1 3.6 0.0 0.0 17.7 3.6 St. Lucia 80.9 28.1 52.8 52.8 0.0 0.0 0.0 52.8 0.0 St. Vimcentand the Grnadines 23.7 10.6 13.1 5.5 7.6 0.0 0.0 13.1 7.6 TOTAL 270.7 56.0 214.7 137.7 77.0 36.4 16.8 2SI.1 93.8 n.s. =ot available. Soxcre World Bankstaff esimates. Am n Table 3: Exwtern FInncigR 6e the Porbic Sectw Invalamn Program and Balce of Paymnpt Sppot, 1996
OdherDewlopmeat
Fmancingof PSRP Reqiems FmancingRequaieme (Balanceof Payments
______Suppot) ______
(A) (B) (C) (D) (B) (P) (0) (H) ( Public Of Which Of Which Of Which Sector Bitesnal Disbusemen Not Yet Total Not Yet wicrntm Local Fnancing From Eisting Gap Idntfied Required Idfied ______ProgramContribution Requirmenfts Commimats (C)-(D) TOTAL (Gap) (C)+(F) (E)+(G)
Blize n.a. n.a. n.s. n.a. n.a. n.a. n.a. n.a. n.a. Guyana 122.7 15.0 107.7 ;0.0 47.7 22.1 7.3 129.8 55.0 Jamaica n.a. n.a. n.a. n.a. n.a. o.a. n.a. n.a. n.a. OECS Dominica n.a. n.a. n.a. n.a. n.a. 0.0 0.0 n.a. n.a. Grenada n.a. n.n. n. nae. n.a. 0.0 0.0 n.a. na. St. Kis and Nevis 10.7 1.2 9.5 7.0 2.5 0.0 0.0 9.5 2.5 St. Lucia n.a. n.a. n,a. n.a. n.a. 0.0 0.0 n.a. n.a. St. Vinceat an t Grenadines 10.2 6.4 3.8 0.4 3.4 0.0 0.0 3.8 3.4 TOTAL 143.6 22.6 121.1 67.4 53.6 22.1 73 143.1 60.9 n.a. = not avaiable. Sowrce: Wodd Dank staff esimates. Amat U Tabl 4: £xtwnuu FInacin Relrw* o the PObWSecaw vasbnumt
Odrer D e pmet
Fnancing of PSIP Requirements Finncing Requiremnts (Bne of Payments
______S upport)______(A) (1, (C) aD) (E (F (G!) (H m Public Of Which Of Which Of Which Sector Extena DisbutsmneutB Not Yet Total Not Yet Investment Loal Fnancing From Existing Gap Identfied Required kdtihed Pxogrm Contrition Requirenents Comn enta (C)-(D) TOTAL (Gap) (C)+(F) (E)+(G)
Belize n.a. n a. n.a. n.a. n.a. n.a.n.a.n.a. n.a. Guyan 308.9 29.0 279.9 178.0 101.9 82.0 32.1 36t.9 134.0 Jaanica n.a. n.a. n.a. na. n.a. na.a. a.. n.a. n.a.
OECS Dominica 19.4 8.1 11.3 11.3 0.0 0.0 0.0 11.3 0.0 Grenada 64.i 5.4 58.7 13.9 44.8 0.0 0.0 58.7 44.8 St. Kits and Nevis 58.5 7.9 50.6 41.4 9.2 0.0 0.0 50.6 9.2 St. Lucia 155.1 62.3 92.8 92.8 0.0 0.0 0.0 92.8 0.0 St. Vncent and the Grenadne 63.3 31.2 32.1 18.8 13.3 0.0 0.0 32.1 13.3
T1OTAL 669.3 143.9 S2SA 356.2 169.2 82.0 32.1 607.4 2013 n.a. = not available. Sowce: World Bank staff estimates. ANNEX3
Investment,Savings, and CrossEconomy Estimates of Sourcesof Growth
173 AnnexIII Table 1: Invatent and Salga, 1960.92 (m perent of GDP)
A- GM.~~~~~~~~~~~~~~~~~~~~~~~~~ _ 19111~~~~~~~~~~~~~gtgfnB 158 IM8 194 Ig 19115 -.17 19g .md 11t 199 lo" 1902 19e 9
JU19W9UA 39* .4 37 IDA 2.9 29.7 74*0 4 4L3 374 2.5 21J 21.7 39. S 4D 71Q UIAU 25.9 14. 9.9 17.9 4" 17J 172 17 _ .. _ .. _ I1.4 &ARUADeS 253 21 294 19.9 142 15.4 2I" 2* 373 1A4 19.5 194 13.9 3I9 29 3155I 24.1 2S0 237 D .2 24 214 3. 29* 2D. 33S 294 313 29.4 29.9 29* D0W01EA 311 3t.9 5S4 273 3 213. 22.t S3 P.t Ql 3" 32.9 S.7 21 33.2 DO110A RI IW 24.9 2.4 34L 2t.1 23 19.? 359.2 26.2 29* 3* * 9. 2. 2A * 4IRADA 262 40* 4" 402 3*l 333 39 3M* 34.3 xi Xs 312 333 26 6 Wt3tANAJ 2 31.4 2u 21.4 27.4 3* 41 M3 .9 3 414 41A 29 294 3.1 uAnr 2. 19.2 I" 243 2. 242 22. 33 212 32. 89 1.J 1.21 14.7 4 MA5 9.9 sn3 39 292 3.2 353 285 3 2L5 72 19.1 32I 3MA 3* l99. *.314 3.2 3.2 34* 37.2 32 3 273 34 SM Ju NJ 42.5 S. 27 4V3 hf.LU s4 3 34. 29.1 287 19.7 21. 21.2 311 nl 29. 29* 253 "A 293 2. W.VODKfl M4ANDITaGR.AZU9 393 3X7 312J.7 2.9 3L3 294 324. 31J 2M. 3a3 32. 3. 3.4 M 32 2t9A2E 212 9 i 7.4 I2S4 114 243 24 29* 173 3. 21.1 143 29. 21.2 27.7 1TODAMNDTOINAO 39A 27.9 292 29* 24t I23 214 193 23.1 I"4 m24 123 Its 2.17 12
ANTN1RVAMA4DAR3 3.9 14.1 5J3 04 3. 24 tt59 #54 19.7 152 .9 143 IIJ 124.9 11 THICMANW 22.1 04 ISA4 29* 2.9 243 24 II* .- 123.1 8*33AS 2A.4 293 I.2 25.1 nJ I29 2.7 14.9 2t8 3 *SS 14. 2t3 17J 24. NamIV24 2 13.4 3 219 3s9 292 233 21.7 22.3 3* 29. 21.2 2t4 2 D0S43rA -.9 -.5 20. 14* 24.9 A4 24.1 173 3 I3I 143 11. 4.1 04 1 3.4 UW lm _ 2 14.9 f7* 142 15.1 2S3 129.2 214 31 S7. 3. 19* 17.9 12.4 11.9 2tl GIRDIAD4, 83 IQ0 43 I? 2. Il2 34.4 174 19.9 21.2 312 3.2 3 m2.9 3. G4YANA 243 .9 4 .42.1 3. 4* 121 .53.1 -IAI 4A1 423 4A -4 1.A wn 20 1.2 84 7* 7.? s* 4.2 s. 9 2.7 -IS 1.2 2. JAMIAA 20.4A 9C 20L 92 73 249 s* 2X.4 39.2 its 22l Il 2 I.lumtuAwl 29.2 212 294 1.7 249 2L 234 29 35A.4 21 2.7 43 29.A 293 2 Sr.LUM 93 t3 7* its 7J 2. n9. ISJ t94 2I2 I2I 73 9.1 223 9.4 Sr. vD690f AM32TM 3RM4D1241 10. 9 *SS 22. 24 293LS 3" 9.? US 233 I2. 39 19. ff.9 243 S323344 19.? 287 122 4.09 32 9.1 32 24 21. 29A 2* 22.2 244 I2.7 ISJ TD9 DWAND VSAO 33 33* 211 23.2 37. 214 243 204 CI 21.2 23* 243 29. 3.2
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!Aq 3 9-3 2 96n 3 {e9 a a|'7 e t W Anna Hl Table4: Cros-Ecnomy Estma of ExtendedGrowth Model I, 19, (dqepdent vaWfG real GDP Vowth rtes)
Guena,Hti, Bahamas,Barbados, Antiguaand Domina GCanada, Suiname,and DominicanRepublic, Barbuda, St. Kittsand Nevis Tnidad and and Jamaica Bdize, and and St. Vimaen Tobao St. Luca andthe Gessdins
J/DP (%) 0.00 O.1S7 4.183 0.031 (0.07) (0.99) (2.04)' (0.93) LPG(%) 1.392 1.644 4.866 4.165 (1.45)"* (1.6)" (1.37m (0.79) OC/GDP(%) 4.240 -0.061 O.5S5 4.045 (2.19)* (0.26) (1.64)" (0.50) XGNPS/GDP(%) 0.040 0.036 0.030 0.113 (0.70) (0.67) (0.41) (2.94)' CONSTANT 0.586 -5.022 20.979 4.889 (0.16) (0.92) (2.07)* (0.03) A4udsedR 2 0.18 0.34 0.66 0.96 DP 42 42 30 42
Note: I = total hrvestmt, LFG = labor frce growth, GC govenmn consumption,XGNFS -cxport of goodsand nonfactorscrices, GDP = gros domeic product at madrat price, and DF = degreesof freodom. All equatioo ameesmated using SHAZAM7.0. StatisticalyOPgEC at S peact. " Statiswticallysgcant at 10 pecan Staistaly signifiet at 20 percent.
sewea ID Staffestimfts.
178 Anm M Tabb S: Cros-Ecoanoy Estimatesof ExtendedGrowth Model U, 1979-90 (dependentvarable rea GDPgowth rates)
Ha}i, Surname, Barbados,Domican Andga and Batbuda, and Republic, St Lucia, and Trinidadand Tobago andJamaica St. Viacentand tbe Gr_nadine
DIIGDP(%) 4.103 0.413 40.030 (0.44) (3.13)* (0.42) FDVGDP(S) -0.843 0.147 -0.250 (2.10)* (0.26) (2.94)* LFG(%) 2.014 -1.960 4.051 (1.70)** (1.41)*" (0.07) GCIGDP(X) 4.S2S 4.230 -0.364 (2.34)* (1.23) (1.30)"' XGNFSIGDP(%) 0.236 4.081 0.058 (1.54)"' (1.30)"'* (0.99) CONSTANT 0.402 2.167 11.818 (0.08) (0.41) (1.31)" Adjtd Rs 0.23 0.64 0.89 DP 29 29 29
Note: Dl = domesti componentof invesmet, DI 8 foreigndiret imvesent, LFG = aborforce grwth, GC 8 governmetconsumption, XGNS = expostof oodsand nonictor sevices, GDP = grss domestioprduct at merbatprice, and DF = degre of freedom. Al equationsan estinatedusing SHAZAM 7.0. * Statistialy sigificnt at 5 peract. " Statisntcalygnificant at 10 pacet Statisticaysgnificant at 20 peren Soercw. IBRDStaff es4imates.
179 A_m Ni IMbI 6: Cros-Eesmiy FAdMa of Endead Enhaned Growtb Mode , 1 79-90 (depumd vral rel GDP rowth ran)
Guyan, Hai Batbados,Dominican Donica, St. LAci, and Republio, and Tiddad nd Tobago and Jamaica St. Vincenand the Grenadives
hODP (S) 0.313 0.437 4.112 (1.04) (3.50)* (0.93) LFG (X) 5.473 -1.564 Q.56 (1.39Y1ce (0.74) (0.54) HC (yea) 4.240 0.039 6.072 (0.29) (0.04) (1.70Y- OC/ODP() 4M3 4.187 -0.499 (1.70)*' (0.99) (1.51)"* XGNFSGDP(S) 0.130 -0.071 -0.042 (1.42)*os (1.07) (0.53) CONSTANT -13.433 4.273 -6.889 (1.05) (0.03) (O.S2) AdjusedR2 0.24 0.66 0.77 DF 29 29 29
Note: I - ltoal _vestmen,LlG laborforme govh, HC - humancapital, OC oonsumaiow,XGNS - pou of goods ad nonfcor sesviocs, GDP- gss dometicpro4uc at nmadrt-d, and DF - degreesof feoodom. Al eqwats ar estmod wing SHAZAM7.0. * Sttiloaly alalos at S feteent -3 Statsticaly awgmt at 1o pefent. Saisticay s _nifcntat 20 percent
SP MBiDS eStiffmtes.
180 Annex MBThbe 7- Creas-EeOU.myFadmatu OfExtede EnhancedGrowith MDel U, I19790 (dendet avaUble:ral GDPgowth rate)
Haiti Basbatos,Dominican St. Lucia,and and Repli St. Vmcn and the Tridad and Tobago and Jamaica Grenadin
DIVGDP(%) 0.581 0.468 -0.155 (0.85) (3.29)' (1.34)' PDJ/GDP(%) 1.010 0.236 0.415 (0.26) (0.39) (3.84)* LPG (%) 35.06 -1.220 2.584 (1.89)** (O.S6 (1 ** HC (yeas) -6.554 0.221 6.968 (1.80)Y (0.25) (1.15) GCIGDP(%) 1.444 -0.172 0.662 (1.21) (0.84) (1.27) XGNFSIGDP%) 1.389 -0.071 -0.036 (3.26)* (1.02) (0.28) CONSTANT -102.940 -2.341 -7.142 (2.02)" (0.21) (0.35) AdjustedR2 0.49 0.66 0.97 DP 16 28 16
No-e: DI- domesticcomponent of invetmeat,FDI reigndirect invstment, LFG - lbor frc growth,RC = humancaptal. GC = govern-meconsumption, XGNFS - expostof goodsand nonf_cr serein, GDP = goss domedioproduct at mardt price,and DF = degreesof freodom. AUeqans are esimatedusing SHAZAM 7.0. - Statisticalysig_ificnt at 5 pere ttstically sigifiant at 10 Peret *" Sstiafy gnifiae at 20 percent.
Sores: IBtD Staffetmate.
181 Ann M Table 8: S d Grow Ras and Indator Avera , 1979-90
Growthof 1Al Invtuent/ Labor Force GDP(%) GDP(%) Growth(%)
Angua and Bait,uda 6.8 33.9 0.5 TheBahamas 4.7 17.4 2.0 Daibados 2.2 19.7 0.3 BDize 5.9 22.6 2.7 Dominioa 3.6 33.6 0.0 DomminianRepubli 2.4 20.9 22 Grenada 5.5 39.5 0.2 Guyana -2.1 25.6 0.5 Haiti 0.4 14.8 1.9 Jamaica 1.0 21.6 1.3 StKlttandNevis 5.8 38.7 .0.8 St Lucia 5.7 25.8 1.9 St. Vincentand the Grenadine 6.1 29.5 0.9 Surinacne -2.2 13.5 1.7 Trinidadand Tobago O.S 22.4 1.4
a. Averageof the yearlyrates. Source:IBRD. World Tables 1993.
Anez I Table9: TOta Facor Poductlvlt Labor and CqpIa Inu_, 19"79-
GDPGrowth Duo to Toa Factor GDPGrowth k Facto Accumulation ProducitiLyChange Antiu and Baibuda 6.8 .6.6 13.4 mTeBahamas 4.7 6.0 -1.3 Baibados 2.2 3.6 -1.4 Beliw 5.9 6.4 12.3 Dominlca 3.6 1.0 2.6 DomEincanRepublic 2.4 6.9 -4.S Grenada S5. 1.2 4.3 Guyan -2.1 0.9 -3.0 Haiti 0.4 2.6 -2.2 Jamaica 1.0 SS -4.5 St Rit and Nevis S.8 1.3 4.5 St Lucia S.7 -6.3 12.0 St Vincentand the Gradie 6.1 0.8 5.3 Surname -2.2 2 -4.7 Trnidadand Tobago 0.5 2.1 -1.6
a. Avage of the yeary rm. Sowres: Ann m, Table 6 and8.
182 ANNEX4
ExternalShocks and Performance MeasuresMethodology
183 EXTERNAL SHOCKS AND PERFORMANCEMEASURES: GENERAL METHODOLOGY
I. EXTERLNALSHOCKS
In this annexthree typesof direct shocksand one indirectare considered: Direct Shocks A. Termsof TradeEffect B. GlobalDemand Export Volume Effect C. InterestRate Eifect Indirect Shock D. CumulativeImpact of AdditionalBorrowing due to Shocks
A. Terms of Trade Effect(TaWT) The methodologyused to estimatethe impactof terms of trade variatio is presented. Firsdy,import and exporn pi. e effectsare estimatedseparately and later combinedto obtainthe total termsof trade extead shock. This approachcan be extendedto further dia based on differenttade categories. Terms of trade Importand exportvalues, gained or lost by the countryas a consequenceto changesin the teraisof trade, are obtainedusing the followingaproach.
TOIT, = TOIM, - TOTX, t=(1971,...,1991) TOTrt is the net effectof terms of trade variationat time t due to importand exportpric changesfrom time t-1 to t. The conventionadopted is that unfavorableterms of trade effect TOTt is positive.
hnport effect TMO,t= VM,(PMK - PM.) A positivevalue for TI71k, representsa loss in importsvalue by the countryat time t, due to an unfavorableimport price changefrom time t-I to t.
VM,= M/PM, = volumeof merchandiseimports by the countryat time t M,= valueof merchandiseimports by the countryat time t (CIF, currentUS$) PM&=unit valueof importsat time t
185 Export effect
TOT3, = VE, (PE, - P4 1) A positiveTOIX, meansa gain in exportsvalue by the countryat time t, due to a favorableexport price variafionfrom time t-l to t. VE,= E,/PE = volumeof merchandiseexports by the countryat time t E,= valueof merchandiseexports by the countryat time t (FOB,current US$) PE,= unit valueof exportsat time t Addingtogether the importand exporteffect:
TIOT = V (PMK- PMK)J- [VF,(P, - PEA,)J
Thus, a positive TOTrt is an unfavorableshock. Note that r°,T1 gives the net resultfor one year. To computethe terms of trade effect over a numberof years, these terms may be summed.
B. GlobalPemand. Export VolumeEffect (EVE)
The global demandshock is estimatedby lookingat the quantityeffect The Export VolumeEffect indicates that the country'sshare of worldexport is changedas a consequence of growth/slowdownin the worlddemand. A positiveEVET is an unfvorable shockon the currentaccount.
EVEt= E., (rXVW,- GRXVWt) t=(1970,..,1991)
EVE is the valueof eports by the countryat time t if it is assumedthat there is no changein pre fromtime t-1 to t. EH= valueof meadise exportsby the countryat timet-I (FOB,current US$) IXVW,is the exected rate of growthin worldeport volumeat time t, basedon theprevious ten years. The estimateis obtainedthrough:
LogXVWi= a + bt4 b = TXVW i=t-ll,...,t-l XVW, = volume of world merchandiseexports at time t
GRXVWt=(XVW, - XVW11)/XVW.1 growth rate i world exportvolume from time t-l to t
18B C. Interest Rate Effec (RM
IRFt = LTVR,.. (i - i,) t=(1970,..,1991) IRF, is the loss/gainin interestpayments at time t causedby movementsin the international interestrate.
LTVEIRis the volumeof long-termdebt at time t-I sensitiveto changesin inter na intert rate. It is computedby addingtogether the shareof publicand publicly guaranteed long-term debt at variableinterest rate ane the total privatenon-guaranteed debt. The later it assumedto be interestsensitive.(See World Bank, World Debt Tables 1992-1993) i = Six-monthsI1BOR on US dollardeposit. (Periodaverage in percentper annum). A positiveIRF,, as determinedly an increasein theinternational interest rate, meansa worsenn in the country'sobligation or an unavorableshock.
D. Cuxmullte Inpact of AddhionalBorowing due to Shocks(CUM} Assumethat additionalnet etternal financingat time t due to impactof all shocksat at time, net of otherresponses, is ANEP,. Thenat time t+ 1 this gives ise to an additionalburden of CUMK+1where
CUTM+l= ANEFt(i+ 1 ,) If one continuesto assumethat the interestis paideach periodthen at time t+j
CUK+j = ANEFt+j., (it+) + ANEFt+j.2 (1+i+)i,J+3 +...
Thus the cumulativeimpact of additl net eal financingcan becomequite hle. On the other hand under favoraAleshocks ANEF may be negativethereby reducmg or evenmalkng the overaulburden favorable. This couldthen be interpretedas an increasein resaves.
IL POLICY EFORMANCE MEASURE
Four measuresof rm responseare considered: A. ExportPromotion (EPR) B. Import ntnsity (MSUB) C. Economic Compression(ECOM) D. AdditionalNet External Financing(ANEF)
187 A. Ezport Promotion(EPR)
EPR, = E', - EH, t=(1970,..,1991)
EPR, provides a mesure of export promotionby the country at time t, assumingthat prices had not changed from -*1t-l to t. The differencebetween growth in the country and world export volumesis used to gauge the export promotioneffort undertakenby the country.
EAt = E1 (1 + GRVEJ EA, is the value of exports at time t, at the price prevailingat time t-1. F3>t= value of merchandiseexorts by the country at time t-l (FOB, current US$)
GRVE1 =(VE, - VE,1 )NVE, growth rate in the country export volume from time t-I to t VE= EP = volumeof merchandiseexports by the country at time t EH, = E.14 (1 + GRXVW)
EH, is the value of exports at time t determined by changes in the volume of world export, asuming that the price had not changed from time t-l to t.
GRXVW, =(XVW, - XVW,1)/XVW,l = growth rate in world expr volumefrom time t-1 to t XVWt = volumeof world merchandiseexports at time t
Substitutingwe obtain:
E3PR= E1 (jGRVE- GRXVW,)
A positive EPRMindicates that the country increases its share of world exporu. This result might be interpreted as the consequenceof an export promotion policy. However, EPR, is strongly dependenton changes in intemationalconditions which are independentfrom domesticpolicies.
B. Inport Itensity (MUB)
MSUBt = MB, - MA, t=(1970,..,1991)
MSUB,is a measure of import intensity computedas follows:
MH, = I4l[1 + E[I(GDPGR)]
MhEis a hypotheticalvalue of imports at time t, assumingthat the import elascity to GDP had remained at its "hisil" level and that there is no change in price from time t-l to t.
El1 is the import elasticity to GDP expected at time t based on the previous ten years and computedby r s
188 logV1= a + blogODPi b=19s i=t-l,...,t-ll. V, = country'simport volume index at tme t
GDPGR1= (GDPt- GDP,,)/GDP1 growthrate of country'sGDP fromtime t-1 to t MAt = MK.(l+ GRVMJ
MA,is the value of impOrts attime t,if it isassmed that no age in pricefromtime t-1 to t had occuned.
GRVMK= (VM, - VKM)/VM,1 growh rate in the country's import volume from time t-l to t Substituting,
MSUB, = M.1[E1,(GDPGP)- GRVMJ Technologicalchange is pxrily capturedby changesin the elasficityover time. If import intensificaion s place,it meansthat country'simports are higherthan eWected, and therefore, MSUB1 will be negative. C. EconomicCompression (ECOM)
ECOM, = MVT,- MH, t=(1970,..,1991)
ECOMtis a mea £ofthe change in importsat te t due to ompressionof the eonomy.
MVT1 = MK[l + E!GDPT,)J GDPI, is the epected trend rate of growthin country'sGDP at yeart, basedon theprevious ten years.
logGDP1= a + bt, b,=GDPT, i=t-l,...,t-11.
MHt -=MK[1 + EL,(GDPGR)J
Substitutingwe obtain,
ECOM,= M,l[L(GDPT, - GDPGIJ] Wheneconomic compreso tas place,ECOM, assumes positive values. Note that ECOM,is a measureof the effectof changein the grwth rate alone(i.e., doesnot includeeffect of change in elascity).
189 D. Addional Net External Ehiag (ANEF)
ANEP, = [tr , + EVEt + IRF, +CUM,) - (EPRM+ MSUBt+ ECOM.)]
ANEFt b the ex-post eqilibrium measu of ex al fiacing required to compensat the differencebetween the total extermalshock and performanceresponse measures. It is positive when an additionalexteral fnacing is required.
EXTERNALSHOCKS AND RRMANCE MEASURES: METHODOLOGYAPPLIED TO SPECIFIC TRADECATEGORIES
In thissecton, themethodology adopted above is extendedto computethe effectof exten shockson specdficexport categores. Agan, varations in prices and quantitiesare escmated sepraty to isolatethe impactand the raction to differentexena shocks. In the case of the Caribbeancountries, banana and sugar are used as examplesof export commodities. The methodology,howev, can be exteded to other trade categories.
L EXPORTS
In thispart, the methodologyto evaluatethe effectof price and global demandshocks on the exportof banana/sugarand the exportpromotion response measure is presented.
A. External Shocks
Effect of price hag
It is ass_ud that the countryis a price take in globalmarkets. The effectof variatins in the word marketpice of banana/sugaron exportrecepts is computedon a yearby yearbasis:
TOTCt= VEC1t (P. - PEC) t=(1970,..,1990)
A positive TOYC is a loss in bWana/sugaexport receipts by the country at time t, due to unfavorableprice changesfrom time t-l to t.
VEC]= EC/PEC, = volumeof banana/sugarexport by the countryat ime t EC-= valueof countryexport at ime t (FOB,current US$) PBCt= price of banana/sugarexport at time t
190 B. Export Volume Effect (EVCE)
EVCEt= EC,, (rCXWW- GRCXWI) t=(1970,..,1990)
EVCE1 is the value of banara/sugar exports by the country at time t, if it is assumed that no change in price from dme t-l to t had occurred. A positiveEVCE, indicates an un1vorable shock on the country's cunent account.
ECt-X= valueof banana/sugarexport by the countryat time t-l (FOB,current US$) TCXW,is the exp riateof growthin worldexport volume of banana/sugarat year t, basedon the previousten years. The estimateis obtainedthrough:
logCXWi= a + bt, b = TCWt i=t-ll,...,t-l GRCXWt = (CXWt- CXWtl.)/CXWl growth rate in world export volume of banana/sugarfrom time t-l to t
Cxwt= CWX/PWXt = volume of worle,banana/sugar exports at time t CWX,=value of worldbanana/sugar epos at time t (currnt US) PWX,= worldprice of banana/sugarexports at time t
C. Perormance Response Mesure
Export Promotion (EXCOCPR) If there was an exportvolume shock on banana/sugar,it is of interestto observehew the country esponded.We analyze-this by esmating the coreponding expaotpromotion effort.
EXCOCPR'= EXCOC1 - EXCOCH t=(1970,..,1990) EXCOCPR,provides a measureof banana/sugarexport promotionby the country at time t, assumingthat price had not changedfrom tme t-l to t. It is the differencedue to changesin volumeover time whichreveals whether the coutry has increasedits owninternational share of the trade categoryhere analyzed. EXCOCt= ECtj (1 + GRVECQ) EXCOCtis the valueof banana/sugareWports by the countryat time t, if it is assumedthat no changein price fromtime t-l to t had occured.
EC~, = valueof banana/sugarexport at time t-1 (FOB, current US$) GRVEC, = (VECt - VEC1,)IVEC,.1 grwth rate in the country's export volume of banana/sugarfrom time t-l to t EXCOCKt= ECM1 (1 + GRCXW3
191 EXCOCH,is thewalue of bamna/wsugarepots at time t deemined by annualchanges in the volumeof banana/sugarwold exports. Againit is assmed at the price remainsat dme t-l Li.
GRCXW,- (CXW,- CXW4)/CXW41 gowth rate in world export volume of bangaasugarfirom time t-l to t Substiing we obtain:
EXCOCPR = EC,&1(GRVECt- GRCXW,) A poditveEXCOCPR ws that the countryincreases its n atenationalare of basugar W9ort
192 Anne IV Tbb 1: JAMAICA- tmcsi Shwck ad Nicy ft fasaeM ssla' (as a pecet of GDP)
,,, , 94 ,, 19 197 8 1950 11 - 1" 19 ON 1 1 1 no8 1 190 19l91
Ta.s.tTdaEllet 2.22 25 3a42 LA 43 -1.76 3.17 .6 4.15 2175 4.-48 -1.12 4.32 4.75 4. S5 -1.84 7.92 -3M .s
__q.lit~Ua 4.) -a0f 034 5. -an 073 0.41 -0* 1.0 .ZL I.Q 0.0 -1.16 as 034 . -1.20 483 0.0 -06
_1u A 4.01 15 0.M -t2 46 0M 0Q 0.3 0.25 0.M 4.6 44 0. 494 4- 0.1 0.2 031 4.25 48
Ad_ OAD&bd 0* .m 040 0.18 041 GM 4. 040 0.67 1.8 3.18 S 624 4.0 4.0 3m.3 i 0 4.77 45
Tod L5 3.40 4. 4.45 -1. 24M 4. 2.16 T76 7.01 4X 1S 4.24 2X0 4. 12 LA IM1 .13 4.55
M1 297 2. -IJ 4.4 .1.16 -.35 3n 3* 4* 14.41 9 9.16 40 16 45 92 A 12. 1.5 5.75 Bat h i -27 4.63 0.9J 37 90 Q 3. . 0.17 2.27 4.17 4.34 .1* .11.6 4.90 241 -OS 3.D 4. 4.13
bt_st hi 2.7 4.2 . -5.4 4.6 LS 3107 1. 0.31 4.25 2 -S.23 1 -3.7 5.33 -325. 4.25 4-1 3.12 -1.22
Buinh C.qu.u 1*1 1.51 2.56 1.79 4. 1.63 4 IJ9 2.2t 1.45 4 -.IA 477 1.79 -12 -2. 4. 1. 152 0.15
tawl 1.50 340 4.78 4.4 -1.86 40 4.23 2.90 7.46 7.A 4.25 US 42 3.0 42 642 1.01 11.6 3.1) 4.5
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- - .3' . M133MR5.,uPwa w"P vDrjvp Mrq Al =11"d Ann IV TaWbb3:DOMICAN REDLUC - Exal Shksu PandbNy P _ewmacee (as a perat of GDP)
I972 197) 1974 15 19k 197 1s 17 1 1981 in 1U 196 U 6 U IS 19 U 19
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a,i agm Iam 14 3935 Ms i9s" 398 19" too0 Mta 192 Ig6o Is"4 1o$ Ho9 36 tno u@ tim 199
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FISCAL.D)s54XIP .27. .31.9 -30.2 -13. 19.2 .16.7 -14.0 -13.6 41.5 47.9 58. 21. umO913A~yoam a. @p)(s)" 9.7 .3.9 21.4 324 7.0 9.1 4.33. .0 -.It 0.7 10. _.5 3.4 1.7 5.4 L.i 44.5 53. 4OA 313 (130m-lo 100.L7 300. 109.7 324. 345. 347 153.4 145. 7L0 94. 74.4.4 4 45.4 Naiad ad$ 1.0 I.t it1 2.1 2.4 1.4 14 1. 1. 2.4 La8 5A 3.0 1.8k 4.5 IL, 9. 0.0 I 27.2 59.5 313. Nmtul3kw"a gpg" 59 5.9 5.9 it9 59 5.9 7.0 9.1 107 314 32. 3me as. m2. Me. t3l3 3.0 251 Su* 30. Pm3wM.-..k8IFe tOU (t967 US3) 430 410 540 $2 soU 5no 45 3 440 410 430 410 140 13 530 240 310 21 230 210 Owrn D*m6. hwntat pt m d 13 140 130 1us 130 10 too ISO 3 N 3ID 1km so meO 310 1310 330 5 to 3 3n0
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Chow la ban. (U8t33ka)O* *2 .8 16 .46 -AD is I I -37 57 45 to 0 0 .24 .5 .3 a 4 .30 -a .47 MU3ECIUB0C88L DIDWATOM#
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A. b b - A.t S tt;a S tAt; ~~~~I Amu IV TableS: TRINIDADAND OBAGO- SelectedKesoumllndlcats
1971 1972 1973 3974 3925 293 1917 *93 *979 NW1 1963 £961 19O 199 19W NW| NP £99 NW" NW £
4 2. L9 94 11.7 s 4.4 - 4* 1.4 -&I -L.9 - 4 .7 *. 29
01(S) Si 9.3 1 2LO 7.0 W 1.71. 103 14.7 173 14.2 13 12 13 7.6 7.7 0" 7J ItA4 110 X9 1 < _ _~(USuI3us) 4u1.. .119 -1.9 339 U4 I1 4 1.7 43 17 S1 4.3 -t2.S 44 41.1 .33 .4 44 .4 L97 43
Pi -ap1mU=W SS so 54 42 43 4 Am MSt 46 so a e7 61 S1 4 Sa a a A Oasa1 0 Uw_mug* 34 Is U4 13 4 n u is 14u 42 3 16 17 39 23 2 23 23 17 £4 Is OM DmsiswAidu2 34 It 26 22t 25 27 so 23 1I 29 23 26 2n £9 32 20 u4is £7 to Ua43303 is So 23 t6 39 2D 23 1 7 27 22 26 27 z 21
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-d3a.£spgssh t6s3.(£3P-£IU3 7.3S 7US 7U. t3.7 9 *tA0 327 tlOA 10M3 IIIA £3.7 M"l bs _s4 hdiuit(£97-£OI sz 90 39 3 401 ?4m_ mid p 4N6172tl9 UN) 26W 23 21 2W 2If0 14to 34 74 "a 40 40 43 SW 30 24 243 213 NW M £7 aSmDui£s ma PCpaD 430d 40U0 M in 73 M M M AWm 3 I5 M II 2 14 £ND 1010 so M M 60
ts4 VAR(M 9.. M2 . its 240 96 39 40 Mt M M4 3m 143 2 *44 INS 10 24 2297 2310 21m 2_0111911D 2(S) 1* £1 n2 s 6 4 Si 14 Is Is Is is to Is 20 39 3 40 St I 47 *AMP 3.3s'. (USOW. -32 23 7 28 4n 4 4 4S04443MM7 4. 8 6n go 722 26 to -4 an to SMM10 SOCUL3160A7'
mug mad P*Is S 9Me 94 91 3 9 91 2 ff 6 96 9 3S 91am_ 3*s_doual4 4a 56 St Q£ 70 73 7 77 U 4 o loo M" _"howas" 2.8 4. 4.7 4.6 4.5 4.4 3* 39 4.2 3.4 bft U*OdkvaN 43 42 41 40 40 S9 38 7 # 34 32 St' 3 23 7 25 24 2s 21 20 1 9
S. WV&9Uf_ 2. T341.mw.Am SVA p4' j.u
4. 73.m 4 q .&9- 3.112. V-1_ a1FlaW ami£ lmdadhau. sb _ut S 1a~£9;0e.WW. 6. 1? hUm sa3807 d.dma) WI. 7. 39-f3bgssRs1~32bni0a3Vd 9. 0.4.4 tqf bls ufmALm 4 f
_u. _:d 35*3207136590, 9m N, aM.. lld, Mi'. 3711 IFwS Y 190.d Rl. Anma IV TIbe 9: JAMAICAaud DOMINICANRIKUDUC - S.gr Sbok (as a percet of GDP)
1971 1972 1973 1974 975 1976 1977 1971 1979 19S0 1961 19 1 19S4 1965 196 1917 198 19f9 190 t99t JAMAICA
Pdc 4Q050 4.44 4.0e -1.4 -2n -2.20 -0n 0.0.0 4 04 S.5S 0.14 0.13 4.27 -. 01 0.70 4.61 4.50 4.24 0.29 0.26 0.06 (4- ) b n tu&vboihck
BTh_dVom Bffe 0.12 0.04 4.09 0.07 037 4.03 4.51 0.47 0.04 0.09 4.02 4.13 0.IS 0.09 0.06 0.06 4.04 4.16 4.0.0 1.01 4.04 (+4-)I ontmONabeb*ck
TOt Shock 0.07 4.41 4.04 -1.67 -2.36 2.18 4.64 0.32 0.08 4.46 0.12 0.00 40.12 0.07 0.76 0.53 4.55 4.40 0.28 .24 0.02
_xotPvcoda 0.11 40.26 -0.29 0.07 0.07 -1.06 4.48 0.11 4.09 -0.57 4.21 o.0s 0.12 0.42 -0.07 -0.03 0.11 0.13 40.31 0.21 0.09 (+) ba hwombk pcfonwAwe
DOMCANRErUBuc
Pdbe Fcc 0.15 40.07 -1.52 -4.77 -7.23 *.14 1.40 0.13 -0.04 -2.0S .2.64 3.27 0.42 -0.6 t 21 40.47 0.73 .t011 4.59 4.42 -0OS (+) 1 omkvoi"ebdiok
BqE, VobmuFBc 0.31 40.12 -0.28 0.26 1.16 -0.07 -1.46 0.83 0.0 0.13 -0.03 4.S 4.39 0.19 0.11 0.12 40.06 4.20 4.01 0.03 4.03 (+2-)ho vahvombledoc
TolI Shock 0.46 40.82 .S1 I4.61*6.06 8.07 40.06 0.91 0.01 *1.92 -2.87 2.70 0.8 40.41 1.39 4.3S 0.6S 40.31 40.60 4.39 4.08
2APOctPmmota 2.01 0.38 40.69 .0.09 0.27 -0.24 40.80 4.12 0.27 40.4S 0.14 4.76 0.74 -'.37 -1.19 4.79 0.59 40.37 4.07 4.57 4.21 (+4-) a &wnub pfafmim
Saw Bohku an dat fhm FAO dataaIn DM uid CEM
-a Anne IV Table 10 ST. LUCIA, ST. VINCEN and the GRENADINES and DOMINICA - Suw Sbhok (as a percent of GDP)
1971 1972 1973 1974 1975 1976 I977 197 19 96 191 19B1 96I3 1964 19# 16 1967 1968 1969 190" 1991 Sr. iCI
WeeUEea .1.21 4.S6 4.91t .tA2 4.71 0.799 -.26 4.911 t35 264 4.53 436 4.59
3qsmV ebit 0.33 0.17 0.02 0.26 1.45 4.65 0.9 4.9 4-.6 4.17 -1.26 -1A -1.14
lnSbod -1.89 4. 4.90 -1.2 .73 4.05 4.99 *4.? .2.01 2.4 -1.79 -2.46 1.73
BS _0 4.66 4.5 2.34 46 2.70 2.54 1.92 5.90 -5.79 9.76 -4.0 4.9 .5S4
IL WOMILE mi dhb
Fdz%ab~ 0.17 4.44 -3.66 4.00 .2.15 4.57 .2.61 160 43-0. -231 4.32 4.83 1.47 -15 .1.45 .2.35 -1.15 4-63 3.35 -2.10 4.78 (4-) 6 onmhudwbocc&
W VoOmWMed 4.67 0.09 0.23 0.S1 0.67 03 4.36 4.53 0.40 0.15 0.02 40.29 1.26 4.96 0.27 1.LOO 4.45 40.35 -1.17 -1.75 -1.21 (4-) 6 im vm&wambbdk TdoWSbmck 4.50 4036 .3.6 .3.49 *1L28 4.92 -2.9 -2.34 46.46 .2.17 -4.30 .1.11 2.74 -2.51 .1.18 -335 41.0 40.77 2.6 -3.6 -1.9
Bzpan eemdam -1.79 4.68 4.98 0.63 .3.9. 12 -2.94 1.48 -3.27 .1I5 4.47 -2.27 4.6 .1.79 3.23 1.41 -. ".4 6.73 122 0O5 .S.03 (4-) ha bvogablqpuafcen
DIXINBICA
Pds BR&c 1.S2 40.67 .7.33 0.65 1.37 -5.41 -.3.3 -1.65 -1.13 -1.29 1.37 -1.01 40.77 1.54 -1.79 .4.00 .1.10 -1.41 1.3 -1.22 40.49 (4-) 6 m vfmi&ycub-hock N+ X BqwaVobm EBke -1.41 0.25 0.71 1.23 1.34 0.53 -0.44 -0.72 0.63 0.11 0.01 4.30 1.64 -1.12 0.29 40.89 .0.65 40.26 .1.56 -1.71 .1.10 .S * 7 .0 *.t 27 t1 *.S -3 10 4S S 3S 19 (4) 0*940k 43 . .9 *.B 49 29 23 7 4a *.9 $2 1 14 67 .2 05 5e TOW8N Shook P 0.1117 4OA4 -6.62.B 1.80z 2.70s9 4.691 .2.792 *2.57.S 4.50sn 4.18*.2 14447 -1.32-. 0.87 0.42 -1.50 4.89 -1.75 -1.7 430S1.5* -2.93
EqmV_EoomcIiu0 4.97 -1.09 -. 41 1.56 O.tS8 3.72 -2.61 2.71 012.34-3.81 10.61 -0.42 235 0.23 0.65 5.31 3.81 2.60 4.89 0.10 *.26 (- ha hvmablpafomanI
SoewwMWmam bi ainod tamfv AOd*Wbm ihEDM madCEM StatisticalAppendix
203 STATISTICALAPPENDIX
TableNumber PageNumt er
EconomicIndicators
1.1 CaribbeanCountries - BasicSoao-Economic Indicators 207 1.2 CaribbeanCountries - Growth of GDP, 1980-92 208 1.3 CaribbeanCountries - PublicSector Savings, 1980-92 209 1.4 CaribbeanCountries - Balanceof Payments CurrentAccount, 1980-92 210 1.5 CaribbeanCountries - Tourism,1980-92 211 1.6 CaribbeanCountries - SugarExports, 1980-92 212 1.7 World SugarExports, 1980 and 1985-91 213 1.8 World SugarImports, 1980 and 1985-91 214 1.9 World SugarProduction, 1980 and 1985-91 215 1.10 World SugarConsumption, 1980 and 1985-91 216 1.11 World SugarSupply, Domestic Consumption, Stockto ConsumptionRatio, 1980-91 217 1.12 CaribbeanCountries - BananaExports, 1980-92 218 1.13 World BananaExports, 1980-91 219 1.14 World BananaImports, 1980-92 222 1.15 AverageGrowth Rateof BananaImports 224 1.16 World BananaProduction 225 1.17 CaribbeanCountries - BauxiteExports, 1980-92 229 1.18 CaribbeanCountries - AluminaExports, 1980-92 230 1.19 CaribbeanCountries - Endof PeriodInflation Rates, 1980-92 231 1.20 CaribbeanCountries - RealEffective Exchange Rate, 1980-92 232 1.21 CaribbeanCountries - Net ExternalCapital Flows, 1982-92 233 1.22 CaribbeanCountries - Net ExtemalCapital Transfers, 1982-92 234
SocialIndicators
2.1 CaribbeanCountries - EducationIndicators, 1985-90 235 2.2 CaribbeanCountries - Adult IlliteracyRates, 1960,1970, 1980, 1985, and 1990 236 2.3 CaribbeanCountries - PublicExpenditure on Education,1985 237 2.4 CaribbeanCountries - PublicExpenditure on Educationas a Percentage of GNP, 1975,1980-88 238 2.5 CaribbeanCountries - PrimaryEducation Enrollment Ratios,1970, 1978-87 239 2.6 CaribbeanCountries - SecondaryEducation Enrollment Ratios,1970, 1978-87 240 2.7 CaribbeanCountries - HigherEducation Enrollment Ratios,1970, 1978-85, 1988 241 2.8 CaribbeanCountries - Healthand Nutrition Indicators,1988-92 242 2.9 CaribbeanCountries - InfantMortality Rates, 1980-92 243 2.10 CaribbeanCountries - GovernmentExpenditure on Healthas Percentof Total GovernmentExpenditure, 1980-86 244
205 COPINGWMI CHANGESIN THEEXTERNAL ENVIRONMENT
TableNumber PageNumber
2.11 CaribbeanCountnies - Population, 1981-1992 245 2.12 CaribbeanCountries - PovertyIndicators 246 2.13 CaribbeanCountries - Indicatorsof SodafSectors, 1987.89 247 2.14 CaribbeanCountries - Indicatorsof Womenin Development,1980s 248
EnvironmentalIndicators
3.1 CaribbeanCountries - Scale Factors, 1980s 249 3.2 CaribbeanCountries - Indicators of Deforestation andSoil Degradation, 1980s 250 3.3 CaribbeanCountries - LandUse Pracdces, 1980s 251. 3.4 CanbbeanCountries - Selected Indicators of CoastalResources, 1985-87 252 3.5 CaribbeanCountries - Air andWater Pollution and Causesof Death,1980s 253 3.6 CaribbeanCountries - Sectoral Composition, 1990-92 254 3.7 CaribbeanCountries - SelectedIndicators of NaturalResources, 1990s 255
206 Table 1.1: CARIBBEANCOUMTRIES - BASIC SOCIO-ECONONtC INDICATORS
...... _..
Life Infant SUP Per Adutt Expectancy fotauity Dally Capita PopuLation ILLiteracy of Birth Rate CalorSo (USS) ('000) Rate(1) (years) per 1000 Intake 1992 1992 1992 1992 t992 1989
......
Antigua and Barbuda 4870 e1 5 74 19 2222 TheBahanmas 12020 263 1 72 22 261 Barbados 6530 259 1 75 9 3279 Betife 2210 200 9 69 19 2656 Domdnfca 2520 72 6 72 la 2810 DominicinRepubl1c 1040 7321 20 67 65 2530 Grenada 2310 91 3 70 15 2706 Guyana 330 806 4 6S 50 2710 Haiti n.a. 671S 47 5S 97 2013 Jatic 1340 2394 2 74 13 2609 St.Kitta and Newis 3990 42 10 68 24 2609 St.LuCia 2900 1S6 10 71 Is Z595 St. Vincentand the Grenadines 1990 109 18 71 22 2604 Surfname 3700 467 S 69 37 2975 Trinidadand Tobego 3940 1268 4 71 11 28S3
...... Source:Social Indicstors of Development,World Bsank; Demographic and Health Surveys. NJ Table 1.2s CARIBBEANCOUUMTIES--M NTI OF GP, 1980-92 0i -- (constnt mrket price)
...... ^.*...... 0-0 . *...... , _ 1960 1981 18 18 '1964 196 1986 1987 1986 1969 1W9 1991 1992 _......
Antfus and Barbiuda / 6.7 5.0 0.4 6.9 7.5 8.8 9.7 9.0 7.7 6.3 3.4 4.3 1.7 The bA 6.7 -9.0 7.5 3.2 6.4 5.2 2.6 3.2 2.0 0.2 0.9 -3.1 -1.2 Uarbmdo 4.7 -3.2 -S.0 0.4 3.6 1.1 S.1 2.5 3.S 3.6 -3.3 -5.4 -2.9 IbIN2e 5.8 0.8 *1.6 -0.4 S.S 0.4 3.S 12.6 9.6 12.9 8.0 4.7 4.9 paufnica of 16.4 6.4 2.4 2.1 S.4 1.7 6.8 6.8 8.0 -1.2 6.4 2.2 2.1 OomnicanRepultfc 6.0 4.1 1.6 4.6 0.3 -2.6 3.2 7.9 O.? 4.1 -5.4 -0.9 7.6 Srterda of -1.5 2.1 5.3 1.4. 5.6 4.9 5.5 6.0 5.3 s.r S.2 2.6 -0.9 Guyan 1.7 1.5 -13.2 -6.8 -0.2 0.1 2.5 -3.8 -2.6 -3.3 -2.5 6.1 8.0 Haiti 6.4 -2.7 *3.4 0.8 0.3 1.1 0.6 0.6 .1.5 -1. -3.0 -4.0 -10.8 Jamica -5.8 2.S 1.1 2.3 -0.9 -4.6 1.7 6.2 2.9 6.9 s.? 0.3 1.2 St. Kitteand ltevfs o/ 3.9 S.1 6.3 -1.1 9.0 S.6 6.3 6.8 9.8 6.7 3.0 6.8 5.0 St. Luciao/ -0.8 1.2 3.0 4.0 S.0 6.0 14.9 1.7 12.7 8.S 3.9 1.6 6.6 St. Vlncent andthe Grenadines 3.4 7.2 5.2 S.8 5.6 4.5 7.2 6.3 8.6 7.2 7.1 3.0 4.9 SUr1iwD -6.6 6.9 *3.8 -4.1 -1.9 -2.3 -2.0 -13.3 4.1 3.1 0.4 n.e. n.s. Trinidadwd Tobago 6.8 5.2 1.7 -7.3 -12.8 -2.9 *1.7 -5.0 -4.0 -0.? 1.5 3.1 -1.6
...... ,...... *** ^**** eJ Factor cost. n.a.s Not 1alable. Sources IIID EcnomecMm d. IUDLe 1.2: C^IIUBtM WUIMA"Aw'r'LfOL .C16sui OsFINtOp 17OW-7f
1980 1981 1982 1983 1984 1965 1966 1987 1968 1969 1990 ...... 1991 1992 ...... (USSoili on) Antigueend 8arbuda 0.5 2.1 -1.0 2.0 4.2 10.3 18.9 7.7 8.9 -7.7 -1B.1 -15.3 -13.4 TheBahamas l 41.4 37.1 12.0 -4.5 5.0 28.7 53.9 53.3 17.9 -12.6 12.2 -21.9 53.2 Barbedos 40.1 29.9 42.9 62.4 48.4 37.3 27.1 12.7 58.3 101.9 13.1 68.1 85.8 Belizeb/ 7.7 4.1 -3.5 -5.8 4.5 11.0 18.1 23.8 37.9 37.7 48.2 51.9 41.9 Dominlca -7.4 -2.5 -1.3 1.4 2.3 s.8 9.1 10.7 12.4 8.5 6.6 5.9 2.4 DominicanRepublIc 5t.2 25.8 -104.4 32.5 227.2 118.9 129.0 377.8 419.1 405.4 223.2 482.5 687.3 Grenade -0.2 -0.6 1.9 2.0 4.0 4.5 2.1 -0.0 9.1 -6.3 1.7 3.5 3.7 Guyana 12.7 -96.0 -103.0 -1B1.1 -130.5 -203.6 -163.1 -90.8 -79.6 -11.5 -84.9 -49.0 -32.9 Haittc/ 3.4 -13.7 9.3 19.1 11.3 20.2 2.2 -13.0 8.7 2.4 -11.1 -16.1 -190.7 Jamaica a/ -201.3 -137.6 -166.6 -312.1 -35.5 -19.8 110.6 122.5 110.9 201.8 277.2 306.9 274.0 St. Kitts and Nevis 2.7 -0.1 -1.7 -2.2 0.9 -0.9 3.7 7.3 6.1 8.1 5.4 5.4 13.0 St.Lucia . 3.5 4.0 -0.0 3.7.. 6.4 10.1 16.6 23.6 40.0 36.4 40.3 46.4 53.4 St. Vincent and the Grenadines -0.3 -1.3 0.9 -0.9 5.1 9.1 10.6 13.0 12.0 15.4 16.5 16.8 17.1 Suri e -0.6 -22.4 -39.7 -122.3 -135.4 -182.1 -241.7 -270.6 -255.8 -197.9 -85.4 -346.4 -457.6 Trinidad and Tobagoaf 1675.1 1495.8 520.3 188.9 145.9 228.2 -65.2 -59.1 -213.8 -143.0 -0.0 169.4 -46.2
(as percent of GDP) Antigue *ndB rbuda 0.4 1.7 -0.7 1.3 2.4 S.1 7.7 2.7 2.6 -2.1 -4.6 -3.6 TheSahamae of -3.1 3.1 2.6 0.8 -0.3 0.2 1.2 2.2 2.0 0.6 -0.4 Barbados 0.4 -o.7 1.7 4.8 3.2 4.3 5.9 4.2 3.1 2.1 0.9 3.8 5.9 Belfze 0.8 4.0 4.9 bI 3.9 2.1. 2.0 -3.1 2.1 S.3 8.0 8.6 12.1 10.4 12.3 12.4 9.2 Dominica -12.6 -3.8 -1.9 1.8 2.6 5.9 8.1 8.4 8.5 5.6 2.8 3.3 1.3 DominicanRepLblic 0.9 0.4 -1.3 0.4 2.2 2.6 2.4 7.4 9.0 6.1 3.2 6.7 8.9 Grenada -0.3 -0.7 2.1 2.1 3.9 3.9 1.6 -0.0 5.5 -3.4 0.8 1.7 1.7 Guyana 2.2 -18.0 -21.4 -37.0 -30.0 -44.4 -32.3 -25.6 -19.0 -25.6 -28.6 -20.8 -11.8 Haitic/ 0.2 -0.9 0.6 1.2 0.6 .0 0.1 -0.6 0.4 0.1 -0.4 O.S -5.3 Jamaica a/ -7.7 -4.3 -5.1 -8.6 -1.5 -1.0 4.4 4.0 3.1 S.0 6.5 8.4 8.6 St.Kitts and Mavis 5.6 -0.2 -2.8 -3.7 1.3 -'.2 4.0 6.8 4.9 s.? 3.4 3.2 6.8 St.Lucia 2.6 2.6 -0.0 2.1 3.3 4.? 6.3 8.2 12.2 9.8 10.1 10.8 11.3 St.Vincent end the Grenadine -0.5 -1.7 1.0 -0.9 5.0 6.0 8.3 9.1 7.4 8.9 0.4 8.0 7.6 Surfname -0.1 -2.2 -3.8 -12.2 -13.9 -18.7 -24.7 -24.5 -19.7 -13.1 -5.0 -18.4 -19.1 Trinidadnd Tobagoa, 26.9 21.5 6.4 2.4 1.9 3.1 -1.4 -1.2 -4.8 .3.3 -0.0 3.2 -0.9 ~~~~~~~~~~~~-- --...... ao Centrat Govenwaent. bd tonsolideted Non-fPn§msalPubilc Sector. el 1991-92re estimted. 0 n.o. not svaidatl. Socens IMRDEconoic Neuoranda. Table 1.45 CMRIBBEANCOULTRIES--BALAMCE Of PAYNENTS CORREIT ACCOUT, 1980-92
bj...... ,, 1980 1961 1962 1963 1964 1965 1986 196? 1986 199 1990 1991 1992 ...... ^**X**^.*******v*******w*^^***********^XX** (UBSmillion)
Antigue and Barbudb -27.6 -42.? -43.7 -15.4 -2.0 -24.8 -136.3 -81.2 -6T.9 -83.4 -60.7 44.3 46.3 The allamas -50.9 -87.9 -84.2 -50.0 U63.9 -76.8 -40.1 -210.2 -145.2 -1?6.T -195.0 -211.0 -136.5 Barbados -11S. -23.9 -44.5 -S0.6 17.5 S3.8 -3.6 -15.6 19.2 26.8 -43.7 15.9 76.9 set 1: -8.? -10.2 -13.2 -13.7 -12.8 -12.8 -2.8 1.3 -11.9 -33.2 -18.8 -35.7 -37.2 Dominica -33.0 -23.4 -12.6 -10.4 -18.5 -20.6 -7.9 -7.2 -13.0 -45.1 -41.1 -37.6 -25.2 Dominican Repubsle -674.4 -422.7 -457.0 -441.0 -372.4 -314.7 -230.9 -429.? -167.6 -396.8 -262.2 -239.0 -439.8 Grenada -13.3 -25.2 -33.9 -29.5 -20.4 -25.4 -32.0 -26.2 -23.9 -36.1 -33.S -38.2 -27.8 Guyana -109.3 -182.6 -153.2 -163.8 -105.6 -136.8 -146.9 -l19.2 -100.6 -120.9 -163.1 -127.3 -49.6 Haftfaof 93.5 -174.7 -118.1 -151.6 -139.1 -130.8 -138.8 -152.4 -131.0 -147.5 -1se.? -142.0 -98.0 Jamaicea -1.S -312.5 -405.0 -442.8 -331.3 -363.7 -92.1 -195.6 -37.9 -485.1 -43.9 -303.8 25.4 St. Kitts andNevis -7.2 -S.2 -6.8 -17.6 -3.7 -4.1 -2.7 -10.5 -26.5 -45.7 -47.2 -29.0 -22.5 St. Luefa -33.1 -39.5 -36.5 -12.5 -23.7 -18.6 -S.1 -14.6 -18.5 -63.1 -56.0 -77.9 -70.3 St. Vincent and the Grenadines -13.4 -5.7 -10.7 -12.6 -7.7 -6.5 -11.1 -32.5 -25.0 -31.6 -24.8 -42.6 -27.4 Surinam. -SB.3 -122.5 -153.3 -163.4 -82.6 -52.S -21.2 -6.5 49.9 137.4 -2.4 -96.8 -24.5 Trinidad and Tobago 481.2 406.6 -61S.5 -983.5 -S1S.2 -101.1 *624.1 -231.0 -111.4 -61.6 434.0 *23.5 136.6
(as percent of GOP)
Antigueand aBrbuda -25.1 -34.3.. -31.7 -10.0 -1.2 -12.3 -S5.S -28.2 -25.8 -22.4 -15.4 -10.S -10.6 The Bohamas -3.6 -6.2 -S.3 -2.9 -3.1 -3.3 -1.6 -7.7 -5.2 *6.0 -6.4 -7.0 -4.4 Bsarbados -2.9 -12.2 -4.S -4.8 1.5 4.S -0.3 -1.1 1.2 1.6 -2.5 0.9 4.4 Bellt -4.5 -S.3 -7.4 -7.2 -6.1 -6.1 -1.2 0.5 -3.8 -9.2 -4.8 -8.5 -8.2 Gominica -56.0 -35.4 -17.6 -13.3 -21.7 .20.9 -7.0 -S.7 -8.9 -30.0 -24.5 -21.2 -13.6 ominican Repubfic -10.2 -5.8 -5.7 -5.1 -3.6 -7.0 -4.2 -6.s -3.6 -5.9 -3.? -3.3 -5.7 Grenada -17.8 -31.4 -38.2 -31.S -19.6 -22.0 -24.6 -17.4 -14.4 -19.3 -16.5 -18.1 -12.9 Ouyana -18.5 -34.3 -31.8 -33.5 -24.3 -29.8 -29.1 -33.6 -24.0 -43.4 -54.9 -53.9 -28.4 Naitt af -6.4 -11.9 -6.0 -9.3 -T.? -6.5 -6.2 -7.1 -6.0 -6.2 -5.? -4.4 -2.? Jamaica -5.5 -*0.5 -12.3 -12.2 -13.9 -16.0 -3.6 -6.5 -1.1 -11.9 -10.5 -8.3 0.6 St. Kftts nd evis -15.0 -9.2 -11.3 -29.5 -5.3 -5.3 -2.9 -9.7 -21.2 -32.3 -29.6 -17.1 -11.7 St. Lucia -24.8 -25.9 -22.1 -7.0 -12.1 -8.5 -2.0 -5.1 -S.7 -17.0 -14.1 -1a 2 -14.9 St. Vincent and the Irenadine -22.7 -7.6 -12.7 -13.3 -7.5 -5.7 -8.7 -22.9 -1S.6 -18.2 -12.? -20.4 -12.1 Surinam -6.5 -12.2 -14.8 -16.3 -8.5 -5.4 -2.2 -0.6 3.6 9.1 -0.1 -5.1 -1.0 Trlnidad andTobago 7.7 5.8 -7.6 -12.7 -6.7 -1.4 -13.0 -4.8 -2.5 -1.4 8.6 -0.4 2.S ...... _...... ad' 1991-92 are estimated. Sourcet 18RDEconomic Nemormndm. Tsble 1.Ss CARIBBEANCUINTIES--TOUISN, 1960-92 ------(receipts fn USSmiltiong arrivals In thousands)
1980 1961 1982 1983 1984 1965 1986 198T 1988 1989 1990 1991 1992
Reelpts
AntigusAmi Barbuck 42.5 4.6 73.? 96.1 129.7 147*8 154.5 191.0 242.2 267.0 298.3 308.9 331.9 The Bahamas 577.7 639.2 654.5 770.2 801.5 996.0 110S.0 1145.8 1149.5 1309.5 1332.9 1192.6 1243.6 Barbados 251.0 261.9 251.6 251.1 280.4 309.1 323.7 378.0 463.1 531.7 480.2 435.6 453.4 Betize 7.0 7.5 8.9 9.3 7.6 12.7 21.0 19.3 22.1 29.4 34.3 52.9 64.8 Domfnfes 2.9 3.3 6.6 8.2 10.6 10.0 10.2 10.7 14.7 15.7 20.4 24.1 25.4 DOminicanReplbic 172.S 206.3 266.1 320.5 370.6 451.0 506.3 571.2 768.3 818.4 899.5 877.2 1054.8 Grenada . 20.1 1S.1 14.0 14.6. 17.8 26.6 34.2 39.2 43.6 48.S 61.1 70.9 73.0 Hatil 76.5 74.9 81.2 72.7 68.0 82.0 90.3 74.0 68.2 70.0 65.5 n.a. n.a. Jmica a/ 240.S 284.3 337.8 396.0 421.0 436.8 545.0 615.9 S25.0 593.0 740.0 790.5 932.7 St. Kitts and Mevis 7.9 9.9 9.8 10.4 15.2 20.1 26.5 33.S 37.6 39.9 43.6 55.8 6T.2 St. Lucia 32.9 29.4 29.5 36.2 39.9 61.1 74.2 87.5 95.6 111.8 121.0 127.5 127.5 Vincent St. and theGrmnadins 13.7 1S.0 16.0 16.7 17.3 18.8 19.9 21.2 21.0 24.8 26.8 27.4 29.7 Trinidad and Tobao 153.0 155.3 197.0 88.6 100.1 97.4 83.3 93.7 91.9 84.S 94.7 103.6 111.2
Arrival.
Antigus an Barba 205.0 209.1 173.9 174.8 216.0 260.6 294.2 341.2 416.7 420.1 457.5 479.0 48S.1 The Bahamas 1904.S 1763.4 1947.8 2224.1 2325.2 2631.9 3007.3 3081.4 3158.1 3398.3 3628.5 3621.9 n.a. Barbados 526.4 488.3 414.5 430.8 466.8 481.4 SS.1 646.7 742.4 798.4 794.7 766.4 785.1 Setize 18.7 16.7 22.6 21.S 22.2 29.6 32.6 29.3 5S.5 70.3 78.9 83.5 100.0 Dominic. 24.8 22.8 22.1 28.5 27.0 28.6 36.3 39.3 45.4 6.7 S9.1 120.d 154.9 DominicanRepubile 566.4 513.8 602.9 597.6 678.0 152.6 886.3 1037.5 1059.6 1100.0 n.s. n.a. n.e. Grenada 175.0 110.6 93.3 82.7 73.8 142.7 171.2 184.6 197.9 189.3 265.2 288.6 287.3 Halti 301.5 283.1 214.2 223.7 228.0 224.5 202.1 200.6 200.2 148.7 n.a. n.a. n.e. Jamaica a/ S43.0 SS2.0 670.2 '81.1 859.7 854.2 MOt3.? 1040.3 t020.3 1163.2 1236.1 1414.5 1614.5 St. Kitts ad Nevis 38.5 46.3 45.7 51.1 73.9 9.1 83.8 97.9 123.3 108.7 109.6 136.7 163.7 St. Lucia 140.3 89.6 106.1 112.9 128.0 1S1.4 174.2 209.9 214.3 242.4 250.7 318.8 346.9 St. Vlncent and the Grenadfnes n.e. n.e. n.a. n.a. 92.2 78.5 83.6 104.8 1o0.1 111.2 130.0 173.3 155.1 trinidsd endTobao 205.9 215.5 196.3 207.3 198.1 187.0 191.0 201.7 187.8 194.2 194.0 n.e. n.e...... 9...... **...... _--.,--.. .------~ ao Fiscal years for 1951 nd 1992. n.e.t Not avalable. SourcesIBRD Eeoncmie Nbo rarda. Table 1.6: CARIBSEACOINTRIES--SUS1 EXPRTS, 1980-92 ...... (value In USSmIllion; volume In '000 Long tons)
...... ,_ 1980 1981 1982 1983 198$ 1965 1986 198T 1988 1989 1990 1991 1992 ...... _4......
Value
Bcrbodos 57.8 31.7 35.5 26.8 32.1 28.6 26.? 31.1 34.3 33.6 28.4 29.S 31.9 lestIe 47.7 42.6 32.8 34.2 32.5 22.9 31.5 31.3 3S.0 34.1 42.7 41.T 37.6 Dominicsn Republc 290.2 S13J2 265.5 263.6 271.9 158.5 133.5 127.1 123.2 157.1 142.7 132.3 120.6 Guyana 120.6 102.U 87.7 71.5 70.9 66.4 84.6 90.4 74.8 83.4 74.9 8?.7 134.2 Haiti 6.4 n.a. n.s. 1.7.. 6.4 4.3 4.1 2.6 2.9 2.9 2.5 n.s. n.s. Jamfca 54.4 46.5 44.0 s5.3 66.0 49.8 62.2 74.1 91.9 67.8 85.8 87.4 62.5 St. KIttet and evis 14.4 14.7 12.2 10.0 11.6 6.7 11.7 12.5 13.1 11.9 9.1 11.3 12.1 Trinidad anxTobago 28.0 27.1 21.9 25.8 28.7 22.0 23.3 21.1 25.4 30.8 30.5 32.4 33.0 at
Voltm
Barbodos 119.6 63.0 89.0 73.5 85.9 83.4 98.6 Y.7 57.9 ".2 68.9 52.6 52.2 Beltte 97.2 90.4 98.1 109.1 93.9 89.1 98.5 79.0 79.7 78.8 92.4 91.8 90.0 DomlnfeanRepubd lc 802.0 847.5 833.3 917.7 828.4 6SS.2 449.2 553.1 513.9 490.5 354.9 318.9 334.6 Guya 248.1 264.6 254.6 217.8 205.8 213.3 214.3 179.3 146.9 170.0 134.S 150.1 246.0 Haiti 19.2 n.a. n.e. 7.1 15.2 10.8 11.0 6.5 7.1 6.9 6.0 n.s. n.s. Jamaiec 131.8 121.3 138.3 136.7 157.0 152.0 143.3 135.7 152.7 132.0 146.4 152.3 130.3 St. Kitts atd ievis 31.5 29.1 32.7 22.8 28.0 24.0 25.6 22.6 23.6 22.5 14.2 18.8 20.1 Trinidad and Tobago 64.0 66.8 50.2 62.5 73.3 68.2 57.0 53.2 51.1 56.9 62.3 56.5 59.2 a/
.. ,...... _...... a/ January- Novmber°. n.a.: Not avelable. Source: IBRDEconomc Nmrda. Table 1.7: UOCRDSUGAR EXPORTS, 1980 AND 1985-91 ...... ('000 NT)
REGION 1980 1985 1986 1987 1988 1989 1990 1
OEVELOPINGCOUNTtIES 19330.0 18356.317651.1 17618.817559.0 17812.4 18251.5 18338.1
CENTRALAMRICA 8100.0 7900.6 7700.9 7524.5 8616.2 8040.7 7934.6 7991.4 Cuba 6190.0 o209.06702.6 6482.1 6978.0 7123.3 7171.8 6767.5 Nexzio 0.0 66.2 219.1 518.4 1014.5 334.2 4.5 252.6 Otter 1910.0 625.4 779.2 524.0 623.7 583.2 758.3 971.3 CARISSEAN 1510.0 1367.3 1125.9 1170.0 1067.8 1056.6 906.8 884.0 Barbados 120.0 77.8 88.3 83.0 67.8 5S.S SS.3 S4.6 lelize 100.0 95.5 105.0 84.4 64.6 83.3 98.1 98.8 Dominica Republfe 800.0 721.6 480.6 587.3 527.6 521.3 377.4 336.5 Guyana 260.0 230.4 219.2 194.8 143.2 173.0 133.8 154.5 Haiti 10.0 0 0 0.0 7.0 5.0 7.0 7.0 8.0 Jmaica 130.0 154.8 146.1 135.7 152.7 135.0 148.8 154.2 St. Kitts and Nevi 30.0 25.2 26.7 22.8 23.9 22.5 22.0 19.2 Trinidad and Tobago 60.0 62.0 60.0 5S.0 63.0 59.0 64.4 s8.2 SOUTHAERICA 3960.0 3198.1 2973.3 2688.6 2171.0 1530.3 2577.6 2221.5 Brazit 2700.0 2608.7 2554.4 2424.0 1610.0 965.3 1576.9 1613.5 Colombia 280.0 294.9 211.8 96.0 243.0 323.2 416.3 292.9 other 980.0 294.5 207.1 168.6 318.0 241.8 584.4 315.1
AFRICA 2360.0 2547.6 2625.3 2755.1 2425.1 2419.8 2392.4 2446.7 Camaroon 9.0 0.2 19.5 0.0 2.5 0.0 0.0 0.0 Ivory Coast 30.0 22.2 22.0 18.0 20.0 21.0 32.0 11.0 Madagascar 30.0 34.9 0.0 19.1 19.0 76.0 41.3 22.2 Nauritius 650.0 571.2 661.6 695.S 691.7 674.0 612.2 S84.4 South Africa 70.0 1025.2 873.7 1104.9 909.2 924.0 833.4 896.9 ZIdhue 220.0 219.6 270.3 241.0 148.6 163.2 246.4 125.8 other 631.0 674.3 778.2 676.6 634.1 561.6 627.1 806.4 ASIA 3400.0 3342.7 3225.7 3480.6 3278.9 4765.0 440.1 4794.5 China 230.0 250.0 290.0 490.0 270.0 465.0 620.0 475.0 India 70.0 40.7 44.0 25.3 34.3 29.6 46.5 335.0 Indoresia 0.0 O' 0 0.0 0.0 0.0 0.0 0.0 0.0 Philippines 1800.0 594.8 230.1 127.1 143.6 193.7 258.7 280.2 Thaiand 460.0 1781.0 2049.4 2071.8 1961.2 3105.2 2496.4 2862.7 Other 840.0 676.2 612.2 766.4 869.8 971.5 1018.5 841.6
DEVELOPEDCOUNTRIES 9080.0 9398.0 9521.2 10637.4 9808.7 10092.7 10091.4 9254.2 ......
NORTH AMERICA 600.0 429.7 507.5 710.5 335.6 451.3 495.5 663.8 Us 590.0 364.4 412.2 589.3 299.5 414.8 463.6 622.7 Cauada 10.0 65.3 95.3 121.2 36.1 36.5 31.9 41.1
EE 5600.0 5893.9 5960.6 6649.7 6068.9 6070.8 6116.4 5754.9 EC 4320.0 4280.4 4373.S 5479.8 018.1 5007.9 5352.S 4891.t Other Europe S80.0 493.5 287.1 179.9 140.8 132.9 153.9 103.2 Fomer Centrally Pltued 700.0 1120.0 1300.0 990.0 1010.0 930.0 610.0 760.0
JAPAN 20.0 3.8 4.7 5.4 2.6 1.6 1.1 1.6 OCEANIA 2860.0 3070.6 3048.4 3271.8 3401.6 3569.0 3478.4 2833.9 Australia 2410.0 2651.4 2709.9 2826.5 2980.0 3149.3 3069.5 2456.0 New Zealand 2.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other 447.9 419.2 338.5 445.3 421.6 419.7 408.9 377.9
WORLD- TOTAL 28410.0 27754.3 27172.3 28256.2 27367.7 27905.1 28342.9 27392.3 ...... lotes Dta msy differ fra Table 1.6 due to data sourcesand definitions. Source: Sugar Yearbook, Interantional Sugar Organization.
213 Table 1.8: IORLOSUGAR IMPORTS, 1980 AND 1985-91 ...... - '000 MT)
,......
REGION 1980 1985 1986 1987 1988 1989 1990 1991 ...... *......
DEVELOPINGCOUNTRIES 13494.7 14860.2 1449S.5 1577.4 15942.0 14168.5 15S30.0 15031.3
CENTRALAMERICA 840.0 0.0 0.0 0.0 21.8 607.4 1S85.1 913.3 Mexico 760.0 0.0 0.0 0.0 0.0 597.4 1552.2 898.4 Other 80.0 0.0 0.0 0.0 21.8 10.0 32.9 14.9 CARISSEAN 56.5 127.0 156.t 156.8 163.5 216.9 241.6 187.6 The Sahamas 7.9 6.5 10 0 9.0 9.0 14.0 10.0 10.3 Barbados 0.0 0.1 0.2 0.2 0.2 0.0 S.0 0.0 8elie 0.0 0.0 7.3 0.9 0.0 0.0 0.0 0.0 Bernuds 2.3 3.2 .1.9 2.0 4.0 1.0 2.0 2.0 Dominica Republie 0.0 0.0 0.0 0.0 0.0 0.0 8.0 0.0 GuYsna 0.0 0.0 0.0 0.0 3.7 26.5 28.9 25.9 Haiti 9.9 18.3 20.8 26.0 29.0 55.0 66.0 52.0 Jamaica 4.7 33.0 55.0 52.7 45.6 73.4 54.7 44.2 St. Kitts and Mavis 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.7 Surinrm 2.7 7.2 4.2 2.0 5.0 8.0 12.0 9.0 Trinidad and Tobaso 20.1 28.4 27.0 30.0 30.0 10.0 S.0 16.5 UTndiard Islands 0.0 21.7 22.4 25.0 28.0 21.0 34.0 19.0 Notherland Antilles 8.9 8.6 7.8 9.0 9.0 8.0 16.0 6.0 SOUTHAMERICA 827.3 295.S 318.5 S61.0 S83.2 543.6 365.0 690.0 Chile 432.5 28.0 10.3 27.4 44.2 27.0 108.0 213.6 Vene2uela 332.8 234.3 0.0 139.8 265.1 259.2 146.0 15S5.1 Other 62.0 33.2 308.2 393.8 273.9 257.4 111.0 321.3 AFRICA 3050.0 3307.3 3575.2 354.1 3258.4 293S.1 3519.3 3655.8 Algeria 581.6 S31.9 487.0 653.0 751.0 697.0 809.0 1059.0 Egpt 468.5 711.0 744.0 669.0 851.0 617.0 805.0 736.0 Other 2581.5 2596.3 2831.2 2874.1 2407.4 2318.1 2714.3 2919.8 ASIA 8720.9 11130.4 10445.2 11516.5 11915.1 9865.S 9819.0 9584.6 Chfina 950.0 2214.0 1098.0 2200.0 3952.0 1606.0 1379.0 1260.4 India 190.0 1781.2 1046.S 943.2 4.5 53.0 0.0 0.0 Indonesia 390.0 3.3 82.0 146.0 116.0 325.5 320.1 330.6 Iran 785.5 625.3 652.0 582.0 280.0 381.0 606.0 672.0 Philifppnes 0.0 0.0 0.0 29.5 0.0 0.0 0.0 0.0 Thailand 84.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Sadi Arabia 327.5 259.0 291.4 412.0 389.0 386.0 400.0 392.5 other S993.1 6247.6 n75.3 7203.8 7131.6 7114.0 7113.9 6929.1 DEVELOPEDCOIUTRIES 15629.0 13607.3 13858.3 12941.0 12236.3 14119.3 12955.2 12310.1
NORT0AMERICA 4709.0 3432.6 3074.1 2142.8 2267.1 2613.7 3058.7 2642.9 US 3801.7 2274.7 1796.0 1221.3 1309.9 1636.1 2109.6 1685.6 Canada 907.3 1157.9 1278.1 921.5 957.2 977.6 949.1 957.3 EUROPE 8360.0 8000.0 8750.7 8809.8 7876.5 9479.6 7921.0 7569.0 EC 1430.0 1295.3 1827.7 1743.1 1677.5 1M.6 1719.1 109.2 Other Europe 1130.0 1236.7 620.9 839.9 634.5 669.6 1238.7 588.4 Former Centrally Ptanred 5800.0 5468.0 6302.1 6226.8 5564.5 7037.4 4963.2 5271.4 JAPAN 2330.0 1986.4 1823.1 1W.5 1920.0 1849.8 1752.3 1894.9 OCEAIA 230.0 188.3 210.4 210.9 172.7 176.2 223.2 203.3 Australia 0.0 0.0 0.0 0.0 0.0 9.1 14.4 14.6 NoeiZealand 180.0 174.0 163.9 181.0 152.0 156.0 179.0 159.0 other 50.0 14.3 46.5 29.9 20.7 11.1 29.8 29.7 ORLD- TOTAL 29123.7 28467.5 28353.8 28718.4 28178.3 28287.8 28485.2 27341.4
...... Source: Sugar Yearbook, Interantional Sugar Organization.
214 Table 1.9:UORLD SUGAR PROD CTION, 1980 AND 1985-91 ------* (MillionNT)
......
REGION 1980 1985 1986 1987 1988 1989 1990 1991 ......
DEVELOPINGCOUNTRIES 49.9 56.9 62.2 64.2 65.2 65.4 69.4 69.2 ......
CENTRALAMERICA 12.7 14.6 14.8 14.3 14.9 13.9 14.9 14.2 Cuba 6.8 7.9 7.5 7.2 8.1 7.8 8.4 7.2 Mexico 2.2 1.8 4.1 4.1 3.9 3.6 3.4 3.7 Other 3.7 4.9 3.2 3.0 2.9 2.5 3.1 3.3 CARIBBEAN 1.9 1.8 1.7 1.6 1.5 1.4 1.2 1.3 Barbados O.1 0.1 0.1 0.1 O.1 0.1 0.1 0.1 Belize 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Dominican Republic 1.0 0.9 0.9 0.8 0.8 0.7 0.6 0.6 Guyana 0.3 0.3 0.3 0.2 0.2 0.2 0.1 0.2 Haiti 0.1 0.1 0.0 0.1 0.0 0.0 0.0 0.0 Jamaica 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Trinidadand Tobago 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 SOUTHAMERICA 13.3 13.3 12.8 14.0 12.7 12.2 13.2 14.9 Brazil 8.3 8.5 8.0 9.3 7.9 7.3 8.0 9.3 Coloabia 1.3 1.4 1.3 1.3 1.4 1.5 1.6 1.6 other 3.7 3.4 3.5 3.4 3.4 3.4 3.6 4.0 AFRICA 7.3 4.9 9.1 9.2 9.6 9.1 9.3 4.9 Cneroon 0.1 0.1 0.0 0.0 0.1 0.0 0.1 0.1 IvoryCoast 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.2 Egypt 0.7 0.9 1.0 1.0 1.0 0.9 1.0 1.1 Nadsascar 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Nauritius 0.5 0.7 0.7 0.7 0.7 0.6 0.7 0.6 South Africa 1.8 2.5 2.2 2.2 2.5 2.3 2.2 2.5 Ziixhabe 4.0 0.5 5.0 5.0 5.0 5.0 S.0 0.3 ASIA 14.7 22.3 23.8 25.1 26.5 28.8 30.8 33.9 China 2.8 4.8 5.7 5.5 4.9 5.4 8.2 7.0 India 4.5 7.1 7.6 9.2 10.2 9.9 12.1 13.1 Indonesia 1.2 1.7 2.1 2.2 2.2 2.2 2.3 2.4 Philippines 2.3 1.7 1.5 1.3 1.5 1.9 1.7 1.8 Thailand 0.8 2.4 2.7 2.5 2.6 4.3 3.5 4.2 Other 3.1 4.6 4.2 4.4 5.1 S.1 3.0 5.4 DEVELOPEDCOUNTRIES 38.1 57.6 55.S 57.5 56.0 59.5 56.9 51.8 ...... ---- ...... NORTHANERICA 5.4 5.5 5.8 6.8 6.5 6.3 5.8 6.8 uS 5.3 5.4 5.7 6.6 6.4 6.2 5.7 6.6 Canada 0.1 0.1 0.1 0.2 0.1 0.1 0.1 0.2 EUROPE 28.5 44.9 45.3 46.2 44.8 48.4 46.5 40.8 EC 13.5 13.9 15.1 14.4 15.4 16.1 17.2 16.0 Other Europe 3.9 17.5 16.7 17.7 16.3 18.2 16.5 14.4 FormerCentrally Planned 11.1 13.1 13.5 14.1 13.1 14.1 12.8 10.4 Economies JAPAN 0.8 3.8 1.0 1.0 0.9 1.0 1.0 1.0 OCEANIA Austral'a 3.4 3.4 3.4 3.5 3.8 3.8 3.6 3.2 WORLD- 6.AL 88.0 114.5 117.7 121.7 121.2 124.9 126.3 121.0 ...... ,...... Source: Sugar Yearbook, Internatfonal Sugar Organization.
215 Table 1.10: UORLDSUGAR CONSUMPTION,1980 AND 1985-91 ...... (000 MT)
REGION 1980 1985 1986 1987 1988 1989 1990 1991 ...... ,...... *o ...... -... ¢......
DEVEWLOPINGCOUNtRtES 44548.0 SS645.2 s7258.2 60828.5 61007.2 62375.1 63519.3 66217.4
CENTRAL AMERICA 5024.5 S956.8 5791.8 6060.4 6386.3 6566.5 7060.2 6866.4 Cuba 529.9 886.7 761.7 772.5 745.7 882.2 937.0 95S.6 Mexico 3151.8 3547.5 34s5.4 36s5.2 4070.4 4023.3 4424.2 4200.0 Other 1342.8 1522.6 1578.7 1630.7 1570.2 1661.0 1699.0 1710.8
CARISSEAN 483.1 549.3 576.8 639.1 515.5 557.9 435.4 553.3 Barbados 15.7 13.5 13.5 13.3 14.1 13.1 12.2 10.8 Selize 7.2 6.4 6.3 6.9 7.2 7.5 8.7 8.9 DominicanRepublic 208.5 303.9 293.6 350.7 222.8 243.7 200.9 250.8 Guyana 33.8 31.3 34.7 44.7 38.2 33.5 28.6 25.7 Haiti 62.0 32.0 60.0 55.0 55.0 70.0 8.5 80.0 Jamaica 117.2 97.2 101.7 108.5 113.2 125.1 114.1 115.9 Trinfdad and Tobago 38.7 65.0 67.0 60.0 65.0 65.0 62.4 61.2 SOUTHAJERICA 10689.0 10594.1 11461.0 11747.1 11073.2 12153.9 11471.9 12467.2 Brazil 6263.0 6079.6 6589.2 6572.4 6241.0 7401.3 6S14.8 7276.3 Cotoob a 992.3 1043.6 1101.1 1207.5 1142.8 1162.8 1195.2 1317.8 other 3433.7 3470.9 3770.7 3967.2 3689.4 3589.8 3661.9 3873.1
AFRICA 7046.0 8092.3 8376.6 8572.3 8558.9 8309.5 8768.7 9005.0 Cameroon 55.8 60.0 45.0 40.0 62.7 40.0 75.0 80.0 Ivory Coast 80.0 125.0 125.0 130.0 155.0 160.0 160.0 160.0 Egypt 1121.4 1600.0 1650.0 1650.0 1775.O 1650.0 1725.0 1745.0 Hadagascar 99.5 83.5 80.6 82.5 78.7 76.4 86.4 86.9 .Nuritius 38.9 38.8 40.4 40.1 40.6 39.6 40.9 42.4 South Africa 1291.1 1367.6 1380.9 1433.5 1416.7 1390.0 1433.0 1381.s Zimbabwe 153.8 224.6 237.9 253.1 269.9 282.6 297.3 293.9 Other 4205.5 4592.8 4816.8 4943.1 4760.3 4670.9 4951.1 5215.3 ASIA 21305.4 30452.7 31052.0 33809.6 34473.3 34787.3 35783.1 37325.5 china 3600.0 6350.0 6700.0 7soo.o 7700.0 7200.0 7100.0 7100.0 India 5042.0 8974.3 8693.7 9731.6 10175.4 10677.0 11120.9 12055.6 Indonesia 1550.0 1794.4 2122.9 2350.0 2545.0 2600.0 2650.0 2628.9 Philippines 1209.2 1339.8 1180.0 1438.2 1224.9 1470.7 1S81.7 1511.7 Thailand 632.3 721.5 ?44.1 882.8 853.0 980.7 1105.2 1189.5 Other 9271.9 11272.7 11611.3 11907.0 11975.0 11858.9 12225.3 12839.8
DEVELOPEDCOUNUTRIES 47532.s 4ss72.6 47003.4 48216.3 47946.2 47496.3 47456.7 47007.2 ...... ------.--...... ------...... ------......
NORTHAMERICA 10344.2 8339.6 8185.2 8529.2 8528.0 8587.8 8909.0 9094.0 US 9329.9 7289.6 7085.2 7409.0 7428.0 7537.8 7859.0 1100.0 Canada 1014.3 1OSO.0 1100. 1120.2 1100.0 1050.0 1050.0 794.0
EUROPE 33188.3 33329.4 35015.9 35927.6 35416.3 35007.6 34589.3 339A9.6 EC 1O97.2 10731.s 12211.1 11921.9 12240.3 12751.9 13067.2 13166.0 Other Europe 4895.0 5032.4 4504.8 4135.9 3977.0 4108.1 4280.0 4078.6 Former Centrally 17321.1 17565.5 18300.0 19869.8 19199.0 18147.6 17242.1 1672S.0 Planned Economies JAPAN 2981.6 2891.4 2738.0 2690.3 2905.1 2¢01.3 2832.8 284S.9
OCEANIA 1018.4 1012.2 1064.3 1069.2 1096.8 1099.6 1125.6 1097.7 Australia 783.5 764.4 817.8 817.3 844.3 855.3 864.1 834.8 Other 234.9 247.8 246.5 251.9 252.5 244.3 261.5 262.9
WORLD- TOTAL 47532.5 101217.8 104261.6 109044.8 108953.4 109871.4 110976.0 113224.6
...... -***o*-*vvo ...... ^**------^ ---**@**v Source: Sugar Yearbook, International Sugar Organization.
216 TabLe 1.11: UORLDSUGAR SWPPLY. DOMESTIC CONSUMPTION 1 STOCKTO CONSUMPTIONRATIO, 1980-91 ....---.-- (mdllion NT- raw vatue)
......
Stock World Raw Begirning Domestic End Consuaption Sugar Price Tears Stocks Production Imports Supply a/ Exports CorsuaptIon Stocks Ratio % (US cts/lb) bI ......
19B0 41.6 84.S 26.7 152.8 26.8 88.6 37.5 42.3 28.7 1981 37.5 92.8 28.2 158.5 29.1 89.9 39.1 43.4 16.8 1982 39.1 102.0 29.6 170.7 40.4 94.0 48.0 51.1 8.4 1983 48.0 97.0 27.7 17.7 29.0 93.8 49.4 52.7 8.5 1984 49.4 99.2 28.1 176.7 28.5 96.7 51.4 53.2 S.2 1985 51.4 98.4 26.6 176.4 27.8 97.9 50.8 51.9 4.1 1986 50.8 100.3 7.1 178.2 27.2 101.5 49.3 48.6 6.0 1967 49.3 104.0 2.6 180.9 28.4 106.3 46.2 43.5 6.8 1988 46.2 104.8 27.0 178.0 27.4 106.2 44.2 41.5 10.2 1989 44.2 107.2 27.8 179.2 27.9 107.8 43.5 40.4 12.8 1990 43.5 110.4 27.8 181.7 28.4 108.7 44.8 41.2 12.6 1991 44.8 112.2 26.3 183.3 27.6 110.7 44.1 39.8 9.0
...... a/ Supply a begimning stocks plus production plus liports. bl Internationat Sugar Agreenent Daily Price Average. Source:Sugar Yearbook 1991 (InternationaL Sugar Organization) and U.S. Department of Agriculture.
1- Table 1.12: CARMIUEACOUTRIES--BMANAM EXPORTS, 1980-92 Co * ***^*--. (value in US1,o IlIfon; volume fn '000 tons)
...... _, ...... 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 ......
Value
Belize 3.5 2.2 2.1 2.4 3.1 3.3 4.6 7.2 8.3 9.0 9.9 7.3 10.2 Dominica 3.0 9.1 10.0 11.2 11.1 13.3 25.2 32.0 38.4 2S.1 30.7 31.5 31.8 Grenada 4.1 3.7 3.3 3.0 2.9 3.1 3.7 4.1 4.7 4.0 3.9 3.7 3.3 Jamaica 10.5 4.3 4.7 6.8 1.5 4.2 9.2 19.1 15.7 19.3 38.4 45.1 39.5 St. Lucia 10.5 14.7 15.6 20.4 23.8 30.2 53.4 43.0 65.3 58.5 69.5 56.0 68.4 St. Vincent and the Brenedines 6.3 10.1 9.0 11.0 11.8 16.9 19.4 19.6 31.9 33.3 44.5 33.7 37.6 Surinfme 5.7 6.8 7.4 7.4 8.9 10.2 11.1 9.5 11.3 10.2 10.3 9.1 8.9
Votune
telize 15.0 10.5 10.0 10.1 10.6 10.3 12.9 21.3 25.1 27.9 30.8 20.7 28.2 Dominica 8.1 27.1 27.5 29.3 32.5 33.9 52.8 61.2 72.3 51.3 58.6 56.7 59.2 Grenada 25.1 22.0 23.2 10.5 18.9 17.9 17.5 17.9 20.1 19.0 16.9 15.3 13.6 Jaaicea 33.1 18.1 21.2 23.0 11.0 13.0 20.3 33.3 27.4 6.9 S8.0 73.5 70.9 St. Lucfa 32.8 42.9 42.3 54.3 64.6 80.6 112.0 83.2 126.0 123.6 131.6 99.0 133.0 St. Vincent and the Brenadinsi 18.8 29.8 25.0 33.9 31.5 40.6 39.4 36.6 57.6 66.1 79.0 63.2 77.4 SurIname 33.2 36.5 37.5 32.2 34.9 37.3 36.0 32.4 35.6 28.8 28.3 27.9 n.a.
...... …...... n.a.: Not available. Source: IZED EconomicUmorada. Tabte 1.13: WORLDBAAM EXPORTS,1980-91 a/ ...... ('000 NT) Page1 of 3 ...... 1980 1981 1982 1983 1984 198S 19%6 1987 1988 1989 1990 1991
...... CARItBBEAN Betize 15.0 10.5 10.7 10.6 10.7 10.9 15.3 22.1 27.5 29.5 26.8 18.7 Jamaic 33.1 18.2 21.4 23.4 11.0 13.0 20.8 34.7 27.9 43.0 61.2 75.3 Surinae 34.0 36.5 30.6 32.2 34.9 37.3 36.0 34.0 35.6 28.8 28.3 28.2
Sub-total 82.1 65.2 62.7 66.2 56.6 61.2 72.1 90.8 91.0 101.3 116.3 122.2
WINDWARDISLAND Dominica 7.8 27.6 27.5 29.8 33.3 34.5 51.0 61.2 73.3 52.6 59.9 55.6 Grenada 12.5 10.2 9.6 4.1 8.6 8.1 8.2 8.1 9.1 8.6 7.7 6.7 St. Lucia 33.5 43.1 41.8 46.9 64.5 74.0 11.1 83.0 141.8 120.6 134.0 101.5 St. Vincent and the Grenadines 19.6 33.4 26.8 25.0 34.5 44.1 43.4 39.0 60.4 67.3 77.8 68.2
Sub-total 73.4 114.3 105.7 105.8 140.9 160.7 113.7 191.3 284.6 249.1 279.4 232.0
OTNERS 16.5 DomInican Repbtilc 11.1 28.2 17.7 6.3 5.6 3.2 2.2 1.5 1.8 5.4 12.3 French West Indias: euKdltupe 60.5 90.4 119.2 114.4 131.7 102.7 128.4 91.4 105.4 81.7 70.6 86.5 Martinique 53.9 74.8 94.5 167.8 178.0 154.1 173.7 170.8 174.5 188.5 220.4 146.5
Sub-total 125.5 193.4 231.4 288.5 315.3 260.0 304.3 263.7 281.7 275.6 303.3 249.5
REGIONALTOTAL 281.0 372.9 399.8 460.5 512.8 481.9 490.1 S45.8 657.3 626.0 699.0 603.7 ...... ----......
MEXICO,aJBA ANDCENTRAL AMERICA CostaRica 998.2 1025.8 1015.8 1032.5 1029.8 856.5 885.2 991.2 1060.8 1276.7 1443.7 1541.1 Guatenata 391.1 400.0 404.1 316.1 320.8 365.8 342.7 363.5 332.9 395.8 366.3 332.3 Norduras 33.1 804.1 914.5 714.4 848.2 871.8 810.4 931.6 891.2 849.7 811.5 698.7 Nexico . 16.0 6.0 7.0 30.8 32.4 43.8 80.S 94.6 891.2 100.1 154.1 210.0 Nicaragu 120.5 94.3 14.7 68.6 82.8 89.0 78.4 75.8 72.0 79.6 92.0 106.8 Panama 504.9 572.6 S65.5 652.0 655.4 686.2 586.9 675.8 583.4 676.9 745.8 706.6
Sub-total 2063.8 2902.8 3053.6 2814.4 2969.4 2913.1 2784.1 3132.5 3831.5 3378.8 3613.4 3595.5 Table 1.13: WDRLDBANANA EXPORTS, 1980-91 a/ (con't) ------('000 NT) Page2 of 3 ...... 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 ...... SOUTHAMERICA Braz)l 67.3 66.7 59.2 89.4 103.2 105.3 101.2 81.2 76.2 83.5 53.1 38.4 Coltabia 691.6 802.8 804.2 786.9 tU28.8 783.0 987.1 994.0 977.7 985.4 1148.2 1473.4 Ecuador 1290.6 1229.6 1261.3 910.0 907.2 1075.0 1365.3 1406.2 1551.2 1770.0 2209.6 2714.3 Venezuela 5.7 6.9 T.5 14.2 26.2 28.0 30.3 15.4 16.4 34.2 37.5 38.4
Sub-total 2055.2 2106.0 2132.2 1800.5 2065.4 1991.3 2483.9 2496.8 2621.5 2873.1 3448.4 4264.5
REGIONALTOTAL 4119.0 5008.8 S185.8 4614.9 5034.8 4904.4 5268.0 5629.3 6453.0 6251.9 7061.8 7860.0 ...... ----......
ASIA China 10.1 95.4 99.0 121.0 127.1 136.3 96.9 124.5 102.5 87.1 52.2 75.0 Israel 0.8 3.2 5.2 7.7 9.2 5.9 6.0 2.9 5.8 0.4 0.5 0.8 Nelaysia 23.5 28.0 26.1 25.3 33.6 27.2 28.6 30.2 28.5 27.2 35.3 35.0 Pakistan 12.4 9.5 10.8 4.6 3.2 4.6 5.2 8.6 6.0 0.4 0.4 0.8 Philippines 923.8 869.7 927.7 644.6 800.3 789.3 8'5.7 775.0 866.8 851.0 839.8 950.5 Thailand 12.7 16.2 18.4 9.7 4.4 4.0 2.2 1.8 1.6 3.6 2.4 2.1 Vietnam 8.2 8.0 1.3 12.6 8.0 8.0 9.8 11.7 7.2 3.5 2.9 10.C
REGIONALTOTAL 991.5 1030.0 1088.5 825.5 985.8 975.3 1004.4 954.7 1018.4 973.2 933.5 1074.2 ......
OCEANIA Cook Istands 2.1 2.4 2.1 0.2 1.2 1.9 0.7 0.2 0.7 0.4 0.3 0.3 Samoa 2.3 1.2 2.1 1.3 0.4 0.1 0.1 0.1 0.1 0.1 0.0 0.2 Tong& 2.3 2.7 0.6 1.1 2.6 2.6 4.1 3.6 1.3 0.4 0.3 1.2
REGIONALTOTAL 6.7 6.3 4.8 2.6 4.2 4.6 4.9 3.9 2.1 0.9 0.6 1.7 ...... ------...... Table 1.13: UORLOWUJU EXPORTS,1980-91 a/ (con't) ...... ( m000ST) Pase 3 of 3
...... 1980 1961 1982 1963 1984 1985 1986 1987 198 9 1990 1991 ...... AFRICA Cameroon 64.9 53.3 40.9 45.7 62.0 50.4 38.8 20.2 38.1 83.2 61.3 116.0 Cape Verde 1.0 2.0 1.2 1.2 0.S 1.4 1.9 1.4 2.2 3.2 3.2 3.0 Ethiopia 5.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 Ivory Coast 122.0 111.4 91.7 79.8 99.6 11.2 91.7 84.9 77.8 85.7 101.0 120.0 adgascar 2.3 1.3 0.2 0.7 0.1 0.5 0.0 0.5 0.1 0.1 0.0 0.1 Somaia 50.0 34.3 SO.5 62.5 47.9 45.3 s5.9 64.0 73.4 76.0 74.6 10.0
REGIONALTOTAL 245.2 204.3 186.5 191.9 212.1 110.8 192.3 173.0 193.6 250.2 242.1 251.1
EUROPE Portual (inct. Nadaira) 28.3 26.9 k7.6 32.5 32.5 32.5 38.7 40.5 37.4 37.3 40.0 36.0 Spain (fnc. Canary Istands) 405.4 410.5 396.4 401.8 400.0 400.0 400.0 400.0 400.0 400.0 400.0 400.0
REGIONALTOTAL 433.7 437.4 424.0 434.3 432.5 432.5 438.7 440.5 437.4 437.3 440.0 436.0 ......
WORLD- TOTAL 6077.1 7059.7 7269.4 6529.7 7182.2 6909.5 7398.4 7747.2 8761.8 8539.5 9377.0 10226.7
_...... a/ Data my differ from Tab*le 1.12 due to data sources and definitions. Source: Trad Yearbook and Bana Statistics, FAO. Tabte t.14: WLO BANA IMPORTS,1980-92 a1 ...... -.. ('000 NT) Page1 of 2 ...... j...... 1980 1981 1962 1983 1964 198s 19t6 1987 1968 1989 1990 M991 1992 dl ...... -...... -...... ^. ^..,..*^
DEVELOPEOCOUNTRIES 6060.7 6111.6 6136.8 5662.6 6107.4 6611.6 6841.6 6970.6 7193.0 7634.4 8070.6 8489.7 8997.5 ...... -* -* ...... --- v...--- ...... *^-*-*--..... *
EUROPEANCOeUITY 2360.6 2374.9 2302.1 2177.7 2281.2 2335.5 2467.0 2562.7 2785.2 3011.8 3311.1 3569.7 3695.8 Belgfu-Luxembourg 81.0 78.8 73.3 66. 65.5 76.8 76.3 74.4 102.3 87.7 85.0 92.0 100.0 Dmark 25.7 24.9 24.6 23.S 26.2 31.7 34.8 33.8 34.0 50.3 46.0 50.0 58.0 France bl 446.0 466.0 466.0 440.0 442.0 425.7 453.6 445.2 454.8 455.0 456.7 454.3 473.0 Germany 610.3 601.7 S42.0 491.9 614.9 649.4 677.0 717.7 807.0 901.4 1106.5 1295.7 1320.0 Creece 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 30.0 36.1 4.2 39.8 40.0 Iretand 24.3 2t.3 21.6 20.6 23.6 22.0 24.7 23.7 23.7 31.S 29.2 36.6 37.0 Italy . 300.7 306.6 330.0 304.8 309.8 307.2 339.2 362.8 380.5 400.0 430.0 452.0 475.0 Netherlads 107.2 104.5 96.3 90.7 92.2 104.1 109.7 119.1 126.5 125.8 123.0 140.0 160.0 Portugat b/ 31.6 30.4 30.0 33.0 31.0 32.0 52.2 66.6 78.6 108.4 136.6 138.0 138.0 Spain bi 405.4 408.8 396.3 399.9 366.7 363.0 356.5 360:0 360.0 382.0 382.0 382.0 350.0 United Kingdom 328.4 331.9 322.0 307.2 309.3 323.6 343.0 359.4 387.8 433.6 469.9 489.3 544.8
OTHERWESTERN EUROPEAN COU 1TRIES 356.4 341.9 299.4 m.9 324.8 333.8 370.0 415.7 461.9 518.7 6Q8.s 643.6 628.3 Austria 76.9 75.8 71.6 64.4 77.7 83.6 91.6 95.6 110.2 121.5 143.7 154.0 150.3 finland 39.1 42.5 45.2 36.5 42.1 47.9 50.6 57.0 59.2 71.3 70.0 73.2 70.0 Iceland 1.8 2.0 2.0 1.9 2.0 2.0 2.0 2.4 2.3 2.3 2.7 3.0 3.0 Malta 2.8 3.2 3.5 2.3 3.1 3.0 1.9 3.5 3.8 3.1 5.2 7.4 7.0 Norway 30.6 33.1 36.2 33.2 35.6 37.0 41.3 43.4 45.7 51.1 4s.s 53.5 61.2 Sweden 70.0 72.0 72.4 67.0 77.8 86.8 96.1 111.2 126.4 137.5 142.7 159.6 161.8 Switzerland 63.1 58.2 58.6 55.6 58.6 60.5 63.3 66.2 69.1 72.9 75.7 79.0 75.0 Former Yugoslvia 72.1 S5.1 9.9 12.0 27.9 13.0 23.2 36.4 45.2 59.0 120.0 113.9 100.0
EASTERNEUROPE AND FORMERUSSR 188.8 149.7 98.4 116.8 127.1 151.4 86.2 119.3 159.3 177.2 153.3 175.4 209.2
NORTNANERICA 2392.9 2501.8 2643.4 2507.7 2652.6 305#.0 3116.3 3044.2 2979.7 3102.4 3190.8 3245.0 3626.0 Cand. 24S.8 260.3 269.4 250.0 277.6 285.0 300.6 324.4 229.7 322.4 340.8 345.0 380.0 United States 2147.1 2241.5 2374.0 2257.7 2375.0 2m.0 281S.? 2719.8 2750.0 2780.0 2850.0 2900.0 3246.0
OTNERDEVELOPED COUWTRIES 762.0 743.5 793.s 607.S 721.7 733.9 802.1 828.7 806.9 824.3 806.9 856.0 838.2 Japan n2.5 707.9 757.9 s75.9 662.3 680.0 764.6 774.8 760.4 M.? 7s7.s 803.0 m.2 7NwZealand 36.5 35.6 35.6 31.6 39.4 53.9 37.5 s3.9 46.5 S0.6 49.4 53.0 61.0 Tabte 1.14: WoRLDBANAA INPorTS. 1980-92 *7 (ceont) . ,. ('000 NT) Page2 of 2
1980 1981 1982 1983 1984 198S 1986 1987 1988 1989 1990 1991 199241 ......
DEVELOPINGCOUTNRIES 720.4 741.8 602.S 446.3 434.7 423.0 438.5 571.9 592.5 605.2 610.5 983.7 872.7
AFRICA 17.0 40.1 52.5 12.1 11.0 11.4 8.8 14.9 14.9 12.8 13.0 13.0 13.0 Algeria 0.6 18.0 28.S 0.0 0.0 0.0 0.0 0.0 0.0 n.a n.a n.a n.a Morocco 0.0 1.0 2.3 2.4 1.2 1.0 1.0 1.0 1.0 1.0 1.0 n.a n.e Senegal 0.9 1.8 1.7 4.5 S.7 3.5 3.? 9.S 9.5 6.8 7.0 n.a n.a Tunisia 9.4 12.3 14.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 n.a n.a n.a Burkina Faso 2.1 3.0 2.0 1.2 0.1 2.9 0.1 0.4 0.4 1.0 1.0 n.e n.a Zimbabie 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 n.a n.a
ASIA 263.8 268.9 265.8 256.0 245.9 224.2 212.5 361.2 373.1 393.0 403.8 730.0 S98.2 Chine 20.0 20.0 20.0 20.0 20.0 40.0 4S.0 50.0 50.0 50.0 50.0 50.0 SO.0 HongKong 21.4 25.1 30.7 23.7 33.4 35.1 38.8 38.2 36.1 34.1 32.3 41.8 40.0 Korea 1.S 0.5 1.4 0.8 7.8 0.8 3.? 9.2 t2.9 21.2 21.8 314.2 312.0 Near East cJ 197.8 221.1 188.0 187.5 159.7 123.3 100.0 236.8 247.1 260.7 275.7 299.0 171.2 Singapore 23.1 22.2 25.7 24.0 2S.0 25.0 25.0 27.0 27.0 27.0 24.0 25.0 25.0
LATINAMERICA 439.6 412.8 284.2 178.2 177.8 187.4 217.2 195.8 204.5 199.4 193.7 240.7 261.5 Arentina 195.2 181.4 100.6 72.9 79.6 94.7 128.8 100.0 90.0 81.7 7.t 112.6 120.0 El Salveador 49.6 36.9 60.0 35.0 29.9 29.0 23.8 2S.0 25.0 25.0 25.0 25.0 25.0 Chtle 154.3 153.1 87.8 43.8 40.6 32.2 32.2 36.9 53.4 56.6 63.4 60.2 64.8 Uruguy 40.S 41.4 35.8 26.5 27.7 31.5 32.4 33.9 36.1 36.1 32.2 42.9 51.7
WORLD- tOtAL 6781.1 6853.6 67393 6128.9 6542.1 7034.6 7280.1 7542.5 7785.5 8239.6 8681.1 9473.4 9870.2 ...... a/ Net i"ports. b/ Figures include domestic shipmentsof overseas provinces. c/ Near East: Saudi Arabia, UnitedArab emfrates, usait, Iran, Iraq eandSyrIa. b3 d/ Preliminary. (a) sources Trade Yearbook*ad 8 nane Statistics, FAO. Table 1.15: AVERAGEGROTH RATEOF BANANAIMPORTS a/di
._...... ,,...... _ _.. _,.... _...... ,,,_......
1951-61 1961-71 1971481 1981-91
EuropeanCoamunuty - 4.0 OpenMarkets 14.0 3.5 0.8 7.2 Preferential Narkets 7.4 2.8 -0.1 2.5 Spain and Portugal 6.3 5.9 0.4 1.6
Rest of Western Europe - 6.7
Eastern Europe and former USSR 13.1 4.1 2.?
PorthAerica 1.2 1.5 2.9 2.9 USA 1.0 1.2 3.0 2.9 Canadb 4.5 4.2 2.2 3.3
Japan 11.0 30.7 -2.7 0.?
Far East b . - 18.5
Ndar East c- 4.1
Vortd 5.0 4.4 1.1 3.2
al Average *wnal rates of growth calculated from import trends expressed as 3-year moving average. bi China, HonMKong, Republ1c of Korea and Singapore. c/ Saudi Arabia, united Arab Emirates, Kuwait, Iran, Iraq, Syria. d/ 1991 lmpert figures ar preliminary. - fndfcates f igure not calculated or avaltable. Source: Trade Yearbook and Banan Statistics, fAO.
224 Table 1.16: WORLW uANAJAPRWUUCTIOu, 1YUU-Y1 Of ,,,,,,.... V000 NT) Psge 1 of 4
,,.,,,...... ,,,,...... ,, ...... ,s......
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 ...... CARIBBOEA The Bahams 7 7 8 8 8 8 8 8 8 6 6 6 Barbados 1 1 1 1 1 1 1 1 1 1 1 BetIze 21 16 Is 14 14 14 15 28 35 37 34 34 Guyana 7 5 S 5 9 11 17 18 20 20 20 20 Juasica 100 100 160 160 150 160 160 180 135 130 128 128 Surinam 39 39 41 37 41 40 44 45 52 U 48 49 Trinidadand Tobago 5 5 5 5 s 5 6 6 6 6 6 6
Stb-total 180 173 238 230 228 239 251 286 257 246 243 244
WINDWARDISLAND Dominica 32 35 37 37 38 40 55 65 80 So 65 67 6renada 18 18 1S 14 14 13 t3 14 14 12 11 It St. Lucia 55 58 SS 69 85 90 115 113 168 145 155 155 St. Vncent and the 6renadfnes 21 33 31 33 33 41 40 47 65 67 80 80
Sub-total 126 144 138 153 170 184 223 239 327 282 311 313
OTHERS Domfnfcan Repubtlic 301 320 320 320 330 314 422 373 391 384 395 389 Freneh West Indies: Guadatoupe 83 150 167 142 163 127 144 148 150 109 86 95 Martinique 94 187 191 178 181 181 212 212 221 241 255 255 Nalti 200 210 230 230 235 23S 250 250 200 225 235 220
Sub-totaL 678 867 908 870 909 857 1028 983 962 959 971 959
REGIONALTOTAL 984 1184 1284 1253 1307 1280 1502 1508 1546 1487 1525 1516 ----...... ----...... ----......
NORTHA4ERICA " United States (mnci. Puerto Rico) 104 112 107 101 100 96 94 95 95 90 72 73
REGIONALTOTAL 104 112 107 101 100 96 94 95 95 90 72 73 ...... ---- ..... Table 1.16: WRLDBAIIAM PRODUCTION, 1980-91 a/ (con*t) ...... (000NT) Page 2 of 4 ......
1980 1961 1982 1983 1984 1965 1986 1987 1988 1989 1990 1991 ,...... NEXIO MADA CNT AMERICA Costa Rica 1092 1144 1136 1153 1169 100B 100 1100 1162 1512 1740 1550 Cuba 144 174 192 200 221 201 147 166 203 183 200 200 El Salvador 52 53 54 S4 55 33 36 36 36 61 63 63 Guatemala 650 650 655 67S 680 690 496 470 351 420 478 470 Honduras 1330 1425 142S 1186 992 1091 1020 1150 1180 1092 999 1100 Mexico 1501 1591 1572 1640 2093 11st t473 1770 1366 118S 1591 1868 Nicaragua 1S0 1S 157 128 116 127 101 119 90 90 104 114 Panama lOSO 104S 1057 1045 1056 1067 907 1251 1081 1254 1166 1170
Sub-total S969 6239 6248 6081 6382 5368 5180 6062 S669 5797 6341 6535
SOUTHANERICA Argentina 146 77 89 126 161 163 165 243 2S0 240 260 283 3o.tvia 216 164 152 1S4 160 210 290 350 360 355 398 413 Brazil 6721 6710 6818 6566 7062 4815 5052 5131 5118 5s55 5502 5630 Colombia 1030 1155 1147 1173 1450 1200 1300 1300 1300 1450 1600 1600 Ecuador 2269 2010 1999 1642 1678 1970 2316 2387 2576 2576 3055 2954 Paragay 300 303 314 315 325 325 325 423 449 29? 310 311 Venezuela 890 91S 917 934 965 989 1007 1038 1100 1134 1167 1170
Sub-total 1IS72 11334 11436 10910 11801 9672 10455 10872 11153 11557 12292 12361
REGIONALTOTAL 17541 17573 17684 16991 18183 15040 15635 16934 16822 1n754 18633 18896 ...... ----......
ASIA Bargtadesh 652 684 678 675 690 691 759 689 609 637 650 620 Cambodia 6S 70 75 82 84 92 100 106 110 112 115 120 Chins 276 311 404 403 503 830 1402 2233 2058 1602 1657 2105 India 4830 4580 4195 4648 4626 5390 4608 4767 S954 60S6 6655 6400 Indonesta 1977 2501 2033 23a 2759 1909 2079 2281 2308 2192 2360 2400 Israel 75 66 73 67 68 81 82 101 69 83 Al 62 Malaysia 4S5 460 440 450 475 477 480 485 490 50 SOS S09 Pakistan 130 131 134 135 137 140 202 202 206 205 210 224 Phitippines 3977 4073 4077 3668 2299 2222 3832 3157 3645 37M 3409 3645 IwaUI 1. IW UMLI WPARAR YIUNAILI SU, lYOU'J l tW1;C ,,._...... ('000 MT) Page3 of 4 ...... _...... ___...... _
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 ...... ASIA (can't)
Vietnm 893 900 1000 1100 1200 1300 1400 1425 1215 1186 1200 1250 Others 116 111 137 131 154 158 190 199 239 210 229 123
REGIONALTOTAL 15426 15868 15228 15662 14979 15275 17120 17632 16891 18S05 19041 19449 ......
OCEANIA AustraLia 124 130 131 146 145 134 158 160 209 180 210 210 PapuaNew Guinea 916 932 949 900 920 940 950 965 1100 1150 1200 1200 Others 46 47 48 49 49 49 48 48 50 57 53 54
REGIONALTOTAL 1086 1109 1128 1095 1114 1123 1156 1173 1359 1387 1463 1464 ......
AFRICA Angola 280 280 280 280 280 280 280 280 280 280 280 280 3urtudi 9S0 940 960 1210 1250 1384 1436 1440 1S74 1608 1547 1580 Cameroon 97 49 57 57 66 67 68 68 68 508 S10 S20 Central frica 79 82 78 80 82 82 83 84 86 91 93 93 Comoros 32 32 33 34 34 35 39 52 49 50 S0 52 Egypt 133 137 165 169 147 203 237 278 355 388 408 410 Ethlopia 73 73 73 74 74 75 75 75 76 77 78 79 Guinea 99 100 110 103 104 lOS 106 107 110 110 110 110 Ivory Coast 163 151 1SO 130 148 163 137 136 133 133 116 116 Kenya 135 136 138 140 142 144 14 146 148 190 200 210 Liberia 74 75 77 78 79 80 80 80 80 8O 80 80 Nadagascar 288 280 281 286 224 255 225 226 226 217 220 218 Nalad 12 12 13 76 77 78 79 80 81 8B 89 90 Nozaibique 65 65 70 70 70 70 75 80 82 84 85 80 SomIle 60 59 99 99 62 70 94 108 115 105 110 110 " SouthAfrica 112 115 130 130 116 151 T77 178 180 180 182 182 Sudan 90 90 90 90 50 60 62 63 62 60 45 63 Tanzania 780 820 1000 1000 1000 1000 1100 1200 1300 743 823 750 Uganda 369 370 400 410 420 430 440 450 470 490 S00 510 Table 1.16: WORLD3NANA PRODUCTION,1980-91 of (con't) ,...... - ( 000NT) Poe 4 of 4 ED0------0------
1980 1981 i982 1983 1984 1985 1986 1987 1988 1989 1990 1991 ...... AFRICA(con't)
Zaire 310 312 320 325 325 330 335 340 403 404 404 405 Zimbabwe 54 56 58 60 62 64 66 68 70 72 74 76 Others 112 119 106 124 127 140 140 12 122 121 124 128
REGIONALTOTAL 6347 6354 6670 7006 6923 7251 745 7648 8058 8068 8118 8133 ......
EtROPE Greece 3 2 3 3 5 7 12 13 12 12 12 12 Portugal 34 26 26 26 46 4 48 50 50 30 30 30 Spain 475 487 455 447 439 402 471 449 395 397 380 405
REGIONALTOTAL 512 515 484 476 490 455 531 512 457 439 422 447 ...... --- ......
WORLD- TOTAL 42000 42715 42585 42586 43096 40520 43503 45502 47228 47330 49274 49978
...... a1 Data may differ from Table 1.12 due to data sources and defInitfons. Source: Production Yearbooks, FAO. Table 1.17: CARIBEAI COUNTRIES-SAMITEEXPORTS, 1980-92 ------(va.tu In US$willion votum. in '000 tons)
...... 1960 1981 1962 1963 1964 1965 1966 1987 1988 19 1990 1991 1992 ......
Valtu
Domnican Rhpublfe 16.5 15.7 5.3 0.0 0.0 0.0 0.0 4.1 1.7 0.9 0.5 0.2 0.0 Guy1n 186.0 152.8 94.2 72.9 91.6 99.1 82.4 86.2 .9.5 72.s 74.9 79.1 53.5 Halti 19.6 16.6 21.3 n.a. n.a. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Jamaica 198.4 172.1 170.0 109.2 159.7 77.5 90.1 112.5 111.8 111.0 103.1 112.9 88.8 Surinam 64.5 63.0 29.2 24.8 40.6 35.8 26.9 10.4 28.0 n.a. n.a. n.o. n.a.
Voluta
Dominican Rqpbtic 605.8 457.2 140.6 0.0 0.0 0.0 0.0 328.0 199.9 174.9 76.5 30.0 0.0 Guyae 1591.5 1483.3 1140.6 1187.0 1310.9 1604.1 1401.8 1370.3 1268.4 1321.1 1429.7 134S5.9 895.0 Halti 579.0 480.0 622.0 n.a. n.a. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Jamalca 6050.0 5370.0 4080.0 3120.0 4600.0 2325.0 2939.6 3700.0 3500.0 4200.0 3900.0 4300.0 4100.0 Suriname 1767.0 1269.0 497.0 49.0 957.3 992.5 839.2 322.6 6.9 n.a. n.e. n.a. n.a.
...... n.a.: Not available. Source: IID Economrc Nmor anda. Table 1.18: CARItBEANCWUITRIES--ALUINIA EXPORTS, 1980-92 .....-- (vatue in USSsiltion; volume in '000 tons)
...... 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 ......
Value
Guana 43.7 32.7 1.8 2.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Jamaica 537.3 588.1 343.8 314.6 283.8 212.3 205.4 224.0 355.0 1.75.0 625.3 543.0 471.1 Suriname 279.4 264.0 232.2 217.0 196.7 173.6 177.1 194.5 289.7 437.3 354.1 261.7 240.1
Volue
Guyana 226.2 149.6 64.0 29.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Jamaica 2395.0 2549.0 175s.o 1900.0 1700.0 1600.0 1600.0 1600.0 1600.0 2100.0 2900.0 3000.0 2900.0 suriname 1329.0 1166.0 1043.7 1143.3 1096.5 1265.2 1342.6 1342.1 1630.0 1553.0 1473.0 1449.0 1514.0
...... n.a.: Not avallable. Source: IMROEcononic Nmranda. Table 1.19: CARIBBEANCeUNTRIES--END OF PERIODINFLATION RATES, 1980--92 .....-..-. (In percent)
...... -.-...... _...... _...... ,_.,...... _, 1980 1981 1982 1983 1984 1985 1986 1987 1968 1989 1990 1991 1992 ......
Antigue and Barbuda 16.3 7.0 1.9 3.6 3.8 -2.0 1.3 8.3 3.4 S.3 7.7 1.S 3.0 The Baharas 12.2 9.0 4.5 3.4 4.6 4.8 6.9 4.2 4.8 6.2 4.5 7.3 S.7 Barbados 13.9 12.3 6.8 S.5 5.1 2.3 -0.4 6.2 4.5 S.9 3.6 8.1 3.3 Belize n.s. 11.9 3.9 2.6 5.8 -0.6 2.4 2.0 3.3 2.1 4.0 4.5 2.4 Dominica 21.4 8.1 4.1 2.6 2.1 3.5 2.8 2.8 5.2 5.7 5.5 2.1 4.1 Dominican Repshlic 4.4 7.5 7.2 5.4 40.8 28.4 6.5 25.0 57.6 41.2 100.7 4.0 6.7 Granada 21.9 10.4 7.1 6.5 3.6 1.8 0.0 0.6 6.5 3.6 3.7 1.0 3.8 Guyana al 8.6 29.0 19.2 11.2 28.0 7.7 6.6 34.6 51.5 104.7 75.9 83.1 13.8 Haitf 15.3 12.3 S.0 11.2 5.4 17.4 -0.5 -5.1 8.4 14.4 24.3 8.4 32.0 Jamaica bt 28.7 4.9 6.9 16.8 31.1 23.1 10.6 8.4 8.6 17.2 29.8 80.2 40.2 St. Kittsand Nevis 14.4 8.5 3.1 2.9 2.7 1.8 -0.8 3.4 -0.6 6.6 3.7 4.5 1.S St. Lucia c/ 19.6 15.0 4.6 1.5 1.6 1.2 2.2 7.0 0.8 4.4 3.9 6.1 5.7 St. Vincentand the Grenadines n.s. n.s. 4.8 5.1 2.1 1.3 0.5 3.4 2.1 3.5 9.1 2.3 3.1 Surfname 10.6 7.6 6.3 4.2 4.5 15.6 30.0 52.2 -7.6 12.0 19.9 30.0 57.5 Trfnidadand Tobago 16.5 11.5 10.9 13.7 14.1 6.6 9.8 8.2 12.1 9.3 9.S 2.3 8.S
...... al UrbanIndex. bJ 1986-92are In fiscalyears. cl Periodaverage. n.a.:Not Available. Source:IBRD Economic Nemorandu and INf InternationalFinance Statistics. Table 1.20: CARIBSEAMCWTRIES--R6ML EFFECTIVE EXCHANGE RATE, 190-92 (1965M100)
...... _...... 1980 1961 192 1 1964 1965 1986 1987 1988 1989 1990 1991 1992 ......
Antigue and Berbuda 91.4 95.7 97.1 98.0 101.4 100.0 93.4 89.5 69.1 89.9 88.8 91.8 92.5 The Bahsais 85.9 90.2 92.7 95.4 97.9 100.0 96.8 95.0 93.4 94.1 90.5 93.S n.a. narbados 78.4 85.4 93.1 101.0 107.2 100.0 94.8 89.2 89.0 92.0 86.4 87.8 90.6 BOOze 74.6 76.0 79.7 90.2 94.7 100.0 89.6 83.5 82.4 81.2 77.3 77.4 76.4 Dominica 76.9 83.2 86.0 91.3 96.8 100.0 92.9 82.6 78.2 82.1 77.4 79.2 81.6 Dominfcen Repubtic 126.8 130.5 132.3 125.2 91.4 100.0 93.6 78.1 67.7 81.6 864.2 90.0 90.6 Grenada n.4 83.7 88.8 93.7 99.9 100.0 93.1 83.7 81.3 85.0 78.5 77.5 n.s. Guyana 66.0 71.4 80.9 94.9 96.8 100.0 94.8 48.8 61.3 48.7 34.4 30.3 33.6 IRI.ti 69.6 M1.3 78.5 86.6 91.7 100.0 94.2 82.8 77.6 76.0 68.0 71.0 65.2 Jamaica 156.2 166.4 172.6 162.5 114.1 100.0 107.5 106.1 107.2 115.0 102.5 92.3 81.8 St. Kitts nd Nevis 100.0 103.1 106.1 107.1 109.3 109.0 105.1 98.5 92.4 94.6 90.0 8914 89.5 St. Lucia 85.4 93.7 96.1 97.7 1O0.7 100.0 94.t 92.4 86.5 88.0 83.7 n.s. n.a. St. Vincent and the Grenadines 87.5 92.6 95.9 99.4 101.0 100.0 96.4 93.4 67.7 8?.9 85.6 86.6 n.a. Suriname 61.7 69.2 73.6 78.2 89.5 100.0 111.4 124.1 136.5 136.7 133.2 163.7 223.8 Trinidad and Tobago 59.7 62.8 70.5 83.6 95.6 100.0 68.7 64.1 64.9 64.1 65.6 65.1 66.8
...... *.*^...... n.a.: Not avaflabte. Sources lnt.raatfonal FfnencIal Statfstfcs IMF. Table 1.21: CARIBBEANCOUNTRIES (CGCED) - NETEXTERHAL CAPITAL FLOWS 1982-1992 a/ -...... (IUSSmillion) ...... 1982 1983 1984 1983 1986 1987 1988 1989 1990 1991 1992 ,...... FtCIAL CREDITORS 1340.1 1074.5 985.8 957.3 451.9 488.1 503.3 741.1 818.2 1210.3 500.3 ......
ULTILATERALLOANS 546.4 551.1 267.5 288.9 -4.7 6.9 -14.9 53.5 183.3 299.1 72.2 ...... - ...... ---- ...... Cos 31.7 23.6 17.4 1S.2 16.9 23.? 24.2 25.1 44.5 4.6 12.9 EDF 3.6 2.6 1.0 1.6 0.3 0.6 1.3 -0.4 -0.4 -0.4 -0.1 EEC 1.3 0.7 0.2 0.3 0.0 0.2 0.7 -0.1 17.3 11.3 5.6 EtS 5.1 5.5 11.1 6.2 8.3 20.0 13.8 4.9 2.S 18.3 0.6 IBRD/IDA 169.1 106.9 79.9 91.4 14.5 66.1 10.5 18.7 44.7 35.2 -43.0 too 87.7 106.3 98.3 151.8 112.7 106.5 79.0 104.2 103.7 99.3 97.3 IFAD 2.1 2.2 3.5 5.5 3.9 7.1 1.2 4.5 0.8 1.8 -2.3 IMF CREDITS 227.6 301.1 - 62.0 25.2 -150.6 -216.8 -136.9 -99.9 -6S.7 104.2 -19.9 IMF SAF/ESAF 0.0 0.0 0.0 0.0 0.0 11.3 0.7 0.3 50.6 24.2 24.7 IMF TRUSTfUND .0.1 *0.6 -1.8 -3.3 -5.3 -5.9 -4.6 -2.9 -13.3 -1.6 0.0 OPEC 18.3 2.9 -4.2 -5.0 -5.4 -5.7 -4.9 -0.8 -1.8 0.5 -3.6 OTHER 0 0 0 0 0 0 0 0 0.4 1.7 0.1 ILATERALLOANS 597.0 328.7 429.0 277.3 61.4 54.0 69.9 155.0 73.8 54.3 -44.0 ...... :...... BRAZIL -0.5 11.9 -1.3 -1.7 -1.4 -2.2 -1.9 2.1 10.3 0.6 -8.7 CANADA 10.0 4.5 31.6 34.9 30.1 -11.7 3.1 1.7 19.2 2.2 -31.4 CIDA 10.6 10.6 18.2 1.5 -0.2 -0.7 -1.2 *1.4 8.5 -0.1 -0.1 EDC 0.0 -8.5 10.3 33.1 36.8 -9.7 3.0 5.2 11.9 3.2 -31.3 CHINA 0.0 0.0 2.0 10.3 4.7 -0.4 -1.2 1.7 14.9 14.8 1.9 FRANCE 3.2 1.1 2.0 8.4 7.3 14.3 14.0 8.8 13.9 7.6 9.9 inwww 4.8 10.6 4.1 2.4 21.7 44.3 11.9 2.1 17.7 19.4 1.4 ITALY 0.0 4.5 0.7 3.6 -0.3 0.8 21.2 29.6 6.6 8.7 4.2 WAPAN 6.7 4.8 19.6 28.8 10.1 7.5 23.3 36.8 54.4 38.0 42.0 IEXICO 32.0 30.9 42.3 -14.0 9.0 12.7 -6.8 6.0 2.6 -3.3 -6.3 IETHERLAiDS 3.3 6.4 0.9 2.1 -1.5 0.3 0.6 1.8 -0.9 -1.2 0.0 IPAIN S7.7 22.9 16.0 3.2 1.7 2.7 -1.3 -0.4 0.0 0.0 -3.5 rAIlW 0.0 0.0 0.4 0.7 2.0 -0.1 -0.2 1.3 -0.2 0.7 -0.4 rRINIDAD& TOBAGO 1.9 3.7 2.6 20.2 -12.3 -27.7 -43.9 -8.2 5.6 -1.3 -0.3 JNITEDKINGDOM 20.1 26.7 13.9 5.6 9.5 12.3 35.7 27.2 4.9 -3.9 -0.6 JMtTEDSTATES 316.2 167.1 279.6 144.5 -14.9 11.7 43.3 53.2 -32.3 25.6 -32.4 AID 170.3 91.4 114.4 37.8 37.7 11.4 20.1 24.7 9.2 4.2 -11.0 Ccc 45.0 26.0 103.6 27.8 -32.1 -25.1 12.8 -6.4 -36.9 -20.9 -16.4 EXIMBANK 23.6 -12.3 15.9 -36.5 -52.9 -51.3 -20.3 21.9 -7.2 -11.9 -1.3 IENZUEULA 119.7 26.7 18.0 24.1 5.0 -11.8 -12.1 1.5 -3.4 -16.3 -13.3 )THERS 21.9 7.1 -3.3 4.0 -9.2 1.3 -1S.0 -10.2 -39.6 -37.3 -6.5 tANTS 196.7 194.6 289.3 391.1 39S.2 427.1 448.3 532.6 561.2 856.9 472.1 amP 19.7 18.6 15.3 14.3 18.7 14.4 20.4 22.2 24.7 23.0 22.9 uf 11.4 9.4 15.3 19.8 27.6 23.5 32.5 56.7 74.3 57.3 67.9 THERPilT. 24.9 17.7 25.3 24.2 17.7 19.6 32.3 30.2 24.8 24.9 32.0 A1IUA 21.1 31.3 44.0 39.6 52.1 61.1 79.9 76.9 65.0 67.2 52.2 lA!CE 5.2 7.3 5.4 7.9 9.6 10.3 12.2 19.8 24.5 38.7 19.8 ERRWNT 17.5 17.6 12.5 14.2 32.7 27.1 40.5 29.4 30.8 23.1 21.4 TAILY 1.1 0.8 3.0 4.5 18.8 7.9 6.2 7.5 5.7 3.4 9.9 WPAN 9.2 4.0 6.8 12.7 14.8 18.5 28.5 29.6 31.1 36.8 21.1 ETHERLANDS 8.6 10.5 9.2 8.0 7.1 5.2 9.5 10.4 33.3 14.3 13.3 NITED KINGOOR 17.1 i4.U 10.8 6.8 9.7 12.4 17.8 25.0 33.6 30.1 24.7 NITED STATES 50.0 51.0 134.0 229.0 174.0 211.0 141.0 186.0 146.0 548.0 107.0 THERBILAT. 10.9 12.4 7.7 10.1 12.4 16.1 27.5 38.9 67.4 -9.9 79.9 VATECREDITORS 202.0 214.3 13.2 223.0 309.4 53.8 283.0 -47.4 -226.7 -184.5 -207.2 ...... _..__...... -----...... ----- AUKSAND OTHERS 168.6 173.6 -5.4 135.0 110.5 -123.0 271.7 -132.1 -208.8 -95.3 -116.9 UPPLIERS 33.4 40.7 18.5 88.0 19.0 69.2 11.3 84.7 -17.9 -89.2 -90.3 AL ALL CREDITORS 1542.1 1288.8 99.o 1180.3 761.4 434.2 786.3 693.7 591.5 1025.8 293.1 ._____.__...... ___...... _...... _...... ----- ..... __...... ______....___...... _._.... __.... _...... Antigua and 8arbuda: All grants for 1988-92 included in other bilateral grants. Bahams: 1990-92 grants not available. Surine: 1982 not available except for private creditor data; all bilateral lending for 1987-92 included in others and all grants included in other bilateral grants. e: Net external capital flows equal grants plus disbursements less amortization of medium- and long term debt plus net use of IMF credits. Includes Antigua and Barbuda, The Bahamas,Barbados, Belize, Dominica, DominicanRepublic, Grenada, Guyana. Haiti, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and The Grenadines, Suriname, and Trinidad and Tobago. rce: World BankDebt Reporting System and OECD. 233 Table 1.22: CARIBBUAC0UNTRIES (COCED) - NETEXTERNAL CAPITAL TRANSFERS 1982-1992 a/ ....--..-.. (US mitllion)
...... _.___...... ____...... _...... 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 199; ...... OFFICIALCREDITORS 1130.6 810.3 704.6 653.3 127.7 130.4 163.8 408.9 351.3 790.4 79.5 ...... MULTILATEMLLOANS 438.9 411.2 91.7 111.2 -216.7 -234.3 -239.0 -171.8 -132.3 26.8 -195.4 ii~~~ ~~~~~~~~~,..-...... CDli 24.1 16.5 9. 4.9 6.1 11.2 11.4 11.5 12.6 -10.3 I8. EDF 3.8 2.6 1.0 1.6 0.2 0.5 -0.2 -0.8 -0.6 -0.6 -0.1 EEC 1.2 0.6 0.2 0.2 0.0 0.1 0.6 -0.2 17.1 11.1 5.2 ElB 4.3 4.7 10.2 4.6 5.4 17.8 9.4 0.3 -1.2 14.5 -2.1 ICRD/IDA 133.8 60.6 28.6 34.3 -61.4 -17.9 -79.4 -63.6 -66.5 -64.3 -135.1 toB ?7.9 94.8 83.5 130.6 78.5 56.4 27.5 51.8 44.1 21.0 20.1 IFAD 2.0 2.2 3.4 5.2 3.2 6.6 0.5 4.0 -0.9 1.0 -3.6 IMf CREDITS 171.5 228.5 -36.5 -60.9 -236.6 -308.1 -200.5 -172.9 -136.4 52.1 -66.7 IMFWrESAA 0.0 0.0 0.0 0.0 0.0 11.2 0.6 0.2 0.0 0.0 -0.2 IMFTRUSt FUND 1.5 -0.1 -2.4 -4.0 -6.1 -6.1 -5.3 -2.6 -0.1 0.0 0.0 OPEC 18.8 0.8 -5.8 -S.2 -6.0 -6.0 *3.6 0.4 -0.4 0.8 -4.4 OTHER 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.? 0.1 BILATERALLONS 495.0 204.5 323.5 151.0 -50.9 -62.4 -45.5 48.1 -77.6 -93.3 -197.0 BRUAIL -2.0 9.2 -2.8 -2.5 -1.8 -2.4 -2.0 2.1 9.4 -1.0 -10.3 CANADA 4.4 -1.0 26.6 25.9 17.9 -25.0 -12.0 -10.8 -13.0 -14.4 -44.7 CIOA 9.? 9.5 17.1 0.3 -0.? -1.2 -1.7 -1.7 8.2 -0.4 -0.3 EDC -7.0 -14.6 4.8 24.3 23.6 -23.1 -12.2 -7.2 10.4 15.6 -2.1 CHINA 0.0 0.0 2.0 10.2 4.7 -0.4 -1.3 0.9 14.9 14.5 1.0 FRANCE 3.2 0.9 2.0 7.9 5.9 13.2 11.3 5.4 8.8 3.6 3.1 G2RIHWI 4.0 9.8 3.3 1.6 20.0 43.0 9.2 -1.0 13.1 9.7 -7.2 ITALY 0.0 4.5 0.7 3.6 -0.5 0.7 21.1 29.5 4.9 6.8 -0.7 JAPAN 6.1 2.4 18.7 26.6 31.2 1.2 15.3 31.8 45.8 23.5 30.8 MEXICO 30.6 23.6 34.1 -16.8 -1.7 0.1 -12.6 -0.8 -9.4 -10.2 -6.8 NETHERLANDS 1.8 S.6 0.6 1.6 -2.8 -0.1 0.4 1.8 -5.1 -2.6 -1.7 SPAIN 54.3 16.6 11.8 2.9 1.7 2.7 -1.3 -1.8 0.0 0.0 -4.3 TAIWUI 0.0 0.0 0.4 0.7 1.1 0.1 -0.1 0.6 -0.3 0.5 -0.6 TRINIDAD& TOBAG6 -1.0 -0.2 -14.2 10.3 -17.3 -30.8 -44.3 -10.9 4.8 -3.1 -2.9 UNITEDKINGDOM 13.7 21.0 11.1 1.2 6.4 5.5 29.9 17.3 -5.3 -17.1 -14.9 UNITEDSTATES 266.8 111.1 236.5 90.8 -61.1 -30.5 6.3 22.5 -83.1 -18.6 -73.1 AID 164.9 82.7 107.0 25.7 26.5 5.6 4.4 11.8 1.3 -2.3 -3.1 CCC 29.1 14.2 101.3 20.0 -43.0 -32.8 8.8 -9.6 0.0 0.0 0.0 EXINBANK 3.0 -50.0 -10.4 -67.7 -7S.1 -69.1 -36.3 8.1 0.0 0.0 0.0 VENEZUELA 998 4.1 3.0 -3.2 -20.2 -28.1 -38.1 -18.1 -17.7 -35.9 -41.4 OTHERS 13.3 -3.0 -10.4 -9.9 -34.3 -11.7 -27.5 -20.5 -45.3 -48.8 -23.2 GRANTS 196.7 194.6 289.1 391.1 395.2 427.1 448.3 532.6 561.2 856.9 472.1 ...... ---- ...... UNOP 19.7 186 15.3 14.3 18.7 14.4 20.4 22.2 24.? 23.0 22.9 EDF 11.4 9.4 15.3 19.8 27.6 23.5 32.5 56.7 74.3 57.3 67.9 OTHERMULT. 24.9 17.7 25.3 24.2 17.7 19.6 32.3 30.2 24.8 24.9 32.0 CANADA 21.1 31.3 44.0 39.6 52.1 61.1 79.9 76.9 65.0 67.2 52.2 FRANCE 5.2 7.3 5.4 7.9 9.6 10.3 12.2 19.8 24.5 38.? 19.8 GERKANY 17.5 17.6 12.5 14.2 32.7 27.1 40.5 29.4 30.8 23.1 21.4 ITALY 1.1 0.8 3.0 4.5 18.8 7.9 6.2 7.5 5.7 3.4 9.9 JAPAN 9.2 4.0 6.8 12.7 14.8 18.5 28.5 29.6 31.1 36.8 21.1 NETHERLANDS 8.6 10.5 9.2 8.0 7.1 5.2 9.5 10.4 33.3 14.3 13.3 UNITEDKINtGDOM 17.1 14.0 10.8 6.8 9.7 12.4 17.8 25.0 33.6 30.1 24.7 UNITEDSTATES S0.0 51.0 134.0 229.0 174.0 211.0 141.0 186.0 146.0 548.0 107.0 OTHERBILAT. 10.9 12.4 7.Z 10.1 12.4 16.1 27.5 38.9 67.4 -9.9 79.9 PRIVATECREDITORS -70.1 -14.4 -207.4 -45.3 -17.0 -275.9 46.9 -97.2 -315.4 -281.1 -389.2 BA)KSAID OTHERS -117.5 -114.4 -215.O -87.9 -161.1 -301.3 -58.7 -200.6 -354.0 -225.2 -192.6 SUPPLIERS 47.4 99.9 7.7 42.6 1U.1 25.5 105.6 103.4 38.6 -55.9 -196.5 TOTALALL CREDITORS 1060.5 795.9 497.2 608.0 110.7 -145.5 210.6 311.7 36.0 509.3 -309.7 ...... 8/ Antigm and Sarbuda:All grants for 1988-92included in other bilateral grants. Bahamas:1990-92 not available. Surf na.: 1982 not available; *ll bilateral landing for 1987-92 included in others and all grants fncluded in other bilateral grants. Note: Net external capital transfers equal grants plus net external capital flows Less interest payments plus net use of [Nf credits. Includes Antigua and Barbuda, The Bahamas arbados, Belize, Dominica, Dominican Rapibifc, Granada, Guyana, Haiti, Jamaica, St. Kitts and Hevis, St. Lucia, St. Vincent and The Grenadines, Swriname,and Trinidad and Tobago. Source: World Sank Debt Reportina System andoECD. 234 Table2.1: CARIBBEANCOUNTRIES--EDUCATION INDICATORS, 1985-90
......
Illiteracy Enrollment Ratios Nuber of Students Enrolled Rate Primiry Secondary Higher Primary Secondary Higher
......
Antigus and Barbud n.s. n.a. n.a. n.a. 11,394 6,827 n.s. The Bahamas 10.3 79.0 52.0 1.4 29,518 29765.0 5,305 Barbados 0.7 110.0 93.0 19.4 30,161 28,695 5,:27 8elize 8.8 n.a. n.a. n.a. 40,700 7,600 n.8. Dominica 5.9 n.s. n.a. n.s. 12,836 6.300 68 Dominican Republic 22.7 133.0 47.0 19.3 1,032,055 463,51. 123,748 Grenada 2.2 n.a. n.a. n.e. 20,976 6,497 535 Guyans 4.1 90.0 55.0 2.1 121,869 69,519 2,328 Haiti 62.4 78.0 18.0 1.1 780,660 143,758 6,289 Jamaica 3.9 106.0 58.0 4.2 339,023 241,000 12,054 St. Kitts and Nevis 2.4 n.a. n.a. n.e. 7,923 4,179 194 St. L-cia 18.3 n.a. n.a. n.e. 33,148 6,833 389 St. Vincent and the Grenadines 4.4 n.s. n.a. n.a. 25,742 7,237 677 Surinane 10.0 133.0 66.0 7.7 71,454 34,608 3,402 Trinidad and Tobago 3.9 95.0 76.0 4.2 189,623 99,615 4,939
NEUORANDWNITEIS
Latin Amerfca and The Caribbean 16.1 109.0 54.0 19.8 n.a. n.e. n.e. Low.Inceme Countries 62.0 99.0 34.0 4.1 n.e. n.a. n.s. Niddle IncomeCountries 29.0 104.0 49.0 14.0 n.a. n.s. n.s. figh IncomeCountries 1.0 102.0 93.0 39.0 n.s. n.a. n.s. n.a.: Not available. Source: IBRO;UNESCO, Statistical Yearbook, 1990.
235 t1.1 2.2: CARIUEAMCOUITRIES--ADULT ILLITERACY RATES, 1960 1970 ...... -- 1985-19 AD 1990
1960 1970 1980 1985 1990
...... --- **--......
Antigu and earbude 11.3 n.a. n.a. n.8. 5.0 The Bahams 10.3 8.8 n.s. n.e. 1.0 Barbados 1.8 0.7 0.5 n.a. 1.0 BSLize 13.4 8.8 n.e. n.a. 9.0 Deaminfc n.a. 5.9 n.a. n.a. 6.0 Dominican RepsbLic 35.5 33.0 31.4 22.7 20.0 Grned. n.s. 2.2 n.e. n.a. 3.0 Gwna 12.9 8.4 6.2 4.1 4.0 Haiti 85.5 78.7 52.0 47.0 47.0 Jaimce 18.1 3.9 2.0 2.0 2.0 St. Kitts and Nevis 11.8 2.4 n.e. n.s. 10.0 St. Lucia n.a. 18.3 n.e. n.e. 10.0 St. Vncent and the Grenedines n.a. 4.4 n.e. n.a. 18.0 Surin n.a. n.e. 20.8 10.0 5.0 Trinidad and Tdego 6.6 7.8 5.1 3.9 4.0
NEVORAMMITEN ...... Latin America end The Caribbean 31.6 22.4 17.6 17.5 n.s.
...... n.a.: Not eiable. Suc: United Nations, ECLA,Statisticat Yearbookfor Latin ADrics and The Caribben, 1990.
236 Table 2.3: CARIWDEANCOCNItREES--PBLIC EXPENDITWE ON EOIWATION,t985 ------(USS thousand)
...... ,...... *...... ,...... _
Total Current Education Expenditure EdueatlonExpenditure Educatfonal Expenditure current Expenditure -...... per Studmnt on Education As X As X As I (in US S) (K) As X of Total of Total of Current ...... otf Gt...... o nt Edittion GovernrAent Primary Secondary Higher Pri ary Secondary Higher Other ClP Expendfture Expenditure Expndiwture
......
Antigum and Barbuda 141.2 197.1 n.a 36.6 30.6 12.r 20.1 2.7 11.5 95.B n.a The ebahmas n.e n.a n.a 44.0 36.0 8.0 10.0 6.2 24.5 92.1 22.2 Barbados 711.8 784.3 2954.4 31.0 32.5 22.3 14.2 6.1 17.8 82.2 18.7 Beliae n.a n.a n.a 65.0 31.0 3.4 0.6 n.a n.a n.a. n.a. Domfnica n.& n.a n.a 62.9 23.1 8.6 5.4 S.2 17.7 n.e. n.e. Dominican Repubilc 26.9 31.1 124.8 44.4 18.4 19.7 17.5 1.6 10.0 96.9 20.1 Grenada 91.5 84.6 142.3 71.9 21.7 3.0 3.4 7.6 12.5 99.5 23.4 Guyana 97.3 130.5 2914.6 31.1 23.8 17.8 27.3 10.1 10.4 83.1 13.0 Halti 14.6 30.9 403.8 51.0 18.1 10.8. 20.t 1.2 16.5 99.8 16.7 Jamaica 86.6 144.1 1592.2 29.9 34.0 19.4 16.7 5.8 12.1 93.7 15.8 St. Kitts and Mavis 278.3 423.9 5S5.5 49.1 40.1 2.1 8.? 6.6 18.5 99.7 19.1 St. Lucia 220.4 543.8 1744.7 50.8 26.8 4.5 17.9 7.6 n.e 94.4 n.e. St. Vincent and the Grenadines n.a n.a. n.a 67.5 19.9 5.7 6.9 5.7 20.7 n.a. n.s. SurfI 909.2 246.4 2208.1 64.0 8.4 7.4 20.2 10.4 29.6 100.0 n.s. Trinidad and Tobago t200.6 1701.4 7666.1 47.5 36.8 8.9 6.8 5.9 12.3 87.5 16.3
...... n.a: Not availabte. Soure:s UNESMO,Statistical Yearbook 1968. Table 2.4: CARIBBEANCOUNTRIES--PUSLIC EXPENDITURE ON EDUCATIONAS A PERCENTAGEOF GNP, 1975, 1980-88
1975 1980 1981 1982 1983 1984 1985 1986 1987 1988
Antigua and Barbuda 4.5 3.1 3.2 3.3 3.3 2.5 2.2 2.8 2.4 n.a. The Bahamas 5.7 5.1 S.6 5.1 n.a. n.a. 4.6 n.a. 4.3 n.s. Barbados 6.0 6.5 6.1 5.7 5.8 5.5 6.0 5.3 5.9 5.4 Belize n.a. n.s. n.s. n.a. n.e. 4.3 4.4 5.3 4.4 3.9 Dominica n.a. n.s. n.a. n.a. n.a. 5.7 S.2 5.3 5.1 4.9 Dominican Repubtic 2.1 2.3 2.3 2.3 2.3 1.7 1.5 1.4 1.3 1.3 Grenada 7.6 7.2 n.e n.a n.a 6.4 6.1 5.5 4.6 4.6 GuWan n.e. n.s. n.a. n.a. n.a. n.a. 5.5 4.6 4.6 8.2 Haiti n.a. 1.5 1.4 1.2 1.2 1.0 1.0 0.9 1.4 n.a. Jamaica 5.9 6.9 7.1 7.3 7.5 5.2 5.4 4.7 4.1 4.8 St. Kitts and Nevis 4.0 5.1 5.6 6.1 6.5 4.1 4.0 4.0 3.8 3.5 St. Lucia 7.7 6.2 7.0 7.8 n.a. 7.2 7.5 7.2 7.8 8.6 St. Vincent and the Grenadines n.a. 6.0 n.a. n.a. n.a. 5.9 5.7 5.8 6.0 6.1 Surinane 5.6 6.7 7.2 8.1 9.0 9.0 9.1 10.4 n.a. n.e. Trinidad and Tobago 3.0 3.7 4.7 S.6 5.9 5.1 5.0 5.0 5.6 5.2
n.a.: Not available. Source: UNESCO,Statistical Yearbook, 1990, Norld Bank estimates. table 2.5: CARIBBEANCOUNTRIES--PRtMARY EDUCATION ENROLLHENT RATIOS, 1970, 1978-87
1970 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987
Antfgua end Sarbudx n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.e. n.a. n.s. The Bahamas n.a. n.s. n.a. n.a. n.a. n.e. n.a. n.a. n.e. n.a. n.s. Barbados 108.0 110.0 115.0 99.0 101.0 102.0 108.0 110.0 111.2 n.a. n.s. Detize n.a. n.a. n.a. n.a. n.a. n.s. n.a. n.a. n.s. n.a. n.a. Dominica n.a. n.a. n.a. n.s. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Dominican Repubtic 98.4 102.0 104.0 117.6 121.5 115.1 112.0 121.0 124.0 133.0 133.0 Grenada n.e. n.a. n.a. n.e. n.a. n.a. n.a. n.a. n.e. n.e. n.e. Guyana 99.0 99.0 102.0 95.0 96.0 95.0 90.0 n.e. n.e. n.s. n.e. Haiti 46.2 60.0 64.0 69.0 69.0 74.9 76.0 78.0 78.6 n.a. n.s. Jamaica 119.0 99.0 99.0 101.0 104.0 106.0 106.0 104.8 n.a. o.a. n.e. St. Kitts andNevis n.a. n.a. n.a. n.e. n.e. n.e. n.e. n.a. n.e. n.a. n.e. St. Lucia n.a. n.a. n.a. n.a. n.e. n.a. n.a. n.s. n.s. n.s. n.s. St. Vincent end the Grenadines n.e. n.a. n.a. n.e. n.e. n.a. n.a. n.e. n.s. n.a. n.e. Surinfe 131.0 120.0 115.0 125.0 127.0 130.0 132.0 133.0 132.0 n.s. n.e. Trinidad end Tobago 107.0 91.0 91.0 107.0 98.0 96.0 99.0 96.0 96.0 95.0 97.0
NENORANDUMITEM
Latin America and The Caribbean 97.3 n.a. n.a. 97.7 101.7 102.3 107.9 104.2 105.4 106.9 n.e.
...... ^...... n.a.: Not available. Source: United Mations Statistical Yearbook, 1988; IMF, Recent EconomicDevelopments.
co Table 9.6: CARIBBEANCOUNTRIES--SECONDARY EDUCATION EROLLNT RATIOS,1970, 1978-87
...... __...... _...... __...... _ 1970 1978 1979 1980 1981 1982 1983 1984 1985 1986 198T
Antf and 8arbue n.a. n.a. n.a. n.s. n.s. n.s. n.e. n.a. n.a. n.s. n.a. The Bahuams n.a. n.a. n.a. n.a. n.e. n.a. n.a. n.a. n.a. n.a. n.s. Barbados 71 82 eS 85 85 89 89 93 n.a n.a. n.a. selize n.a. n.a. n.a. n.a. n.s. n.a. n.a. n.a. n.e. n.s. n.a. Oasinice n.a. n.a. n.a. n.a. n.a. n.a. n.s. n.a. n.a. n.a. n.a. Dominicen Repubtic 20 37 39 42 43 39 42 S0 S0 n.e n.a. Grenada n.a. n.e. n.e. n.s. n.a. n.a. n.a. n.e. n.e. n.e. n.a. Guyana 56 61 59 59 57 57 57 56 n.a n.a n.e. Haiti 6 15 12 12 13 12 16 18 18 n.e n.a. JIaaica 46 60 60 S5 60 60 58 S9 59 n.a n.e. St. Kitts end Nevis n.e. n.a. n.e. n.a. n.s. n.e. n.e. n.e. ;0.e. n.e. n.e. St. Lucia n.e. n.e. n.e. n.a. n.e. n.e. n.a. n.m. n.s. n.e. n.a. St. Vincent and the Grenadines n.e. n.a. n.a. n.a. n.e. n.s. n.a. n.a. n.a. n.e. n.s. Surina 43 49 48 35 38 44 44 51 n.e. n.a. n.e. 7rinidedandw obago 42 63 62 68 69 73 76 76 76 n.e. n.a.
NEVORANDUNtTEN ...... - Latin -'ica end The Caribbean 32 n.e. n.a. 47 48 48 S0 51 S0 n.a. n.a.
...... n.a.: Not milable. Source: United Nations Statfsticet Yearbook, 1990. Table 2.7: CARIBBEANCOUNTRIES--HIGHER EDUCATION EUROLLHENT RATIOS, 1970. 1978-85, 198
1970 1978 1979 1980 1981 1982 1983 1984 1985 1988
Antigua and Barbuda n.a. n.s. n.s. n.a. n.s. n.a. n.a. n.a. n.a. 1.0 The Bahamas n.a. n.s. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0.2 Barbados 4.0 10.1 12.2 15.6 18.7 18.7 18.9 19.4 n.a. 4.9 Beltze n.a. n.a. n.a. n.e. n.s. n.a. n.a. n.a. n.e. 0.2 Dominica n.a. n.a. n.a. n.e. n.e. n.a. n.a. n.a. n.a. 0.6 DomfnicanRepublIc 6.3 9.0 n.a. n.a. n.a. n.a. n.a. n.a. n.a. . .8 Grenada n.e. n.e. n.a. n.a. n.e. n.a. n.a. n.a. n.a. 0.5 Guyana 2.0 3.0 2.7 2.6 2.8 2.0 2.0 2.1 2.2 3.1 Haiti 0.4 0.9 1.0 0.8 0.8 0.7 1.1 1.1 n.a. 1.0 Jamaica 5.5 6.8 6.6 6.4 6.0 5.9 3.9 4.3 4.6 1.6 St. Kitts and Nevis n.a. n.a. n.a. n.a. n.a. n.e. n.a. n.a. n.a. 1.1 St. Lucia n.a n.a n.a n.a. n.a. n.a. n.a. n.e. n.a. 0.6 St. Vincent and the Grenadines n.e n.a n.a n.a. n.a. n.a. n.a. n.a. n.a. 0.5 Suriname 1.3 2.1 2.7 7.0 7.3 7.6 7.3 6.9 6.5 8.0 Trinidadand Tobago 2.8 4.6 4.7 4.6 4.5 4.4 3.8 3.9 4.2 3.4
NENORANDUNITEN ......
Latin American and The Carfbbea 6.0 n.e n.a 13.6 14.8 14.3 14.8 15.7 16.0 n.a. n.a.:Not available. Souree-United Nations Statistical Yearbook, 1990. Table 2.8: CARIBBEANCOUITRIES--NEALTH AND NUTRITI' INDICATORS,19E8-92
...... Medical Intfant Persomel Government Infants DallV Proteln Food Mortality (per 10t000 Expenditure with Low Catorie Supply Production Rate Population) on Birth Supp4y (gOrams per capita per capita (per ...... -- Nealth Weight (per day) (1978-8=100) thousand) Doctors Nurses (X) () capita) per 1990 1992 1964 1984 1966 1982-87 1989 1990 ...... ------...... ~~~~~~~~~~~~~~~~~~,......
n.a. n.a. 122.8 Antigua and Barbuda 19.2 n.a. n.a. n.a. n.a. 80.0 92.0 TheBahamas 22.3 9.8 42.8 13.5 n.a. 2761.0 106.0 78.0 Barbados 9.0 9.4 31.1 l1.4 10.0 3279.0 2656.0 75.0 101.6 Beliue 19.4 2.8 17.1 9.0 n.e. 2810.0 70.0 133.1 Dominica 18.4 n.a. n.a. n.a. n.a. 2530.0 51.0 100.6 DominicanRepubtic 65.0 6.2 0.9 9.0 16.0 2706.0 69.0 90.9 Grenada 15.4 n.a. n.a. n.e. n.a. 2710.0 70.0 85.1 Guyana 50.0 1.6 3.7 5.7 11.0 2013.0 48.0 90.8 Naiti 97.0 1.6 1.9 11.1 17.0 2609.0 63.0 93.9 Jamaica 13.2 4.9 15.8 7.8 8.0 2639.0 77.0 n.a. St. Kitts and Nevis 24.4 n.a. n.a. n.a. n.a. 2595.0 73.0 102.9 St. Lucia 17.7 n.a. n.e. n.e. n.a. 2604.0 57.0 140.1 St. Vincent and the Grenadines 21.7 n.a. n.a. n.a. n.a. 2957.0 72.0 97.4 suriname 37.0 8.7 27.0 3.7 13.0 2853.0 73.5 90.4 Trinidad ardTobago 11.4 10.6 29.0 15.9 n.a.
MEMORANDUMITEM
...... n.a. n.a. n.a. Latin American end The Caribean 44.7 9.2 4.6 5.3 n.a. 2329.0 56.0 106.0 LowIncome Economies 69.0 1.9 2.6 3.7 18.0 76.0 101.0 MiddtoeInm Economies 65.0 2.0 7.5 4.8 10.0 2719.0 3357.0 91.0 105.0 IndustrialMarket Economies 9.0 21.0 55.0 12.9 7.0
n.e.: Not available. Statistics Yearbook, 1990; Source: The Wortd Bank, World Tables, 990; WHO,World Heatth Statistics, 1990; IMF, Goverment Finance United atiens, ECLA, Statistical Yearbook for Latin America and the Caribbean, 1990. Table 2.9: CARIBBEAMCOUNTRIES--INFANT NORTALITY RATES, 1980-92
...... 1980 1981 1982 1983 1964 1985 1986 1987 1988 1989 1990 19m 1992 ......
Antigua and Barbuda 31.5 30.1 28.7 27.3 25.8 24.4 23.0 21.6 21.3 21.0 20.6 20.3 19.2 The 8ahmas 30.0 22.3 33.2 21.6 22.9 26.7 27.3 27.9 21.4 22.3 28.4 26.7 22.3 Barbados 21.0 19.0 17.0 15.1 13.1 12.9 12.6 12.0 10.5 9.0 9.3 9.7 9.0 Beltze n.s. n.a. 60.0 58.0 56.0 54.0 52.0 50.0 48.2 46.4 44.6 42.8 19.4 Domintca 12.6 10.2 20.0 13.9 15.2 16.4 17.7 19.0 18.8 18.6 18.4 18.2 18.4 bominfcanRepubLic 70.8 69.4 68.0 66.6 65.2 63.8 62.4 61.0 59.3 57.6 55.9 54.0 65.0 Grenada 39.4 39.2 39.0 38.0 37.0 36.0 35.1 34.1 32.9 31.8 30.8 29.7 15.4 Guyana 64.6 63.8 63.0 61.6 60.2 58.8 57.4 56.0 54.4 52.8 51.2 49.6 50.0 Haiti 113.2 110.6 108.0 105.9 103.7 101.4 99.2 97.0 96.2 95.4 94.6 94.0 97.0 Jamaica 21.2 19.6 18.0 17.8 17.6 17.4 17.2 17.0 16.6 16.2 15.7 15.0 13.2 St. Kittsand Nevis n.a. n.a. 45.0 43.7 42.4 41.0 39.7 40.0 24.4 22.2 266.1 30.1 24.4 St. Lucia n.a. n.e. 25.0 24.1 23.3 22.4 21.5 21.0 19.4 17.7 17 6 17.4 17.7 St. Vincentand the Grenadines n.a. n.a. 31.0 28.8 26.5 25.6 24.7 25.0 21.7 21.3 20.9 20.5 21.7 Suriname 46.6 45.8 45.0 44.4 43.8 43.2 42.6 42.0 40.S 39.8 38.7 37.6 37.0 Trinidadand Tobago 33.8 32.4 31.0 29.6 28.2 26.8 25.4 24.0 22.8 21.6 20.4 19.0 11.4 n.a.:Not available. Source:The WorldBank, Uorld Tables. Table 2.10: CARIBBEANCOUNTRIES--GOVERNMENT EXPENDITURE ON KEALTHAS A PERCENTAGE ..-----... OF TOTALGOVERNMENT EXPENDITURE, 1980-86
......
1980 1981 1982 1983 1984 1985 1986
......
Antigua and Barbudb n.a. n.a. n.a. n.a. n.s. n.a. n.a. The Baham 14.5 13.8 14.1 14.6 15.8 14.5 13.5 Barbadbs 11.2 10.8 10.8 10.6 11.5 11.5 11.4 setize 9.0 8.9 7.1 9.3 9.7 9.0 n.a. Dominica n.a. n.s. n.a. n.a. n.a. n.a. n.a. Dominican Republic 9.3 9.7 10.7 10.6 10.3 9.0 n.a. Grenada n.a. n.a. n.a. n.a. n.a. n.s. n.s. GuyaWn n.s. n.s. n.s. n.a. n.a. n.s. n.a. Naiti 5.6 5.7 n.a n.a. n.a. n.a. n.a. Jamaica n.a. 4.5 7.4 n.a. n.a. n.a. n.a. St. Kitts and Nevis n.s. n.s. n.s. n.a. n.a. 11.3 n.a. St. Lucia n.a. n.s. n.a. n.a. 0.3 2.0 3.7 St. Vincent and the Grenadines 11.8 10.0 10.4 11.3 12.2 13.4 12.7 Surinmie n.a. n.a. n.a. n.a. n.a. n.s. n.a. Trinidad and Tobago 5.8 5.9 n.a. n.a. n.a. n.a. n.a.
MEMORANDUMITEN
...... Latin America and The Caribbean 4.9 4.6 4.9 5.1 5.6 6.0 5.1
...... n.a.: Not availeble. Source: INF, Goverrmnt Finance StatisticsYearbook.
244 Table 2.11: CARIBBEANCCUXTRIES -- POPULATION,1981-92 ------(thousans)
...... ,, ...... 1981 1982 1983 1964 1985 1986 1987 1988 1969 1990 1991 19m ,......
Antiguand Barbuda 75 75 76 76 76 77 77 78 78 79 80 81 Bahamas 214 219 224 229 232 236 241 246 250 255 259 263 Barbados 250 251 252 253 253 254 255 255 256 257 258 259 Beltize 152 157 158 162 166 170 175 179 183 166 194 200 Daminica 75 74 74 74 74 74 73 73 72 72 7 n Domfni an Repiblfc 5836 5975 6119 6267 6420 6568 6716 6859 7000 7170 7197 7321 Grenada 68 91 92 93 94 93 93 92 92 91 91 91 Guyana 766. m 780 786 790 792 793 795 796 798 802 806 Haiti 5467 5568 s673 5780 S889 6001 6116 6232 6351 6472 6590 6715 Jamalca 2162 2200 2241 2279 2311 2332 2354 2376 2398 2420 2376 2394 St. Kittsand evis 44 45 45 44 43 42 42 41 41 40 42 42 St. Lucfa 126 129 131 134 137 140 142 145 147 150 153 156 St. Vincent and the Grendirnes 99 100 101 101 102 103 104 105 106 107 108 109 Surainme 356 366 376 387 396 407 417 427 437 447 457 46? Trinidad and Tobago 1097 1113 1129 1144 1160 1175 1190 1205 1220 1236 1253 1268
...... Source: The World Bank, World Tables. Table 2.12: CARIBBEANCOUNTRIES - POVERTY INDICATORS
...... -...... -- ---.--......
Imnmization Under S Percent of Daily per ------Nortality ChiLdren underS capita Neasles DPT Rate suffering from calorie suppty (1990's) maLmwtrition as percent 1980-86 of recuuirements,1985
~~......
Antigum and Barbuda 89 99 23 n.a. 92 Bahamas 87 86 28 n.s. 118 Barbados 87 91 12 5.3 126 Belize 81 84 49 5.7 114 Dominica as 94 19 4.8 100 Dominican Republic 71 80 80 12.5 110 Grenada 31 76 30 n.a. 104 Guyana 73 83 62 22.0 108 Haiti 31 41 133 37.0 84 Jamaica 74 86 18 7.0 116 St. Kittsand Nevis 85 97 40 n.s. 94 St. Lucia 60 83 21 n.a. 102 St. Vincent and The Grenadines 92 86 25 n.a. 99 Suriname n.a 80 39 n.a. 120 Trinidad and Tobago 70 82 28 6.0 126
Source: Social .. I.....n...... n...... D...... o e. .. Bank...... Source.,socflal Indicators of Development,world Bank. Table 2.13: CARIBBEANCOUNTRIES - INDICATORS OF SOCIALSECTORS, 1987-89
...... _... , ...... _......
Pubtic Expenditures on Basic Net Primary Social Services as percent of GDP Enrollment ...... Rate Education Health Total 1985-89
Antigut and Barbuda 3.5 n.a n.e 110 Barbados 6.1 4.1 n.a 110 Belize n.a n.a n.a 94 Dominica 5.8 n.a n.a 90 Dominican Republic 1.6 1 3.8 133 Grenada 6.9 n.a n.a n.a Guyana 10.1 4.4 n.a 90 Haiti 1.2 1.0 n.a 95 Jamaica 5.8 2.9 9.5 105 St. Kitts and Nevis 4.8 n.a n.a 78 St. Lucia 7.6 n.a n.a 95 St. Vincent and The Grenadines 5.3 n.a n.a 86 Suriname 10.4 n.a n.a 125 Trinidad and Tobaso 5.9 n.a n.e 100
_...... _...... _...... _...... Source: Wortd BarnkCoumtry Economic Reports; Social Indicators of Development.
247 Table2.14: CARIBBEANCOUNTRIES - INDICATORSOF WOMEN IN DEVELOPMENT, 1980s
Total Single Fertility Mothers Rate (000)
Antiguaand Barbuda 1.9 n.a Barbados 1.8 n.a Belize 4.8 3.0 Dominica 3.0 n.a Dominican Republic 3.6 n.a Grenada 3.2 n.a Guyana 2.9 20.0 Haitf 4.6 n.a Junaica 2.5 55.0 St. Kittsand Nevie 2.7 n.a St. Lucia 3.3 n.e St. Vincent and The Grenadines 2.7 n.a Suriname 3.5 n.a Trinidad end Tobago 2.9 30.0
Reference Group (average)
Caribbean Countries n.s. n.s Latin America 3.5 n.a High Incrome 1.8 n.a Upper Niddle Income 3.3 n.a Lower Middle Income 3.9 n.a Lou Income 3.8 n.e
Source: World Bank Country EconomicReports; Social Indicators of Devetopment, World Bank; The Vulnerability of HouseholdsHeaded by Women:Policy Questions and Options for Latin America and the Caribbean, United Nations EconomicComaission for Latin America and Caribbean, Report no. 8. April, 1991.
248 Table 3.1: CARIBBEANCOUNTRIES - SCALE FACTORS, 1980s
_......
Population ------. Per Capita Average Annual Change Density GNPUSS ....------...... _...... Total Urban Per 1000ha 1989-92 1985-89 1989 1967 1992
Antigua and Barbuda 0.9 1.1 6023 700 4870 The Bahwm 1.8 2.2 170 1910 12020 Barbados 0.2 1.1 5800 590 6530 Belize 2.0 2.7 4192 420 2010 Dominica 0.0 1.8 2890 240 2520 Dominican Republie 2.2 5.1 1451 260 1040 Grenada 2.3 2.7 325 250 2310 buyana 0.2 1.4 .52 380 330 Haiti 1.6 3.1 2316 80 n.a. Jmica 1.5 2.9 2293 580 1340 St. KittB and Nevis -1.2 0.2 137 350 3990 St. Lucia 1.6 2.5 62 n.a 2900 St. Vincent and The Grenadines 1.0 3.4 332 180 1990 Suri:ame 1.5 2.3 25 540 3700 Trinidad and Tobago 1.6 3.2 2462 780 3940
...... _ n.a: Not available.
Source: WIorid Resource. Institute Yearbook, 1990-91; Country Enviromental Profiles, 1990; Cotlaboration of the Caribbean Conservation Assoeiation, The Island Resource Resource Foumdationand The Unitad States Aioney for International Development; World
249 Table 3.2: CARIBBEANCOUNTRIES - INDICATORSOF DEFORESTATION .....-.... ANDSOIL DEGRAOATION,1980s,
Average Annual Solt Degradation Deforestation
Type Degree Caustive Area Percent factors (000ha)
...... _......
Antigus and Barbuda Wt 2 f n.a n.a Barbados Wt 2 f n.a n.a Belize wt 3 f 9 0.7 Dominica Ut 2 f 2 3.9 DominicanRepublic Ut, U 2.2 f,a 4 0.6 Grenade Ut 1 f n.a n.a Guwana Wt, P 1,2 f,a 3 0.7 Haiti Ut, W 4,2 f,a 2 3.8 Jamaica Ut, U 2,1 f,a 2 3.0 St. Kittsand Nevis Wt 2 f n.a n.a St. Lucia Ut 2 f n.a 2.0 St. Vincentand The Grenadines Ut 2 f n.a n.a $urina Pc 2 f 3 0.0 Trinidadand Tobago Wt, P 2,2 f,a 1 0.4
.. _.... _...... n.a: Not avaitable. Notes
Type: Ut a Lossof topsoil;Wd a terrain deformation; Pc u physical deterioration due to compaction,sealing and crusting.
Degree: Scale of 1-4 (with 4 = extreae soil degradation) 1 a light; 2 a moderate 2 a moderate; 3 u strong; 4 a extreme.
Caustive : f a deforestation due to reclmamtion of land for agriculture, factors road construction; urban developmentetc., a a improper managementof agricultural land due to excessive use of fertilizer use of poor qualityirrigation uater, absence of anti-soilerosion erosionmeasures etc.
Source:Adapted from World Nap of the Status of NuwanInduced Soil Degradation, GlobalAssessment of SoilDegradation (GLASDOD), ISRIC - UNEP project, UoridResources Institute Yearbook, 1990-91; Country Enviromantal Profiles 1990, Coltlboration of the CaribbeanConservation Association, The Island Resource Foundation nd the United States Agencyfor International Development.
250 Table 3.3: CARIBBEANCOUWTRIES - LAND USE PRACTICES, 1980s
Average Narine and Percentage Change Anmnal Coastal All In Land Use (000 ha) Fertilizer Protected Protected 1977-87 Use reas Areas ...... Pasture Uoodtand 1985-87 (000 ha.) (000 ha.)
, ._._...... __._._.__...... __._.... ._...... U......
Antigus and Barbuda 0.0 0.0 1.7 2.5 5.6 Barbados 0.0 0.0 92.2 0.3 n.a Betize 22.2 31.0 35.2 5.4 11.4 Dominica 0.0 0.0 150.9 0.4 16.9 Dominican Republic 0.0 -3.1 19.4 134.0 550.4 Grenada -30.6 0.0 5.8 4.8 6.2 wyana 17.0 -7.7 9.1 0.0 11.7 Haiti -7.6 -16.1 1.8 0.0 7.7 Jamaica -8.6 -S.0 4.2 12.0 n.a St. Kitta and Nevis 0.0 0.0 191.1 6.4 6.6 St. Lucia 0.0 0.0 86.5 0.0 0.0 St. Vincent and The Grenad 0.0 0.0 205.3 4.0 9.0 Surinae 22.9 -0.3 136.2 184.0 734.8 Trinidad and Tobago 0.0 -4.3 45.2 10.3 16.1 n.a: Not available. Source: Uorld Resource Institute Yearbook, 1990-91.
251 Table3.4: CARIBBEANCOUNTRIES - SELECTEDINDICATORS OF
- COASTALRESOURCES. 1985-87
Average Lengthof Habitat Annual Coastal Line Sq. kmof Marine Catch (kin) Nangrovee (000 in. tons)
Antigue and Barbuda 153 19 1.7 Barbados 97 n.e 3.9 DelIze 386 21.08 0.7 Dominica 148 29 0.1 DominicanRephlic 1288 90 16.9 Grenada 121 4 2 Guyana 459 1500 40.6 Haiti 1771 180 7.6 Jamaica 1022 70 9.2 St. Kittaand levis 74 n.e 0.5 St. Lucia 924 45 0.5 St.Vincent and The Grenadines 318 14 0 Surinaine 386 1150 4.2 Trinidadand Tobago 362 40 3 n.a:lot available. Source:IJorId Resources Institute Yearbook5 1990-91.
252 Table3.5: CARIBBEANCOUNTRIES - AIR AND WATERPOLLUTION AND CAUSESOF DEATH,1980s
Deaths per 100,000 Pqpulation ...... -.....----.-.--.-.-..-..---..---....- CFCaj Net additions Parasitic Digestive Respiratory Use per to Greenhouse and Pulmnary Capita Heating Infectious and T.B (1986) Effect (kg) (000 tons carbons)
...... kntigua and Barbuda n.a 51 n.e n.a n.a Barbados 12 7 59 0.3 250 3elize 18 18 26 n.a n.a )ominica 12 21 n.a n.a n.a )ominican Republic n.a n.a n.a 0.1 2400 ,renade 35 n.a n.a n.a n.s "ana 43 30 102 0.0 360 laiti n.e n. n.a 0.0 340 lamaica 13 59 n.e 0.1 1200 it.Kitts and Nevis n.e S8 n.e n.s n.a It.Lucia 14 n.e n.a n.a n.e it.Vincent mnd The Grenadines n.a n.a n.a n.a n.a iuriname 85 96 133 0.1 490 rrinidad and Tobago 4 130 130 0.3 2800 kJ Chloro-f lure-carbon. i.a:Not available. bource: World Resources Institute Yearbook,1990-91; CountryEnvironmental Profiles, 1990; Collatoration of the Caribbean Conservation Association,The Island Resource Foundation and The United StatesAgency for International Development.
253 Table 3.6: CARtJBSEACOUNTRIES - SECTORAL COMPOSITION, 1990-92
...... _...... :. .... _._...... _......
Sectoral Distribution of GOP Total Tourism
Agric. Forestry Fishery Tourism USSmit. Arrivals Earnings (OOOs) (USSmil)
...... __._._._...... __. .. ,,...... ,......
Antiguaand Barbuda 2.2 0.1 1.8 13.3 417 473 313 The Bahamas n.e. n.a. n.e. 30 2871 3550 1256 Barbados 5.1 0.0 0.8 10.2 1735 782 456 Belixe 23.0 3.1 2.9 16.3 423 88 S1 Dominica 21.5 0.7 1.6 2.2 177 111 23 Dominican Republic 17.0 0.7 0.4 14.2 7319 n.e. 944 Grenade 13.4 0.0 1.8 7.2 210 280 68 Guyana 24.2 2.8 2.0 0.0 271 n.e. n.a. Haiti 35.0 0.3 0.5 1.1 3194 n.a. 68 Jmaica 8.4 0.4 3.4 9.1 3689 1422 821 St. Kitts and Nevis 4.9 0.1 1.8 8.9 174 137 56 St. Lucia 12.8 0.4 0.7 9.2 432 306 125 St. Vincent and The Grenadines 15.7 0.7 1.9 2.4 210 153 28 Suriname n.a n.a n.a n.e 1990 n.a n.a Trinidad and Tobago 2.5 n.a n.a 0.5 5246 n.a 103
...... ___...... _._._...... _...... _... _S... n.a: Not available. Source: World Bank EconomicReports.
254 Table 3.7: CARI88UEACWINTRIES - SELECTED INDICATORS OF ._._ -..... NATUiULRESOURCES, 1990's
...... _.. ___... ___...... _.__ ... .
Extent of Forest aNd Vo. of Plant Woc4lands Species C000ha) 1991
_.__...... ____...... ____...... _...... __......
Antigu and Barbia 15 724 Th. ahaim n.s. 1350 Babds n.e. 700 Belize 17 3240 Dominica 52 1600 Douinican Republic 629 S000 a/ armada 40 450 Guyan 18695 8000 Natti 48 5000 a/ Janica 67 3582 St. Kitts and Nevis S n.a. St. Lucia 8 104 St. Vincent and The Gradines 13 1803 surfn 15000 4500 Trinidad and Tobago 208 2281
/ Nispeniola. Inctudes Dainican Repubtic and Haiti. n.a.: not vaiLabLe. Source: EnwirotrmntaL Iss Paep Ersnvirauent Division.
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