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.







**You may contact me by e-mail at livinginbarbados[at]gmail[dot]com**

Sunday, January 31, 2010

Barbados Gets New News Media: Barbados Today

Barbados has a new media offering: a true digital newspaper (see image). Barbados Today has just been launched, at the URL www.barbadostoday.bb. The CEO is Roy Morris, veteran journalist at the Nation, who believes there is "demand for a new imaginative approach to news gathering and dissemination in Barbados". He also said a "number of former Nation Publishing Company employees have come together and have been able to attract persons who understand the importance of quality journalism in a developing country like Barbados (see CBC report).

Mr. Morris was previously in the news on an alleged rape charge in 2007: he was the Nation News Associate Managing Editor in July when the alleged rape occurred. He was arrested and charged by police on August 14, 2007. Several local news organizations reported the story at the time, but online versions no longer appear available. For example, the Nation reported:

Journalist On Sex Charge

ROY MORRIS, managing editor of The Nation Publishing Company, appeared before the District “B” Boarded Hall Magistrates’ Court yesterday on a charge of rape.

Morris, of Warrens Park, St Thomas, was not required to plead to having unlawful sexual intercourse with a 16-year-old female.

There was no objection to bail and Magistrate Robert Simmons released him on a surety of $10 000, ordered him to turn in his passport, and to report to the nearest police station thrice weekly – Mondays, Wednesdays and Fridays.

The matter was adjourned until November 1.

The current state of this clear is unclear, looking at what is available through online searches, so perhaps it will be a story that is brought up to date on the new digital paper. It will be interesting to see what impression this new publication makes on the regular print media, their online versions, and the local blogs.

Friday, January 29, 2010

Constrain Banks In Booms

My ever-busy fellow economist also now living in Barbados, Avinash Persaud, has produced another thought-provoking piece about financial crises and their regulation. This time, in a round table discussion on The Economist 'free exchange' (see article). I take the liberty of reproducing the piece here:

Bail-in roundtable: Address the boom

Avinash Persaud is Chairman of Intelligence Capital Limited, and Chairman of the Warwick Commission on Financial Regulation. For an explanation of this roundtable, click here.

DESPITE the mantra that banking is a global industry needing global regulation, what has emerged instead has been a series of national responses and regional perspectives. In Europe, perhaps belying an instinctive mistrust of markets, the emphasis has been on how to regulate financial markets to avoid future crises. Credit mistakes are made during the boom, not during the crash. Besides, it is impossible to do good policy during a crash. Ideas around counter-cyclical charges and minimum liquidity buffers have traction. In the US, perhaps reflecting an instinctive mistrust of government, the emphasis is on resolving a crisis only once it has emerged. Booms are impossible to stop, so lets minimise the impact of the inevitable bust. Dominating the US debate are issues of “TBTF” (too big to fail) and “contingent capital”. Paul Callello’s and Wilson Ervin’s interesting “bail-in” proposals fit most neatly with this “American perspective”.

Messrs Callello and Ervin have focused on how we avoid an enormous liquidity crisis that stems from a more modest capital shortage. Quickly forcing the conversion of a limited amount of unsecured debt into equity might shore up capital and so forestall a liquidity crisis that, left unchecked, would create a bigger capital problem. There is merit in this idea from the perspective of the individual firm and its stakeholders. Instead of a bankruptcy that would wipe out the shareholders and much of the unsecured lenders, a middle path is chosen, of organised haircuts of the unsecured creditors, that allows everyone to survive. This is not dissimilar to provisions in the US bankruptcy code for industrial companies. However Messrs Callello and Ervin rightly argue that financial firms need a more immediate response. It is also not dissimilar from the idea of contingent capital, but Mr Callello and Mr Ervin believe the voluntary market for debt-that-can-become-equity would not be sufficiently large—which should give us pause for thought.

The problem with these and other contingent instruments are clearer from a macro perspective. What we are essentially doing is adding a forced option to unsecured lenders to banks, to convert their credit into something they do not want (a piece of equity), at some future date. In market parlance we are forcing a “put” onto unsecured debt. Markets and private rating agencies are better than governments at most things, but one thing they have consistently proven to be bad at is pricing risk through the economic cycle. Recall that the markets gave Bear Sterns, Lehman Brothers and Northern Rock higher equity ratings (p/e ratios) than they gave HSBC, JPMorgan and other survivors. This “put” will be underpriced during the boom, but when the first whiffs of bust are smelled, the price will shoot up and short-term subordinated credit to banks will dry up. This could bring forward a crisis.

One way to address this may be to give a pre-determined limit to the size of the put—perhaps a maximum of 15% of the unsecured debt can be forced to be converted into equity, limiting the panic in the unsecured market when it becomes clear that these options will be exercised by the regulators. The unsecured creditor is essentially now providing a limited facility to allow a bank to work through its problem. Should the bank survive, this equity could be re-converted into debt.

But there is a second more fundamental problem with these market mechanisms. Crashes are not random. They always follow booms. Appropriately defined, busts cannot be systematically smaller than the preceding booms. Consequently, proposals to reduce the severity of the crash will always be inadequate if they do nothing to address the boom. This proposal does nothing to the boom at best and potentially makes it worse. Booms are both caused and prolonged by the market’s underestimation of risk—often triggered by a new technology that appears to permanently improve the risk-return trade-off, such as railways, motor cars, electricity, the Internet and financial innovation. In the boom, the risk of unsecured debt is and will be systematically underestimated. The rise of under-priced unsecured debt could be perceived as less of a risk to the bank because it is now a form of contingent capital. This allows a bank to expand its balance sheet even more than otherwise. It will not curb the boom and could even add fuel to its flames. By doing nothing to the boom, all we may be doing is lessening the immediate severity of the crash by prolonging the downturn as banks find it very costly to raise unsecured debt in the aftermath of the crash. The history of financial crises is littered with good intentions.

The problem we need to address is a market underestimation of risk that feeds the boom. We require non-market mechanisms that raise the amount of capital banks are carrying as the boom progresses. Having more capital will be far more expensive for banks than this form of convertible debt, but it would provide the same buffer for the emergence of boom-fed credit mistakes and better constrain the boom in the first place. These non-market mechanisms can include the minimum funding liquidity and time varying capital adequacy requirements currently being worked on by the Financial Stability Board and Basel Committee. Alongside these initiatives, improving the power, scope and speed of resolution authorities may help to contain a crisis, but doing this on its own is not an adequate alternative to the main task of offsetting the market's systematic underestimation of risk in booms.

Risks To Image: Issues With Supervision Of Non-banks

The following press notice was issued this week, and raised more than one of my eyebrows.

NFA permanently bars Barbados futures firm and bars principal for three years

January 27, Chicago - National Futures Association (NFA) has permanently barred Kingz Capital Management Corporation (KCM) from NFA membership. KCM was registered as a Commodity Trading Advisor and Commodity Pool Operator located in Barbados. NFA also barred David M.S. Krywenky, the firm's principal, for three years.

The Decision, issued by an NFA Hearing Panel, is based on an NFA Complaint filed in September 2009 and a settlement offer submitted by KCM and Krywenky.

The Complaint charged KCM and Krywenky with failure to uphold high ethical standards and failure to supervise. The Complaint also charged KCM with cheating, defrauding or deceiving another person or attempting to do so.

Following his three-year bar, if Krywenky applies for associate NFA membership with any NFA Member, he must pay a $25,000 fine.

The complete text of the Complaint and Decision can be found on NFA's website (www.nfa.futures.org).

NFA is the premier independent provider of innovative and efficient regulatory programs that safeguard the integrity of the futures markets.

Regulation of so-called 'non-banks' in Barbados is weak and unless the government and central bank act quickly to set up the Financial Services Commission to do this, we could be looking into a shattered mirror, as Barbados' current reputation as a solid jurisdiction based on a conservative approach to regulation of banks, becomes that of a rogue jurisdiction, because of the poor regulation of non-banks.

Thursday, January 28, 2010

Bob Marley Birthday Celebration Party!!!

The Jamaica Association of Barbados invites you to a

"Bob Marley Birthday Celebration Party!!!

This will be held on the great legend's birthday

Saturday February 6, 2010 at the Masonic Centre, Salter’s, St. George

at 7:30pm until you say when.

Come out in you numbers to enjoy some real Jamaican food on sale!!!

Special Guest DJ BOYD (Quad Resident DJ and formerly of FAME FM) from Jamaica

Admission $20.00

Part proceeds in aid of Help Haiti Now!

Tickets available at Kingston 10 (Sheraton Mall and Bay Street)

"Everything is gonna be alright!"

Tuesday, January 26, 2010

What Am I Leaving For? Thoughts On Migrating From Britain To Barbados

One of my readers, who had contacted me last year with a query about moving to Barbados from the UK, informed that she has had to put that decision on hold. In part, that deferral reflects the effect of the current worldwide economic recession, which has affected her employment, but it also reflects concerns about what the move from London, England to Barbados may entail. Those of us who have been migrants know that the decision to shift your family and your life to another country is usually a very difficult one. Many of us in the Caribbean have parents or other relatives who did this nearly half a decade ago, moving from the idyll of tropical semi-rural life to a complicated, urbanized world in the UK or North America. From a country where our peoples were the majority, to lands where we were the minority, and often despised for what we were doing by intruding into the lives of the majority.

By way of background, her parents were both from Guyana, but she was born in London, and has lived in the western part of that city all her life. She visited Barbados for the first time in her early 20s. She had travelled to Europe and the USA but Barbados was her first experience in a Caribbean country other than Guyana. It was one of her first experiences in a country where black people were leaders in the society, and held many professional posts. Her first reaction at arriving at the QEH was to stare at the doctors in disbelief. Nevertheless, she felt instantly at home in Barbados. She decided to make moves to leave the UK and live in Barbados: she built her contacts with this country by marrying in Barbados, travelling there and now owning a home on the island, but has not yet made the final move to Barbados, of which she is now a citizen.

Her father had worked for London Transport and her mother had worked as a seamstress in a local hospital in London after they arrived in England in the 1950s. She went to a local non-religious primary school and a religious secondary school in west London. Now in her mid-30s, she works in a lawyer's office as a paralegal. She has a degree in law, a postgraduate degree and is continuing her legal studies.

Ironically, for someone not born in Barbados or having Bajan roots, she prefers to keep her Guyanese origins hidden: “I don't advertise it as I don't like the response of the Bajan locals and the rejection they give.” Coming to Barbados initially from the UK in an era where many of Caribbean descent did not grow up feeling a part of that country, and going to the Caribbean but also not being accepted there, was very confusing to her.

She has shelved plans to move permanently to Barbados for now because she is not sure if life there will really be any different to life in the UK. Although the island seems to offer a healthier, and better quality of life, several issues concerning living there are giving her some food for thought.

Here are some of her concerns.

"From my experience, most people in Britain have either left or want to leave where they live for a better quality of life, be it abroad or just leaving central London to live on the outskirts so they can enjoy more open space and a slower pace, while they commute into the central area. Job-seeking abroad is very popular among Britons and agencies are making it very easy for people to apply to move to the Caribbean and tax haven countries." She reports that, in the UK, television programmes are shown that offer advice and assistance to families who wish to emigrate to Australia and they are helped to buy houses within their budget, get jobs and also given counselling to see how they would cope without the support of extended family. Her views suggest that Barbados remains an attractive place for potential migrants from the UK, who may wish to make Barbados a new home, whether they are of Caribbean or European origin. We know that Barbados still attracts many Britons as a place to vacation and even own property as second homes to facilitate that. Their presence is very evident at the main south and west coast vacation spots, but they are also very noticeable as owners of properties in exclusive west coast developments.

However, the high cost of living in Barbados and the current quality of education there—which is one of the major determining factors where her migration is concerned—are making her reconsider whether Barbados is the place to be. For her, the concerns about education have caused her a major disappointment: “Since having children, I have always wanted them to be educated in the Caribbean and to grow up there so that they would hopefully not go through the lack of identity that many children of migrants do in the UK.” However, her children are doing very well at school in England, and so far have avoided, with some difficulty, falling into some of the worse elements of UK youth culture and materialism. She is very communicative and has helped her children understand from an early age their history, culture, and identity. This contrasts with her parents, who went to the UK and had their main focus on settlement and work and to provide for their families. Some children were left in the Caribbean and later sent for; some of the children who were with their parents in the UK were left to get on with life without much parental involvement.

She was happy initially to consider state schools in Barbados for her children. However, in discussions with acquaintances who have children in private schools in Barbados, their advice was that her children would settle easier in such schools, and have to deal with less fear of rejection from local children. She also heard that attending a private school would help her children communicate better in standard English than in Bajan dialect. She was aware that the private schools had a large contingent of children from white and black expatriate families, and she was concerned that this showed a desire to not mix with local children and parents.

She noted the good changes that have been taking place in the UK education system, which had had a major overhaul to deal with falling standards: "Schools are promoted, with head teachers who are now more business-like and it shows in the way they now run schools in Britain. So, to that extent the schools are trying to make an effort. News reports in the UK suggest that immigrants are also raising the standards of some schools in the UK, as they apply themselves and make better use of their opportunities in this country than do the children who are born here and are now falling behind." She wondered if similar trends existed in Barbados’ education system, which she now understands does not have as high a reputation as before. If it is not the case, then she wondered if the problem was the children or the system. She was under the impression that the current crop of Bajan children are not as motivated to learn as were their predecessors, maybe because life is now much easier for them than for earlier generations.

She has given some thoughts to how society seems to be developing in Britain. She feels that Britain is moving into a selfish phase and abandoning some basic social values, which were brought out clearly during the recent bad winter weather: "With regard to the recent bouts of bad weather, the days of gritting roads in a country that should be accustomed to seeing snow is a distant memory. You just get sent home early from work, and this applies to the public and private sector. Do you remember the days they used to have the big containers at the bottom of the road with grit that you could help yourself? No more: you get around at your own risk. Municipal councils are in debt and work places are now not about whether you can actually do the work but if you can talk your way to the top." So, in some ways, the UK has become a less welcoming society. This sense was reinforced by her remark that "All these things that have happened have made individuals adopt a 'each man for himself’ attitude. People are no longer happy with just living and raising children and being happy with what they have or who they are around. There is a lot of pressure in this country to have the best whether you can afford it or not." So, beggar my neighbour seems to be brewing with living beyond one's means. Some of the widening divide between haves and have nots in Britain are vividly shown in a recent study (see Times report), which shows that the richest 10% of the population are more than 100 times as wealthy as the poorest 10% of society.

So, the prospect of leaving the UK for Barbados is fraught with complex notions of acceptance and rejection. Feedback she received from those who have emigrated to Barbados, even those who left Barbados to educate themselves in the UK and then return home, indicate that they face rejection in the work place. This includes dealing with comments from locals who ‘feel threatened’ by those persons who have what seem to be superior UK qualifications. This may push returning migrants or new immigrants to Barbados to avoid working in established organizations but look to work for themselves given the chance. I know of several such instances, though, I have not discussed in detail all the reasons behind decisions to create their own businesses.

In terms of considering again whether a permanent move to Barbados made sense, she has looked at Barbados and wondered to what developing countries like it are aspiring. She had concerns that "countries who so want to become developed are really chasing their tails with this ideology that the First World countries have something to aspire to. So far, Barbados has aspired to having a lot of debt to be something that it may never be." It seemed ironic to her that when Britons, working or retired, leave the UK to go to countries that offer what they perceive as a ‘back to basics’ way of life may find increasingly that such places are becoming more like where they are leaving. "It seems that islands like Barbados are doing a good enough job without trying to be like First World countries who may have to back track to that same back to basic structure that they once had. It may take a long time to undo all that damage just to get there....Barbados seems to have all the important factors in place as well as a population that is proud, motivated, loyal and willing to participate in its country’s policies for the better of the people.”

She wondered whether the many gated communities now prominent on the island and cliquishness within of various communities suggested that the community spirit of Barbados is disappearing. Such developments also marked the clear presence of class divisions, and a desire to make those stronger. Social divisions in the UK are an issue too. "The class system has also become 'self appointed', in my eyes," she remarked. "People here have nominated themselves as middle/upper class but are not necessarily so just because they may have a big house and a 'decent' job." This suggests that as people's earning power increases so that they can command a higher loan to buy a house or a car, these people rise in 'class' in their own eyes and in the eyes of those around them; it's built upon by actions that seek to segregate. She believes that something similar has been happening in Barbados, including amongst people who may come as migrants from countries like the UK, and may be a cause of friction that she would have to deal with: “People come from abroad and are somehow automatically elevated on this status ladder because they have a house in a nice area or have sold their house in England, gaining enough profit to buy a house in Barbados as well as afford to send their children to a private school. A rub in the nose for those in Barbados who have actually worked their guts out to get to an acceptable status level. Who gives them this status? Is it the locals or do they also appoint themselves ‘middle class’?”

She has looked at how the UK and Barbados have dealt variously with its particular immigration issues. She sensed greater hostility in Barbados toward migrants from within Caricom—especially, the infamous hostility towards Guyanese shown by Bajans—than if those migrants were from the UK. This seemed bizarre. But she perceived that lack of tolerance is also evident more generally in how the society seems to be developing.

She had noted the arguments about immigrants in both the UK and Barbados, including how they were pressurizing health and education systems. But, she noted that in the UK there was an awareness that many immigrants have made valuable contributions to the country, but even those who clearly benefited from the presence of immigrants were still capable of being critical of their presence.

That said, she was concerned at the animosity that different immigrant groups in the UK were beginning to show toward each other, e.g. older immigrants groups such as from the Caribbean being at odds with newer entrants such as those from Somalia.

Would Barbados be more appealing if it did not appear to be heading in the same direction as the UK and maintained its own identity? "Barbados and other islands are places where people like me who have grown up in the UK and never felt accepted want to return to 'go back to their roots', as well as contribute towards the economy and teach their children the same culture and values that our fore parents had. But I still feel as though I would not fit in there also because of the same issues."

Tuesday, January 19, 2010

It Is What You Do And The Way That You Do It: Tourism Diversification

Today's papers have a report of comments made last week by the central bank governor after the release of the latest economic review (see Advocate article, for instance). His essential point is that Barbados is not necessarily disadvantaged by its heavy reliance on tourism. He touched on the fact that Barbados had "not explored fully the possibility of diversification within the tourism industry" and he "does not believe that enough has been done to develop other areas, and appeal to the interest of other tourist segments". He cites events such as Crop Over, noting that this is "a market that was stumbled upon". Now, to the extent that the central bank is an arm of government policy, it's interesting that Dr. Worrell should step into this area. I know that he is interested in the many fine aspects of Bajan and regional culture, so I feel his heart is in the notion that these things, in their broadest sense, should be made available to visitors, who can support the country with their foreign exchange and patronage, as well as being available to locals to enjoy for their patronage and whatever spending they too can generate.

We are still waiting to see a strategy/policy for tourism out of the Ministry of Tourism, and the floundering in this area does not inspire confidence that anything clear will emerge any time soon.

Various commentators have mentioned previously new tourism ventures and areas of interest such as 'heritage', sport', medical', 'educational', 'religious', 'cultural', all of which could offer important niche opportunities for Barbados. What exists is really piece meal and it's not clear that the various actors really take account of much other than their own self interest.

It will be good to follow this discussion in coming month, not least to see if the government and the major current players in the tourism sector manage to clarify who and when they will target--the Caribbean diaspora/Bajan locals for 'staycation', or non-Caribbean foreigners, or particular groups from wherever (e.g., US colleges, churches, etc.).

It is clear to most people who have visited other Caribbean resorts that Barbados does not offer the average tourist much more than sun, sea, sand, sex, and food. Barbados also has a reputation for being expensive, so when visitors come they are predisposed to seeking value for money. But is that what they really have on offer? One of the weaknesses of the market for cruise passengers, for instance, is that there is only a pitiful range of goods that could be shown off as generating retail interest--and please do not talk about the craft market. Broad Street is not attractive, with a poor selection of outlets. The disparate offerings of attractions are a real bugger's muddle. Take a look at some of these: Harrison's Cave has been closed most of the past three years; the Concorde Experience is like a white elephant trying to hide. I read recently that Harrison's Cave will be due for a 50% increase in entrance fees--whenever it reopens. I also read that the airport authority does not allow the Concorde exhibitors to advertise in the airport, so passengers/visitors with some time to lose at the airport are unaware that next door there is a wonderful attraction. It's another example of how the tourism product has not been bought into by people and institutions at a national level.

Maybe the Governor needs to help push together some of the heads to think along a set of similar lines so that their ideas can be funneled well. But, that would be so much easier if we had that oft-promised tourism strategy. Why are we still waiting for that?

Monday, January 18, 2010

All That Jazz: Time To Lime On Farley Hill

The Barbados Jazz Festival is an annual event that I now look forward to immensely. When we landed on this blessed isle in January 2007, it was too late to enjoy a day on 'The Hill'. We wondered what hill this could be because Barbados was supposedly flat. But, with the help of my wife's future driver, we found the heights known as Farley Hill, and for me it has been a great place to visit regularly--with or without music. Along with Bathsheba, it is one of my 'must see' places for visitors. It has a fabulous view that makes me pine a little for Jamaica. But, enough of that. I found the next year that the 'best lime of the year' was on Farley Hill on the last Saturday of the festival. People whom I had met independently all seemed to join together in groups and surprised me with their interconnections, some as friends, some as family. I just kept on being amazed that the strands were tightly woven. It's been that way each year that I have been on 'The Hill'. Now, I know more people, but they mainly seem to be offshoots of a core group that I first met; I'm newly known to them but they are quite familiar with each other. Maybe that is a real part of living in this lovely region of far-flung islands, but closely knit communities: birds of a feather, flock together, indeed.

This year, I decided to take my little daughter so that she could hang out: no dolls, no games, no books, no fixed bedtime, just freedom. She loved being able to roam around the grassy hill and find seeds to fill a plastic bottle and make her own shak-shak; or talk to some friends we knew as I let her wander around between groups of adults. She loved hanging on the barrier by the stage, with some young friends, acting like a real concert goer, but also enjoying seeing musicians actually playing: in her case, watching Karen Briggs on violin, should have inspired my daughter with her Suzuki lessons.

But, much as I enjoyed myself, I could not help but reflect on some wider issues.

The PM said this weekend that Bajans need to stop belly aching (see Advocate article), and adopt a positive attitude, especially when putting things into context of the tragedies now hitting Haiti. Well, I'm not Bajan, and I am going to have a belly ache. Image is very important, and as I have written before, Barbados has done much to concoct a very good image of itself. But, when it comes to 'sitting above the rest', I'm not slow to say that I find the reality wanting. Take this week's jazz festival, one of the pinnacles of the tourism calendar for Barbados. What would be one of the over riding memories that I will hold, apart from the good music and the good vibes? It will be that there seems to be no regard to how people can feel abused when they have paid good money for an event and then one hour, or even two hours after the allotted start time, people are still futzing about and we have not yet had a bar of music.

It happened midweek with the Smokey Robinson concert at the Garfield Sobers Gymnasium: billed for 8pm, but not getting underway until 9pm, and made worse by the fact that when the MC came out and warmed up the crowd he did not say a word for the delay up to that point or about the delay that was to follow. Why did the musicians get on stage and find that the mikes were not working? All that "Check, check. 1-2-3." that we know should have been done. This is not my teenage garage band at work now. Sure, when Smokey glided on to the stage everyone was pleased, but the slow hand clapping that had broken out sporadically during the preceding hour was a sign of clear displeasure. This did not escape comment in the press the next day, but we mover right along. This is the Caribbean, and time doesn't mean anything, right. Wrong!

It happened again at Farley Hill, when the noon start time just morphed into 2pm. No real sweat on a beautifully pleasant sunny day, with not a care in the world, as people sidled in and looked for places to sit and food to eat and drink to quaff. That is until you push on to the end of the day, which presumably was running two hours later than previewed. Now, I am not thick with Robin Thicke, but even my six year old daughter was ready to swoon when he came on stage at 8pm. The problem for her was that she was also ready to swoon from fatigue.

So, what would be a visitor's take away? I ask because I was sitting near to a phalanx of foreign media on Saturday, guests of the Barbados Tourism Authority. I did not hear what they said and I could not see what they wrote, but I say their faces, and as they wandered around for things to note while not having any live music to hear, I'm sure they were trying to paint the best picture possible. Would they have loved the coolness and relaxed attitudes of the people and the fact that, in keeping with stereotypes of Caribbean island life, time does not matter? We may have to scour the press in coming days to get a real idea.

So, done with that gripe now, I will be glad that I took my time to pass some time on 'The Hill'. Sure, the cooked ackee and salmon that a Jamaican friend proffered made it sweeter. So, too did the barbecued chicken necks. No less so, the hugs and smiles exchanged every five yards.

Sunday, January 17, 2010

The Barbados Economy In 2009 And The Prospects For 2010: A Commentary

When the Central Bank of Barbados released its latest economic review on January 11, covering the last quarter of 2009 and the year as a whole, I was called by the Nation to offer an immediate reaction. The 500 words offered were reworked as shown below and published on January 12 (or see link). The piece needs one clarification. 'Reserve cover' is the amount of a country's international reserves of foreign assets relative to its imports of goods and services, usually expressed in terms of weeks, which is not how the text reads (see red highlights). In Barbados' case, the forecast is that reserves will decline from 21 weeks in 2009 to about 17 weeks in 2010.

Concern over dependence on foreign markets

HEAVY RELIANCE ON BRITAIN as a tourist market may spell trouble in the future for Barbados.

That was the view of economist Dennis Jones, speaking after the release of the Central Bank's report: The Barbados Economy In 2009 And The Prospects For 2010.

"For tourism, the governor said there will be a small contraction in 2010, with recovery beginning only in 2011. This assumes modest economic growth in Barbados' major trading partners (the United States and Britain). But . . . Britain is one of the few industrial economies to still be in recession," Jones said.

"One result of this weak recovery is that reserve cover (the amount of imports the country has stored) will decline in 2010 [which] is a notable negative going forward and should be watched carefully."

In his report, Governor of the Central Bank Delisle Worrell said net international reserves were projected to decline this year and foreign reserves cover may revert to the levels of 2008 - around 17 per cent.

Jones was concerned the island's growth was so dependent on foreign markets.

"Barbados will not be in paradise next year and, in the governor's eyes, when it gets there depends greatly on the fortunes of the North American and European economies," he said. "I cannot fault the governor for his realism, but I wish there was more that we could do but hope."

Describing the fiscal outlook as "bleak", Jones noted that the deficit widened to 8.6 per cent from 6.4 per cent in 2008 as the economy contracted more than expected.

"But this was a pincer move," he said, adding: "Tax income declined, in part due to a shrinking tax base, and corporate tax income was especially hit. But spending rose by three per cent, with wages soaring 11 per cent from 1.7 per cent in 2008, and spending on goods and services was up 12 per cent. Borrowing locally and from Trinidad helped fill the widening gap." (LW)


The Governor, in the press conference held on January 12, noted his emphasis on maintaining the current fixed rate of the Barbados dollar to the US dollar and the risks to that posed by the projected decline in reserves (see Nation report).

Thursday, January 14, 2010

When Lightning Strikes: Thoughts About Haiti's Earthquake

When disasters occur, such as this week's massive earthquake in Haiti, many of us reflect on what we would do in similar circumstances, and what we can do as those fortunate to not be in such circumstances.

Haiti, we know, is the poorest country in the western hemisphere, and it is in our backyard. On world scales, it is not the poorest and most disadvantaged of countries, but to most of us it is about the lowest we will know and see up close. One of its problems is that for two centuries it has gone through difficult economic and political times. I am not going to rehash Haiti's history here, but it has left a legacy which will be staring it in the face as it tries to get over this disaster. Failed government; malfunctioning infrastructure; damaged economy; angry people. These are not the ingredients for success. But, the world will rally and try its best to help and hope that the disaster does not happen again, and better still not soon.

My direct connections with Haiti are few, but I have friends who have Haitian roots. I can hear in their tones and see in their words the pain that comes from knowing that 'your country' is going through Hell. But what to do? In discussing this briefly last night, it seemed clear that besides offering financial aid, most of us could do little. I have an urge to go and help claw away rubble and maybe help find bodies. But, I know too that my willingness is not enough in such situations. I can easily be a hindrance, with my almost total lack of knowledge--apart from being able to speak French--of where I would be and what really is going on. But, if I could find a way to be there and help I would feel better than just looking on. I heard discussions of how best to get over the initial problems of this disaster, and much thought was being given to whether it should be an effort led by military personnel or by aid agencies. The conclusion was that this was an operation to be led by the military, for various logistical reasons, and that away from the country, much could be done and coordinated by aid agencies.

Most of us in the Caribbean think of our disasters in terms of weather-related events, such as hurricanes. But earthquakes are different. They cannot really be predicted with much accuracy, though one can know of their likelihood because of where the Earth's fault lines are: as the media are now reminding us, there is a Pacific Ocean 'ring of fire' (see link), which covers the tectonic plates covering both sides of the Pacific Ocean, and stretches through central America to the Caribbean Sea. So, it is hard to prepare for earthquakes, other than building appropriately and being aware of their occurrences: they do not happen with equal frequency and do not have seasons. When your country's last experience of something is 100-200 years ago, it's hard to expect people to know what to do. Looking back to Jamaica's history, many people talk about the 1907 earthquake, but we can see that the timing of disasters has its own rhythm (see Gleaner summary). Kingston was rebuilt to be able to withstand another earthquake. But, generally, as we know, even if the prospect of disaster is annual, as with hurricanes, we still do nothing till it's very late.

We should all send out hope to Haiti, at the very least, and those who have prayers to send should keep those flowing. Money. Time. Clothes. Other assistance. If you have it, try to share it. Former President Clinton, the U.N. special envoy to Haiti, yesterday appealed to the public to support programs that will provide food, water, shelter and medical supplies to the impoverished country: "The most important thing you can do is not to send those supplies, but to send cash," to relief agencies. As we are often told, but often ignore, we never know if disaster will strike us next.

Wednesday, January 13, 2010

Barbados’ Economic Performance in 2009 and Prospects for 2010

Governor of the Central Bank of Barbados, Dr. DeLisle Worrell will host his first news conference on Wednesday, January 13, 2010 in the Executive Dining Room, Central Bank of Barbados.

Subject: Barbados’ Economic Performance in 2009 and Prospects for 2010.
Time: 11:00 a.m. - local time
Time: 10:00 A.M. ET

Video webcast will be accessible from this location: The Barbados Economy in 2009 and Prospects for 2010 on the central bank's website, http://www.centralbank.org.bb/

The central bank recommend that you access the webcast five minutes before its scheduled start time.

Yesterday, Tuesday, January 12th at 2:00 p.m., the central bank broadcast the Economic Review statement by a video feed and text release. I watched and read at that time and was impressed that the new Governor has decided to use new media to help get out his and the central bank's message. I was asked by the Nation newspaper to comment on the Review immediately after its release and this new format greatly helped me do that. Kudos to the central bank.

Tuesday, January 12, 2010

Broad Street Journal reports on 'A Man For Four Seasons'

Pat Hoyos, who publishes the periodical Broad Street Journal, has recently conducted an interview with Professor Avinash Persaud concerning the recent deal to resurrect the Four Seasons project (see images alongside; click to enlarge), and published this in the edition for January 11, 2010. He poses a number of pertinent questions about the project and the answers give some clarification about the physical and financial scope of the project and the government's new position within it.

I was intrigued when I read the press reports of the deal last week: so few questions were posed about it, not to embarrass anyone but to inform about an important and uncommon approach to 'private public partnership'. That is a dig at the local press, which does not seem to have the consistent drive to go behind what may be offered in a press release. Is the problem that the journalists are too bound by deadlines, as some of their representatives have argued? Is it a matter of resources, which journalists also argue are dwindling? Is it that the reporters do not have the real interest in unearthing more information? I hope that they have a genuine desire to expand the public's understanding of important local matters. But, it is not enough that the journalists that they say do not have the expertise or time or other resources: part of their job should be to see what are national priorities and seek out and speak too those who can offer expertise and then relay their findings to the general public.

When this journalism matter was discussed on Voice of Barbados' radio call-in programme, Down to Brass Tacks, some months ago, it was clear in the context of another major financial issues story (the rate hearing for Barbados Light and Power), that even when offered such expertise, the press do not seem willing to take the hand offered. That said, some elements of the press do try to find experts to help them understand what is going on: I can attest to that, personally, but my reading of the papers suggests that it goes on too little.

As the Four Seasons project regains its legs, several elements of the deal will start to loom large. In my mind, one of these is the issue of the new contingent obligation that the government has taken on in the form of a guarantee of US$ 60 million of the project's debt. As far as the IMF definitions go, the contingent nature of the guarantee does not stop its being counted as part of the country's public debt--it is often the inclusion of such items, some of which can be off-budget, that gives a wholly different picture of the true weight of public debt. So, Barbados' already high debt ratios will rise. The nature of the guarantee may cause few immediate concerns about the country's capacity to repay, but one has to hold breath until work resumes and longer to see if the project is completed and turns out to be the financial success that is envisaged, with the government having a 20 percent stake in the project for no financial outlay. In the meantime, the jury is out, but let's all hope that there will be the hoped for happy day.

Monday, January 11, 2010

Should Barbados Consider Selling Public Sector Assets?

The following is an article I was requested to write for the Barbados Business Authority: it was published today.

Barbados is now unquestionably a highly indebted country, that needs to improve its public finances as its key debt ratios move into the chilly air countries breathe when their ratio of debt to GDP exceeds 100 percent. IMF data in its 2009 Article IV Consultation report show Barbados' public sector debt was due to end 2009 at 116% of GDP and would exceed 131% by 2014. Public debt rose quickly in the previous half decade: the ratio rose from 87% in 2004. Another measure of the 'pain' is the ratio of debt to revenue, which rose from 185% in 2004 to 224% in 2009 and may reach 239% in 2014. Simply put: the economy is not growing as fast as the debt, and significantly government revenue growth is also lagging the rise in debt. These are worrisome developments. So, how to solve them?

Few ways exist to reduce these debt burdens quickly, especially during a recession, when the government finds it harder to cut spending and raise revenue, being tempted to do the reverse to help boost the economy. One option to give Barbados some breathing room while it tries to improve its public finances on a sustainable medium term basis may be to sell some government assets and use the proceeds to help pay off some of the debt. That would ease the immediate debt burden and ongoing obligations that come from having to repay interest and principal. Last October, the UK government announced a £16 billion programme of asset sales as part of a deficit reduction plan to bring down the massive state debt built up during the recession(see http://www.telegraph.co.uk/finance/economics/6305708/Gordon-Brown-unveils-16-billion-asset-sales.html). Britain is no stranger to high debt burdens or to asset sales.

One problem with implementing such ideas in Barbados is knowing what assets the government has and their worth. As the IMF reported in its 2007 Fiscal Transparency Report (see http://www.imf.org/external/pubs/ft/scr/2007/cr07338.pdf), we have only a partial set of data about government financial assets and liabilities:

'Information on central government financial assets is published monthly and annually but is incomplete. The monthly and annual financial reports of the Accountant General that are tabled in Parliament contain statements of the central government’s financial assets ... However, the statements do not provide a full picture of all financial assets, such as equity investments in public enterprises.'

Simply, the country does not know what the government is worth. That makes it hard to know how much we could reasonably expect from selling public assets, even without discussions about their value and possible buyers.'

Asset sales help reduce the debt burden, but such sales also let a government reconsider its overall policy of economic involvement. Is a wider policy of divestment appropriate? The government may want to review why some of its debts were incurred, and if these were initially for temporary or good historical reasons, whether those reasons remain. The government has shed assets in the recent past by selling some of its part of a rehabilitated Barbados National Bank. The government could offload its holdings in hotels or tourism-related activities. The government may also review providing certain goods and services which could very adequately be done by the private sector. It needs breathing space from fiscal burdens so no options should be off the table.

Friday, January 08, 2010

Is Barbados A Doorway To Terrorism? The PM Needs To Connect The Dots

The series of terror events in the USA in recent months is a vivid reminder that people who are determined to do wrong or evil are not easy to stop. Whether it is a disaffected army doctor who decides to shoot fellow military personnel. Whether it is a young man who has been 'converted' to a cause and then tries to blow up a plane to further that cause. There are people prepared to risk their lives to maim and kill others, often people they do not know. The only effective way to deal with the threats posed by such people is for every person to be vigilant to the risks and to help confront them. But government needs to be vigilant too and to have in place mechanisms that do not facilitate acts of terror or jeopardise national or international security.

Barbados may not be on any list that covers 'friends' or 'havens' of terrorism but it may be an unwitting accomplice. Several aspects of life in Barbados--and in some other countries in the region--make us and those who pass through the country vulnerable. One aspect is attitude. Another aspect is procedures (which to some extent reflect attitudes).

Looking at procedures, it is interesting to see what the debate on illegal immigration highlights. Barbados has recently come to the end of a seven months amnesty for undocumented Caricom non-nationals. At the end of that process the minister responsible, Senator Arni Walters, was not able to offer many facts about who had applied and who else remained. That is a gaping hole, which reflects a lack of seriousness about checking people who cross the nation's border. At the same time, we hear that several hundred applications were delayed due to the need for police certification. So, the police know about some persons, but the Minister knows nothing much about all the people who have gone through the process. How is that?

The hoopla about immigration may have a social dimension that touches a willingness to have foreigners within a country but it is also a security issue. If Barbados cannot track people who enter and leave the country what is to stop the USA or another country seeing it as another weak link in its border security--not least because there are direct flights from Barbados to the USA and the UK. Is it far fetched for the USA or UK to start to consider sanctioning those who pass through Barbados? That's a taint that would not help market the island's tourism.

Maybe the PM does not see these dots when he comments that Barbados will continue to meet international security standards at Grantley Adams International Airport (GAIA) (see Nation report, January 8, page 19): it is not about security checks at airport. Even when these are very sophisticated and extensive, they fail because of human or mechanical failures, and lapses. The failed bombing of a plane in Detroit over Christmas showed the lapses at many levels and in many places that let a plausible terrorist suspect board a plane laded with explosive materials. We saw what happened at Newark Airport this week when a TSA official left his post, and the ensuing security lapse shut down that airport for several hours. Several weeks ago, the TSA security guidelines were inadvertently posted on the Internet. The security services are shooting us and shooting themselves in the foot.

The PM's saying that Barbados is 'peaceful' is irrelevant and saying that the island was not a 'staging point' for acts of terrorism or violence against people misses the point. Terrorists do not care if your country is at peace but whether it has weaknesses they can exploit. Maybe the PM never has to go through regular security but regular travellers will have their own stories. I know that I carry items in my hand luggage which sometimes I am told are prohibited and sometimes they are not noticed. They are simple things, always in my bag in the same place, and I know they are not explosive, such as hand creams, but surely they should be treated the same on every visit to the security line. It was many months before a penknife I always used to travel with but forget was in my bag triggered any concern. Officials and machines are not perfect.

But hold on, PM! In the previous day's Advocate the front page reported Senator Walters saying "several loopholes will be tightened, including the inadequate monitoring of arrivals into the island". Issues had been raised last year in the Auditor General's report on the Immigration Department, and include lack of facilities at the ports to cover yachts. The Auditor General's report flagged these as security risks that needed to be addressed. The Minister noted activities off Barbados originating out of Central America or regional islands, involving persons and materials, and cited a worrying incident in 2006. So, even if GAIA meets international standards, the ports do not.

Let's look briefly at attitudes. In small countries, and in this region for sure, people work on the assumption that most people are known, and most are honest, and that if someone says he/she is something then he/she is. So, we are more trusting and casual about checking credentials. But trust is a weak point. Take a visit to a home by a 'utility' or 'service' worker. I would never let someone past the gate unless I see two forms of picture ID: but if I insist on that here the visitors are offended, arguing that I should believe and trust them. Should I? I do not know Adam from Steve. On one occasion someone came to change phone lines. I had no knowledge about it, nor did my landlord, and when I called LIME, they had no record of the work being scheduled. I sent the man away. After a few days he was back and the pieces fit as it was discovered that this was a job that was requested a couple of years ago. But, given that there has been a series of burglaries nearby, why would I not assume that this 'job' was a ruse to survey the property?

I visit Ilaro Court and the security officer waves me in without batting an eyelid; my car is not checked. When the PM was there for 'Christmas by candle lights', who had ensured that no one had a weapon? Ironically, the adjacent Lloyd Erskine Sandiford Centre, has metal detectors, and that is to cover any public event, and when I was dressed up as Santa, I had to go through the screening even though the organizers vouched for me. Presumably, no one in the world wishes the PM harm, but you cannot trust Santa?

Caribbean people do not like what they see as personal violations, so object to body and bag searches, feeling that it makes them seem like criminals. In general, we do not accept that this is for every one's good. Hence, the brouhaha with the security measures for Cricket World Cup in 2007. The region had to beef up a range of security measures to comply with the new realities: Caribbean people felt this spoilt our fun.

Barbados is not alone. We see that the USA cannot protect itself, and we are seeing that 'protecting the president' is more lip service than secret service. But part of the battle is to ratchet up our awareness. Problems in security that President Obama identified this week in terms of poor collaboration and information sharing exist here too.

I would not be surprised if US Embassies are being asked to report on the 'security profile' of countries in which they are located and their neighbours. Would it be a shock for Barbados to be black listed as a security weak link?

Tuesday, January 05, 2010

Here we are again, happy as can be. All good friends and jolly good company

Barbados after the Christmas and New Year's holidays is an interesting place.

First off, it is a place free from amnesty: the government's deadline for Caricom non-nationals to register has now passed since end December. We hear and read that the "heat's off" as the government will not be rounding up any illegal immigrants still in Barbados--unless they are involved in criminal activity. That sounds amazing: if you laid low while doing nothing illegal, other than being undocumented, you can now surface and so long as you remain involved in legal activity--other than being undocumented--they you can breathe easily (see Nation report). "If you have a work permit it's no problem, but we won't go rounding up anybody," the government spokesman said. I can hear the huffing of many of the Bajan population to whom this will seem like a travesty. If this is the 'sanctions' meant by the PM when he spoke in November, then stroll on.

But amongst the real travesties are the inability to do anything and to be proud of that: Minister of State with 'responsibility' for immigration, Senator Arni Walters, noted that after the amnesty he did not have exact numbers of applications or estimates of people expected to be leaving Barbados. What? The country can count Crop Over ballots but cannot add up the application forms for immigration status? You have got to be joking! So, after six months of getting people regularized the government can still say virtually nothing about illegal immigrants in the country. Why am I not surprised? The government is due to listen to public reactions to its policies in a series of town hall meetings from January 14 and I have a feeling that they could be some tasty affairs, if people follow the US examples over health care reform.

One Guyanese acquaintance told me that his sources indicated that nurses from his country had not had their contracts renewed. Also, some 12,000 one-way tickets had been bought to go on LIAT and Caribbean Airways from Barbados to Guyana. He did not see Bajans would be ready to fill in for those workers in construction who had left, nor in nursing. It will be interesting to see if the gaps left do leave people in some economic straits.

What next? I see that taxi drivers are lamenting that they cannot get tourists to use them when they are on the island: cruise ships come and go but the nifty visitors wont take cabs. So what do the cabbies do to vent their frustrations? Read the Nation:

[O]perators [were] at Browne's Beach, St Michael yesterday where scores of them from the Bridgetown Port took a day away from the stress. "This lime is just to get rid of the frustration of not making money because if you study it, you will go mad," one said while at the buffet table. Last December 26 and 27, with five ships bringing in more than 11 000 visitors, taxi operators lining the Princess Alice Highway cried out that they saw little or no business and were not reaping the sweets of the season.

I thought it was only Trinis who turned everything into a fete. To me, that 'beach in' does not suggest a sector in crisis. Well, it is good to see solidarity, or really a solid bunch of men tucking into some solid tucker. "The workers, united, will never need feeding"--with apologies to Socialist International.

Good things come in threes, so I cannot pass by the story about the coconut vendors, who are enjoying a boom time, but leaving the island like the green house for anthiriums (see Nation report). Coconut vending will not be the stimulus to gets us out of the recession, but as the taxi drivers showed, when the going gets tough, the jelly in the coconut tastes sweeter. Those poor banking types on Wall Street are missing their steak dinners and expensive Italian restaurants, but in Barbados, jelly filling our belly.

I have not even managed to get to the domestic chores that are sitting waiting to be tackled.

When I lived in colder climes, the return after Christmas was filled with trepidation wondering if I could reach my house after heavy snowfall, or if pipes had burst during a cold snap and if my ceilings were about to collapse. I sometimes found birds nesting in the attic, having sought refuge from the cold. I also had to chip away at the ice on the pond to check if the fish were still alive, though hibernating. When I had a dog, it was great to get her from the kennels and get back into the love play with a ball and stick.

In Africa, my greatest fears were that some electrical catastrophe had managed to destroy every apparatus and that the freezer had thawed and was raining water and fetid food. It was also a concern that the damp climate would take over my house and leave me with many square feet of mould on any and everything: I never realised that I had any black shirts, but then realised that it was mould that had set in...and my shoes...and anything made from natural materials.

Here in Barbados, we had left our cat to be fed and watered by a neighbour's handy man. That he did...till the food left on the deck ran out and he did not see that more was in the kitchen. No harm done. The cat was still there--alive. But, cats are resourceful, and birds and lizards are plentiful. So, the smell that came from deep downstairs needed to be found...and it was, as I unearthed a fat dead lizard from a shower. What else would I find? No! Not cat poop in my bedroom? Phew. So, what is the smell? I have not yet found out, but it seems to be everywhere. The cat, missing some loving for a few weeks, wanted to be close to humans. So, we put him out on the deck and he would scale the wall and dive back into a bedroom. Put him in the corridor and he would scratch at the bedroom door as if he were chasing a cockroach...not cool at 1 am. Aha! That's it! The smell was dead cockroaches...one, two, three,... My wife hates that. So, off to clear up. In the end, I put the moggy into a spare room and let him have his choice of empty suitcases to sleep in. It was not the same as travelling on American Airlines, but he got a taste.

So, here we are again, happy as can be....

Sunday, January 03, 2010

There Is A Four Seasons....Turn, Turn, Turn...

One of the most visible signs of the economic problems facing Barbados has been the stalling of the Cinnamon 88/Four Seasons/Paradise hotel and private residences project on the west coast. It has had its share of international interest not least because of the media glitterati who stood to go up in smoke and ashes if the project disappeared without trace. Simon Cowell, of American Idol fame, being among that group, which could easily have been renamed "I'm here again, idle".

Today's papers indicate that this is now set to resume (see Advocate report). In a deal brokered by Professor Avinash Persaud, the project will be refinanced, with the agreement of lenders, creditors, private residence owners, shareholders and developers. Kudos to Prof. Persaud for getting the parties to agree on this. The Barbados Government puts itself into the frame as a supporter too: the deal will allow Government to gain an equity share in the project, while guaranteeing the repayment of the loan. The plan includes a US$60 million facility from Ansa McAL Merchant Bank and its Barbadian affiliate, Consolidated Finance, that allows for a repayment of the Bank of Scotland loan, the acquisition of the Esso land to complete the site, a settlement with creditors, and the recommencement of construction.

The government will have a ‘golden share’ to guarantee its interests versus other shareholders and a charge on the assets of the most significant development to occur in Barbados for some time. The PM is clearly optimistic about the whole thing, saying "When these dark days of global economic challenge are behind us, we will come to see this moment as one of our finest hours.” Words like that have a habit of coming back to haunt, and one wonders whether Barbados en masse, with its already heavy debt burden will see the government guarantee in the same Churchillian 'finest hours' terms. While the government may enjoy eating a lovely cinnamon-toasted bagelnow, I hope that it does not end up with just toast, or the hole in the bagel.

The deal calls for the creation of a new management board to be appointed under the Executive Chairmanship of Prof. Persaud.

It's clearly too early to say whether or not this is a good deal. The project, stalled for many months in 2009, has yet to restart, but that is foreseen this calendar quarter. A lot of people have not been working or earning while the project lay idle, and their prospects are less bleak, though not clearly bright. Some contractors are owed monies too for work done previously. As contracts are being re-tendered, it's not clear who will be working again, or working anew, and who will be paid and when. Will Chinese workers be retained? Will Bajan workers and companies get a piece of the pie? Will former management be pushed out and have reason to cry 'foul'? Whose arm will be twisted and nose tweaked to ensure that these aspect does not turn into a PR disaster for the government? So, we may have some contentious months ahead in sorting that out.

The role of government may also come in for some scrutiny. I'm happily reading "Too Big To Fail", about how the US financial world dealt with the turmoils of the sub-prime crisis, and how government had to step in to save some institutions but did not step up for others. Economists often worry about 'moral hazard', where a party by being protected from certain risks acts differently than they should. It will be a matter to be tested whether the government's stepping in is seen as needed in a 'too big to fail' sense, or if it suggests that it may have to do so more widely to help the economy weather the current economic storm. Skeptics will also be looking to see if and when the government steps away, or if this public holding of private hands is a new dance that will be hitting the floors this year.