By David Rowe
Op-Ed Contributor
THE FACT THAT Barbados’ government bonds have been downgraded to junk status was not a good development for the reputation of the Commonwealth Caribbean in international financial markets.
Both Moody’s and Standard and Poors now rate Barbados’ debt paper to be below investment grade, basing their decision at least partially on Barbados’ dependence upon tourism.
The fact that Belize defaulted on some of its bonds and that negotiations continue between the country and its creditors in the international markets does not improve the Caribbean’s already- tenuous international financial reputation. Prime Minister Dean Barrow has called the talks to restructure Belize’s debt “long and arduous.”
Jamaica’s struggle to conclude an agreement with the International Monetary Fund continues; it, too, hardly enhances the Caribbean’s reputation for international financial stability.
Will 2013 be a year in which Wall Street comes down heavily on the Commonwealth Caribbean? If Wall Street does so, it will be because of the Caribbean’s very high levels of debt.
St Kitts and Nevis has recently been praised for working to restructure its debt, and, in addition, is now regarded by the United States as a High Income Country. This action by President Barack Obama came after the official statistics that St Kitts and Nevis had reduced its debt to GDP ratio, although that was not the primary reason for the decision.
Jamaica, however, has indebtedness that is nearly 140 percent of its GDP. This has nearly tripled from 2000, and could exceed 160 percent of its GDP by the end of 2013. These kinds of numbers will have the international financial markets running for the hills and make the multilateral agencies such as the IMF and the World Bank even more truculent than they are now.
The international financial markets pride themselves on communication, information and the willingness of stakeholders to be transparent. The relative lack of information coming from the government of Jamaica on fiscal issues (indeed, the government did not report its recent levels of Foreign Direct Investment to the United Nations) is rather puzzling. The current People’s National Party administration in Jamaica is gifted with many lawyers in the Cabinet, but Parliament is largely silent on these points. This is a source of frustration for both local and international media.
In the absence of information, Wall Street will use a balance of payments analysis to determine the bankability of Caribbean jurisdictions; that is, the movement of money in and out of the Country. In Jamaica’s case, the debits are much greater than the credits. The country is being run on a deficit. In other words we are borrowing to buy groceries. Wall Street will understand the significance of that and will make the appropriate credit decisions. Jamaica’s huge Cabinet should analyze these issues.
David P Rowe is an attorney in Jamaica and Florida and a law professor at the University of Miami School of Law in Coral Gables, Fla.
Note: the opinions expressed in Caribbean Journal Op-Eds are those of the author and do not necessarily reflect the views of the Caribbean Journal.
