Doing Business in the Caribbean 2016

By Paul Hay
CJ Contributor

Doing Business 2016: Measuring Regulatory Quality and Efficiency is the 13th in the long-standing series of co-publications by the World Bank and International Financial Corporation (IFC). This annual report on the ease in doing business in 189 nations covers the period from June 2014 to June 2015.

I have been reviewing such reports for the past two years, and have published two articles from each review: first to examine the global ranking of Caribbean states, then to breakdown their performance into the 10 indicators used in the ranking process. This article reviews “Doing Business 2016”.

Last year in “Doing Business in the Caribbean: Who Cares?” and “Making Caribbean Business Better”, I suggested  collaboration within the Association of Caribbean States (ACS) in order to effect well needed reform, especially considering commonalities that existed within its membership.

The Latin America and Caribbean (LAC) region has a number of groupings that could undertake such reform in “Doing Business”. However, the ACS stands out, because it is focused on the Caribbean. The two tables below present data primarily for member-states.

Caribbean Island Population (Millions) Income (US $) 2015 2016
Caribbean Islands 29.9 6,455 102 104
Caribbean SIDS 8.9 13,687 96 98
Puerto Rico (US) 3.5 19,210 56 57
 
Independent Caribbean SIDS 5.4 10,107 100 102
Jamaica 2.7 5,042 71 64
Trinidad 1.3 16,562 85 88
Bahamas, The 0.4 21,010 108 106
Barbados 0.3 15,579 116 119
OECS 0.7 9,080 104 107
St. Lucia 0.2 7,090 77 77
Dominica 0.1 7,070 89 91
Antigua & Barbuda 0.1 13,360 99 104
St. Vincent & the Grenadines 0.1 6,560 106 111
St. Kitts & Nevis 0.1 14,540 122 124
Grenada 0.1 7,850 130 135
Large Caribbean Island States 21.0 3,390 137 137
Dominican Republic 10.5 5,950 93 93
Haiti 10.5 830 182 182

Table 1: Ratings of Caribbean Islands

Previously, I had advocated reform through the Caribbean Forum (CARIFORUM). However, ACP’s 25 member states comprise 15 CARIFORUM member-states. Cuba is another member, and 8 Caribbean Overseas Territories are associate members, though neither are part of “Doing Business 2016”.

ACS therefore has a wider membership of Caribbean islands than CARIFORUM. Also, “ACS provides a framework for the dialogue and activity necessary to further advance economic integration and intra-regional trade and investment, thereby improving competitiveness of the Greater Caribbean region”.

Doing Business Regional Profile 2016: Latin America and the Caribbean lists 32 LAC states. With the exception of Puerto Rico, 24 of these are ACS members. Nevertheless, data for Puerto Rico was reviewed and is presented for reference. All the other LAC states are located in South America.

Both tables present general information on the relevant economies, as well as their rankings for 2015 and 2016. Table 1 conveys information on 13 Caribbean Islands, divided into two groups: 11 Small Island Developing States (SIDS) and 2 large island-states: namely the Dominican Republic and Haiti.

The SIDS are sub-divided into three groups. Puerto Rico, being the only island that is not politically independent, is a group unto itself. The 6 smallest islands belong to the Organization of Eastern Caribbean States (OECS) – the next group; and, the last comprises the 4 remaining SIDS.

Table 2 conveys information on 12 ACS Latin American (LatAm) states. Like the Caribbean Islands, these LatAm states are divided into two groups – Central, and South American States. The former comprises 8 states and the latter 4 states.

It should also be noted that this table includes three CARIFORUM member-states: Belize, in the Central American group, as well as Guyana and Suriname in the South American group. With the exception of Puerto Rico, all Caribbean islands in table 1 are CARIFORUM states.

ACS Latin American States Population (Millions) Income (US $) 2015 2016
Latin American States 250.8 8,850 104 102
Central American States 169.7 8,480 90 86
Mexico 123.8 9,980 42 38
Costa Rica 4.9 9,750 79 58
Panama 3.9 10,970 66 69
Guatemala 15.9 3,440 81 81
El Salvador 6.4 3,780 115 86
Honduras 8.3 2,190 97 110
Belize 0.3 4,760 118 120
Nicaragua 6.2 1,830 123 125
South American States 81.1 9,640 131 133
Colombia 48.9 7,780 52 54
Guyana 0.8 3,970 132 137
Suriname 0.5 9,640 154 156
Venezuela 30.9 12,820 184 186

Table 2: Ratings of ACS Latin American States

In both tables, 2015 rankings are generally lower than those published in “Doing Business in the Caribbean: Who Cares?”. These rankings were actually revised using a new evaluation process developed for the 2016 rankings: thereby facilitating comparison between the current and past year.

Of all ACS members, only the OECS improved its average 2015 rankings in the revision. This was due to significant improvement in the rankings of Saint Lucia and Dominica, which superseded Antigua and Barbuda as the top performers within OECS: other member states having marginally worse rankings.

OECS average 2015 ranking was revised to 104: equal to that of the LatAm states. But, the average 2015 ratings for independent SIDS as a whole remained superior. The average 2016 rating for ACS LatAm states marginally improved, while that of independent SIDS worsened to become equal, at 102.

For the LatAm ACS, the Central America group benefited from the revised 2015 ranking. Only Honduras improved in rank, but Belize held firm. In the process, Honduras superseded El Salvador in the revised standings. Similarly, Mexico and Panama fared better than their counterparts in this revision.

Mexico was ranked higher than Colombia, previously the top performer within ACS: thus making it top 2015 performer within ACS. Similarly, Panama superseded Costa Rica in the revised ranking. Of the three changes in standing, only Mexico and Colombia maintained their relative positions in the 2016 ranking.

In “Doing Business 2015”, 9 out of the top 12 LAC performers were ACS member-states. In “Doing Business 2016”, this has improved to 10 of the top 12 performers. This improvement is solely due to significant improvement in the rankings of the Central American sub-group.

Currently, the top 12 LAC performers, from highest to lowest rank, are: Mexico, Peru, Colombia, Puerto Rico, Costa Rica, Jamaica, Panama, Saint Lucia, Guatemala, El Salvador, Trinidad and Tobago, and Dominica. Of these, Peru and Puerto Rico are the only states that are not ACS members.

Six Latin American ACS member-states are in the top 12: Colombia being the sole South American member, of its group of 4. Mexico, Costa Rica, Panama, Guatemala and El Salvador comprise the remaining 5, of the 8 member Central American group.

With the exception of Puerto Rico, four Caribbean islands are in the top 12. No large Caribbean-Island state is present. Jamaica, Trinidad and Tobago are 2 of the 4 larger Caribbean SIDS that are top performers: Saint Lucia and Dominica being 2 of the 6 OECS members that are also top performers.

The improvement of the 2016 average rank for the Central America sub-group is specifically attributed to advancements by Mexico, Costa Rica, and El Salvador. The latter two, having been superseded in the revised ranking, managed to retake their previous positions. Guatemala held firm

For the Caribbean Islands, only Jamaica and The Bahamas improved in the 2016 rankings, with Saint Lucia, Dominican Republic, and Haiti holding firm. Though improved, The Bahamas rating was still below-average. But, that of the Dominican Republic remained above-average.

In the Jamaica Gleaner publication dated October 28, 2015, the article “Jamaica Cited for Doing Reforms in Doing Business Report” stated that:

“Jamaica… has been cited by the World Bank, alongside Costa Rica and Mexico, as executing the most reforms in the region in the last five years”, and “also found that Jamaica is among the global top 10 improvers ‘as it implemented a regional high of four reforms’ .

Regrettably, ACS also comprises 7 of the 8 lowest ranked economies in LAC. In ascending order from the lowest ranked, these are: Venezuela, Haiti, Bolivia, Suriname, Guyana, Grenada, Nicaragua, Saint Kitts and Nevis. Of these, Bolivia is the sole non-ACP member.

Only the larger SIDS are not a part of this group. Haiti is one of the two large Caribbean island states in the group; Grenada, Saint Kitts and Nevis: 2 of the 6 OECS. Venezuela, Suriname, and Guyana are 3 of the 4 South American states; and Nicaragua: the sole Central American state.

The South American sub-group therefore has the largest discrepancy in ranks: Colombia is in the top 12, but the others are in the bottom 8. Two of these are CARIFORUM states; or put differently, 5 of the 7 lowest ranked ACS members are also CARIFORUM members.

The Greater Caribbean not only has the most capable states to effect reform, but it also has the most deserving of states. Again, in “Doing Business in the Caribbean: Who Cares?”, I had proposed using the Asia-Pacific Economic Cooperation (APEC) as a model for ACS to address reform within the sub-region.

On the whole though, the relative standings of most states within the sub-region were unchanged: even in the case of Mexico and Jamaica, whose global ranks improved. However, Costa Rica and El Salvador improved their standings: Panama and Honduras falling below Jamaica and The Bahamas respectively.

Otherwise, five (5) islands fell in the regional standings.  Listed from the highest to lowest ranked, they are: Saint Lucia, Trinidad and Tobago, Dominica, Dominican Republic, and Saint Vincent and the Grenadines. The global rank for Saint Lucia actually held firm, but all the others fell.

It should now be apparent that states have to improve their global ranks just to maintain their relative regional standing. The global ranks of Mexico and Jamaica improved by 4 and 7 places respectively, just to maintain their respective standings of 1st and 6th.

Though Mexico was the top performer, it is instructive to note that Costa Rica moved up 21 places globally, from 79 to 58, to take the 5th spot: thus preventing Jamaica from advancing in the regional standing, even though it had moved up 7 places globally. It was simply not good enough.

To actually improve in standing, substantial improvements have to be made. Costa Rica’s global ranking moved up 21 places to take it from 8th to 5th in region. El Salvador moved up 29 places, from 115 to 86, to take it from 17th to 10th place regionally.

With the widening of the Panama Canal now complete, a significant increase in trade and investment can be expected in the Greater Caribbean. So, improving competitiveness of local firms is imperative and this through the improved competiveness of Greater Caribbean states.

The indifference to reform should not be allowed to further deteriorate performance in “Doing Business”. ACS seems to be the regional body most able to facilitate this reform in the shortest order, and time is of the essence to capitalize on expected increase in investment and trade within the Basin.

Central America seems to be championing reform in their individual nations. Can the other LatAm ACS members and the Caribbean islands follow suit? More importantly, can we all collaborate to be able to capitalise on gains expected in the near future? Only time will tell.

Paul Hay is the founder and manager of Paul Hay Capital Projects.

 

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