When looking at the economies of the Caribbean island region, a few distilled facts or significant trends help cast light on the region as a whole. Because of their geography, the islands do not have a large concentration of natural resources, unlike countries in Central and South America, where natural resources and raw materials form a disproportionately high (in comparison to other regions of the world) part of their export portfolios. The Caribbean island nation richest in natural resources is Trinidad and Tobago, because of its huge petroleum reserves. Petroleum is the largest export product in the Caribbean. The region also has important petroleum refineries, the largest of which is Hovensa, on the island of St. Croix in the U.S. Virgin Islands, with a production capacity of 495,000 barrels of petroleum daily (bbl/d). Other important refineries in the region that are aimed at exports are the Isla refinery on Aruba (with a capacity of 320,000 bbl/d), the Pointe-a-Pierre refinery in Trinidad and Tobago (with a capacity of 165,000 bbl/d), and the Cienfuegos refinery in Cuba (with a capacity of 65,000 bbl/d). There are also plans to build a refinery in Jamaica (with an expected capacity of 250,000 bbl/d). In total, the Caribbean region has a capacity of 1.8 million barrels of petroleum daily (bbl/d). The Hovensa and Isla refineries receive most of their crude oil from Venezuela and most of the Caribbean countries benefit from preferential financing for buying petroleum (both crude and refined products) that comes from Venezuela’s PetroCaribbean project. Almost all of the petroleum refined in the Caribbean is exported to the United States. In 2008, Hovensa (U.S. Virgin Islands) exported 320,000 bbl/d to the United States, Isla (Aruba) exported 87,000 bbl/d and Pointe-a-Pierre (Trinidad and Tobago) exported 40,000 bbl/d. Metals (iron, nickel and bauxite) are the second largest natural resource export from the Caribbean and the largest concentrations of these metals are found on the islands of Cuba, Jamaica and Trinidad and Tobago. Guyana and Suriname, in the continental Caribbean, are also important exporters of bauxite.

Agriculture plays a secondary role among exports from the region, despite the history of agriculture dedicated to sugar and coffee. Because of the limitations on land, water and labor, the region is highly dependent on imported food, much of which goes to meet tourism demand. It is estimated that between 40% and 45% of imported food is used to supply the tourism industry. Additionally, much land that was previously used for planting sugar cane has been repurposed for non-agricultural use, such as tourism and real estate. The production of food for export on a large scale is mainly concentrated in the Greater Antilles, and the most important agricultural export products are tobacco, coffee, sugar, cocoa, rice, salt and fish.

Seen from a macroeconomic perspective, export products amount to about 71% of the total gross domestic product (GDP) of the larger islands. Further, many of the Caribbean islands are highly dependent on exports centered on a handful of raw materials that represent 50% of the total exports from the region. These include sugar from Cuba, bauxite from Jamaica, Suriname and Guyana, petroleum from Trinidad and Tobago and the Dutch Antilles, bananas from St. Lucia, Dominica, Grenada, St. Vincent, Guadeloupe and Martinique, and coffee from Haiti. This general pattern among Caribbean economies is problematic for the future of the region because raw materials represent the slowest growing market at the global level. Another general tendency among exports from the Caribbean island countries is a lack of diversification among these sources of revenue and the products exported. On a historical level, the trend has been changing toward more diversification, as shown by both the diversity of the products exported and the diversity of export destinations. The percentage of exports to the United States, for example, has been dropping in recent years in favor of other European and Asian buyers. The portion of exports going to the United States dropped from 44% to 37% between 1990 and 2008, while the portion destined for China rose from 8% to 10%. Despite this, the region has a high dependence on export products along with low diversification (in both products and buyers) in its export portfolio. This is one of the reasons that many of the economies of countries and islands in the Caribbean have been classified as “vulnerable” or “at risk” societies.

The tourism industry is one of the few industries that have shown sustained growth, and tourism has come to play a central role in the Caribbean island economies since the triumph of the Cuban Revolution. More than 20 million people from hundreds of corners of the world pass through the Caribbean each year, arriving on cruise ships, planes or boats. In the continental areas, nature tourism and cultural tourism also have an important role in places such as Costa Rica or the Mayan coast. Tourism, in turn, creates indirect industrial activity such as construction and the service industry (restaurants, tour operators). Together, these represent the largest source of income for the territory, above that generated by petroleum, offshore banking, or any other source of revenue. In the U.S. Virgin Islands, for example, tourism represents more than 70% of Gross National Product (GNP) and provides more than 70% of jobs. In general, tourism accounts for approximately 30% of the GNP of the Caribbean region as a whole. In countries such as Cuba, by the middle of the 1990s the revenues from the tourism industry surpassed those from sugar. The same pattern can be seen throughout the region. Income from tourism in the entire region surpasses $18 billion annually and represents more than 50% of the income of many island states.

The introduction of tourism, however, has not brought about the desired improvement in terms of hiring of human resources or reducing unemployment. The transition from economies based on agriculture to economies based on manufacturing and service industries (tourism), as well as the opening of markets through free trade agreements (NAFTA, CARICOM, CBI, etc.), has revealed the lack of skills and training in broad sectors of the island populations and has created a huge mass of unskilled, unemployed or underemployed workers and sectors that are highly dependent on aid from the welfare state or on payments sent home by emigrants abroad. This situation is particularly notable in the Greater Antilles, whose population represents 80 percent of the total Caribbean population, and particularly in Cuba and Haiti, two of the poorest countries in the Americas. The creation of open markets (i.e. NAFTA) has had a negative effect on Caribbean economies and has revealed the problem of training and competitiveness of human resources. The opening of markets has resulted in increased levels of poverty, unemployment and sharp social inequality. For this reason, many economists believe that investments in human resources (education, training, and health and nutrition) are essential for the economic growth and development of the Caribbean region. In any case, many economists argue that the new economic niches adopted by the Caribbean islands reproduce the structures of the sugar plantation slave economies that dominated until the late 19th century. In fact, this is the central theme of an analysis by a group of recognized economists from Trinidad who gathered at the University of the West Indies, and economist Lloyd Algernon Best and his theory of plantation economies. According to this theory (supported by Caribbean economists such as Kari Polanyi Levitt, Norman Greivan and Eric St. Cyr), contemporary Caribbean economies are marked by the legacy of the sugar plantation system that preceded them.

In his foundational essay on the topic from 1968, titled “Outlines of a Model of the Pure Plantation Economy” in Social and Economic Studies, Vol. 17, No. 3: 283–323, Lloyd argued that “The legacy of institutions, structures and behavior patterns of the plantation system are so deeply entrenched that adjustment tends to take place as an adaptation within the bounds of the established framework.” These structures and patterns of behavior, say Lloyd and his colleagues, keep the Caribbean economies trapped and act as obstacles to change. Therefore the figure of the escaped slave was reclaimed as the symbol of the culture of resistance and as a fundamental hope for change from within the system. The culture of resistance of the escaped slave was mainly reflected in what Lloyd called the “residentiary sector,” or in the residential production activity that emerged after the abolition of slavery. On the other hand, plantation economy theorists try to show the continuity and reproduction of structures typical of the plantation economy in central sectors of the Caribbean economies such as petroleum, gas, bauxite, bananas, sugar and tourism. Factors such as the fact that natural resources continue to be held by foreign investors and the repatriation of profits, among other examples, serve to show the similarities between the structures of multi-national corporations and the sugar plantations and slavery. In any case, of one thing there is no doubt: the levels of social inequality and unequal distribution of wealth in the Caribbean island zone continue to be the highest on the planet.

Finally, looking toward the region’s future, some economists argue that because of their small size (at least for the smaller islands) it will be highly difficult, if not impossible, for some of these nations to survive as independent states in the 21st century. Eventually, they argue, residents of many of these islands will have to resort to migration and dependence on remittances from abroad for their survival and their governments will, in turn, depend on transfers and aid from powerful countries and international organizations to balance their budgets. There exists, therefore, an academic debate about the concerns over the roles that small nations will play in the world, or about the competitive inequality in a global economy. This interest in “the small” was, in fact, the central theme of canonical works produced by Caribbean economists, including “The Economics of Development in Small Countries with Special Reference to the Caribbean,” by William Gilbert Demas in 1966, (in The ANNALS of the American Academy of Political and Social Science, Vol. 368: 213-214) or that of Dennis A. Pantin from 1999, “The Challenge of Sustainable Development in Small Island Developing States: Case Study on Tourism in the Caribbean” in Natural Resources Forum (Vol. 23, No. 3: 221-233). It should be mentioned, however, that the idea that small islands or territories are at an economic disadvantage to large territories with bigger populations is a topic of debate in contemporary economics in general, and there are examples of economic powers that are small geographically. According to the Report on Global Competitiveness 2010-2011 by the World Economic Forum, for example, the five countries with the highest competitiveness index, in order from top to bottom, are Switzerland, Singapore, Sweden, Finland and the United States, and two of those — Singapore and Finland — are geographically very small and their respective populations are around 5% of the population of the United States.


Author: Luis Galanes
Published: March 20, 2012.

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