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Dennis Jones is a Jamaican-born international economist, who has lived most of the time in the UK and USA, and latterly in Guinea, west Africa. He moved back to the Caribbean in 2007. This blog contains his observations on life on this small eastern Caribbean island, as well as views on life and issues on a broader landscape, especially the Caribbean and Africa.

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Sunday, May 06, 2007

Why is living in Barbados so expensive?


Ever since we arrived on this little island, we have been astonished at the cost of living. From the very basic items that are bought each week at the supermarket to luxury items such as meals out, Barbados stands out at the most expensive place I have ever visited. On average, it seems that things cost about twice as much as in the US. Admittedly, many goods are imported, from the US and UK, though not from relatively cheaper local sources such as Trinidad (see below). According to the Index of Economic Freedom 2007 Barbados levies significant tariffs on non-CARICOM goods; average tariff rates are similarly high. There are, however, price controls on basic food items and fuel. No wonder that those who can travel to the US (or Trinidad) and ship things back in barrels or containers. They get better prices and better choices. That would suggest that the difference is not just transport costs and duties.

There was discussion several months ago about price levels, especially the cost of food, and accusations that retailers were price gouging. A week's groceries at one of the major supermarkets (SuperCentre, the island’s largest chain of supermarkets and pharmacies, accounting for a major share of the supermarket trade in Barbados, see) seems to run regularly at BS$ 400 (US$ 200). I certainly don't understand how the average Bajan can make ends meet living with those kinds of prices.

But looking at places like restaurants, I don't understand why meals including local sea food and other local ingredients are priced as if these were coming from Europe. It's hard to find a good restaurant that charges less that B$ 150 (about US$ 75) a person for a two course meal. Only if you eat roti or go to a place like Oistins for fish fry or outdoor BBQ joint like Just Grillin' does a meal come at a reasonable cost, say B$ 15-20 a person. Sure, tourists can deal with these prices over their vacations, especially coming from the UK with the pound very strong; though I'm sure they would love lower prices as few of the places are really that good. But, I suspect that there's a lemming approach to the pricing.

A task force was set up early in 2006 to monitor all aspects of food prices, after mounting complaints from consumers. In March 2007 the President of the Barbados Chamber of Commerce and Industry (BCCI), Dick Stoute, claimed that local businesses were not to blame for the high price levels (see report in The Advocate newspaper). This followed reports by the Department of Commerce and Consumer Affairs, and the Fair Trading Commission (FTC) stating that food prices increased by approximately 25 per cent over the past three years and inflation was up 13 per cent over the same period. What was clear is that no one knows or is prepared to say what is going on in the food retail and distribution industry, which made B$883 million in sales but no one has said categorically what the profit level was, though the BCCI has estimated that at end-2006 the average profit for food retail business was 3-4%. But what is the mark-up at the wholesale level, and to what extent do connected wholesale and retail groups manage to manipulate prices? The Barbados Shipping and Trading Company owns the major food retailer, Supercentre, and the household appliance retailer, Dacosta Manning, but also has major import and distribution subsidiaries.

The FTC report highlighted that increases in sea freight; increases in cost of packaging materials; increases in local energy costs; the Cess (6% tax on consumer imports) imposed by government; and a number of others factors were important contributory factors. Mr. Stoute also noted that with the removal of the Cess [from February] he expects that this will reduce prices over a period of time. Part of the underlying problem is that wages are too high: the gap between real wages and productivity widened between 1999 and 2004, and limited data for period after suggests that gap has not been fully closed (see IMF Staff Report for the 2006 Article IV Consultation). Part is also due to Barbados' appetite for imported goods. Central Bank of Barbados data for the quarter ended march 2007 show that total imports in 2006 were B$ 3.17 billion, about 1/3 of imports are consumer goods (and about 40% of this is food); only just under 25% of imports from CARICOM.

The official measure of inflation in Barbados, the retail price index has been accelerating on average since 2004, from 1-2% previously to around 6-8%. This a disturbing uptick in the trend, even price increases are still relatively moderate, but people are being asked to adjust to a much faster rate of inflation. (For more analysis of the trends see Broad Street Journal article on recent price developments in Barbados and Trinidad.) The central bank expects average inflation to decline by end-2007. Maybe we should put off shopping and eating out for the rest of the year!

12 comments:

Chennette said...

It's good to see facts to support what has been my experience for the 5 months I have been in Barbados, especially being Trini, and most recently being in Guyana. How do people live here? I spend as much as you also (US$200) on a week's groceries in Supercentre and I jeep to minimal items. And as for the restaurants - I guess it's no surprise that's why you see mainly tourists.

Anonymous said...

I know you wrote this in May but I am now seeing it. It is true the price of food in Barbados is high but I think one has to be smart when shopping. It is possible to save some dollars in buying bulk. Triple D in Mapps Hill I find, is a good place to shop. Also Hanchell Inniss on Fontabelle and even Trimart supermarkets. I find the Supercentre Supermarkets to be generally expensive because they cater to a 'certain market'. For fruits and vegetables, Cheapside market is excellent on Saturday mornings and you get big bargains. Generally, any small minimart will save you some cash.

Jane V. said...

Greetings. Try buying an automobile in Barbados! With duty, even a Mini Cooper is $60,000 US. Even so, one finds 100,000 autos on the 7,000 miles of road on this island. The cost of living in paradise ... and, make no mistake, this is paradise. As friends in Tornoto shoveled snow for 3 hours last Sunday, my sweetheart and I walked on the beach. Jane (American living part-time in Barbados)

Dennis Jones said...

I have not been able to find statistics on car ownership but I agree that it seems very high, which is consistent with the high level of average incomes.

In Christianity, paradise really means "heaven or any environment that is ultimately pleasurable", and the word used to mean "a foreign country", so lots of places could fit the bill not just tropical islands. In both senses Barbados could easily be seen as NOT paradise.

Love my Barbados said...

While the cost of living in Barbados may be expensive, most persons still think of Barbados as paradise. The dictionary describes paradise as "an ideal place or state". Barbados has a low incidence of crime, high quality materials, shelter, food and water are readily available and natural disasters like earthquakes and tornadoes are virtually a non-existent occurrence. The temperature usually stays at a moderate degree (usually not too hot or cold). I think that those things alone are often an indication of paradise but if you disagree so much. Another benefit of paradise is that you are free to leave it! I hope you find what you are looking for. I have certainly found it here.

Anonymous said...

The only problem with Jamaica is the frequency of the visits from the peanut gallery. Taste their meat and gather fruit for eternal life.

Waste my money? said...

Food on this little island is so expensive that its no longer on my vacation list. Once you arrive there, you become a hostage to prices set by few food importers that hold the monopoly. Like a Gov. license to steal.

Thanks God, there are other places in the sun to spend my $$$.

Kuisi said...

No one has mentioned how inexpective it is to heat houses in winter...and that the cost of winter clothes is practically zero. Also if one wishes to eat foreign foods, it WILL be expensive...Local vegetables are becoming more abundant and more affordable...To some extent the problem is that people often try to lead a CONSUMER life style, in a society that has things to offer other than The Pentacostal Church of ALmighty CONSUMPTION,
Cheers...Kuisi.

Dennis Jones said...

Kuisi, you comment about heating is valid, but the obverse is the cost of cooling: many cannot now do without AC, and some houses do not appear built to take advantage of prevailing breezes.

I take some of your view on local vegetables.

On consumer lifestyle, it is hard for people to look at what other progress there has been in the world and not expect to consume more as they increase income. But keep pressing good values. Thanks.

Two Sides to the Coin said...

I completely agree as a Bajan who travels frequently for work it is ridiculously expensive to feed oneself here properly which I guess is the reason for the ever expansion of fast food restaurants and diabetes and high cholesterol. And while I can appreciate that local produce is less expensive the reality is that our current culture is not in favour of some good ole ground provisions with salt fish gravy or such like. The great thing about Barbados is the weather but the fact is you can go to any other Caribbean country for the same weather at a cheaper cost and while we may have less crimes at some point you have to make a choice to go somewhere else that's cheaper and be more attentive or come here and only be able to by food......

Anonymous said...

I don't care who cooks a 6 oz steak, it's not worth any $30-$80. Fish dinners should be cheaper than a Las Vegas buffet?

Anonymous said...

I really enjoy going to Tri-Mart since they re-opened now owned by Ansa Mcal. They are really improving weekly it seems. Their produce and meat prices as well as quality are just great. They are really listening to us customers. Their cashiers are much nicer than others. Many new items and many things no one else has. Looks like a great comeback.