contents 3
From the Editor
6
Challenges banking
for
offshore
COLUMNS 10 Dr. Anthony T. Bryan 14 Ambassador P.I. Gomes 18 ICT as a driver of growth in the Caribbean SPECIAL FEATURE 20 Can Trinidad & Tobago become the Caribbean’s powerhouse again? 20 Rebuilding for growth
the
36 40 43 48 50
September 2010
PERSPECTIVES Liz Thompson Dr. Hans J. Geiser Dr. Riyad Insanally Michele Robinson Garfield King
46 News Briefs 56 Industry Updates 62 Books 64 The lighter side
platform
22 New energy minister wants aggressive exploration 23 Tourism still to reach its potential
Editor: Linda Hutchinson-Jafar Contributors: Ambassador P.I. Gomes Dr. Anthony Bryan Garfield King Dr. Hans J. Geiser Liz Thompson Michele Robinson Dr. Riyad Insanally Sirius Mann Design and layout: Karibgraphics Ltd.
Unitisation signing between Trinidad & Tobago and Venezuela pg. 33
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From the Editor’s Desk
F
rom all indicators, the economic convulsions in the Caribbean are continuing and seem to be far from over for some although one or two countries, Trinidad and Tobago included have reported that their decline is tapering. Inside this edition of Business Journal, we have published a number of quarterly updates from countries around the Caribbean on their economic state of affairs and you will also find the latest outlook from ECLAC for Latin America and the Caribbean. It’s not all bad news for the Caribbean. A new ECLAC report indicates that exports from the Caribbean Community (CARICOM) are estimated to leap from -43.6% in 2009 to 23.7% in 2010. This edition also provides provoking commentaries on diverse issues on EU-CARIFORUM relations; emergence of new megacities and regions; the relevance of the OAS; a look at human rights in the Caribbean, Green Business and GDP indexed bonds. In our special focus, we look at Trinidad and Tobago, once an economic giant in the Caribbean made wealthy by its oil and gas resources and its downstream petrochemicals of ammonia, urea and methanol among others. What’s the policy direction of the new government under Prime Minister Kamla Persad-Bissessar and Finance Minister Winston Dookeran? Will the economy continue its huge dependence on the energy sector and what ideas are being proposed to add new productive sectors to the economy? We hope you enjoy this edition and keep your comments coming in on what issues you would like included in subsequent Journals. You can email me at hutchlin@gmail.com. Regards, Linda Hutchinson-Jafar
Editor
business journal | september 2010
L
Regional Exports Expected to Rise 21.4% in 2010
atin American and Caribbean exports will grow 21.4% this year, jumping from -22.6% in 2009 and driven mainly by South American sales of prime materials, according to estimates of a new ECLAC report. The study ‘Latin America and the Caribbean in the World Economy 2009-2010: A crisis generated in the centre and a recovery driven by the emerging economies’ states that this boom is largely due to purchases from Asia, particularly China, and the normalization of United States demand. Regional exports to China rose from 2.2% in the first semester of 2009 to 44.8% during the same period this year. However, there are significant differences within the region. Growth has been much greater in countries that export natural resources (agricultural, livestock and mining
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products), namely South American nations, while it has been slower in countries that import basic commodities and depend on tourism and remittances, such as Central American and the Caribbean economies. The differences per subregion are also significant, according to ECLAC estimates: this year, exports from Mercosur are expected to increase 23.4% and those from Andean nations 29.5%, but sales from the Central American Common Market will expand only 10.8%. Exports from Mexico, for example, will rise 16% and from Panama 10.1%, but sales from Chile are estimated to grow 32.6%. The most notable upswing from the worst period of the crisis in 2009 is expected in the Caribbean Community (CARICOM), whose exports are estimated to leap from -43.6% that year to 23.7% in 2010.
According to the ECLAC report, the most recent global crisis struck Caribbean nations harshly due to the fragility of their economies and public finances. The crisis exacerbated their economic difficulties, highlighted their vulnerability to external events and postponed the implementation of subregional integration commitments. The value of CARICOM exports, mainly fuel and basic commodities, dropped drastically in 2009, due more to the falling prices of natural resources and food and less to a lower volume of sales. After record growth from 2005-2008, in 2009 the value of exports fell 43.4%, especially in Trinidad and Tobago (-51%), Jamaica (-50%) and Bahamas (-30%).
Most CARICOM economies are providers of services, mainly tourism, and to a lesser extent, financial services. With the exception of Trinidad and Tobago, Guyana, Belize and Surinam, services exports are the main sources of foreign currency needed to finance imports. With the crisis, services exports diminished 10.4% in 2009. CARICOM has lost its share of the market in global services trade, particularly in telecommunications, informatics, finance and even tourism, in which it enjoys a comparative advantage, falling from 1.2% in 1990 to 0.8% in 2008. Due to the crisis, income from European and United States tourists shrunk, although there was a slight upturn during the first semester of 2010 (4.5%).
Towards a Single Market and Economy There has been significant progress in the implementation of the CARICOM Single Market and conomy (CSME). Most CARICOM member States have signed, ratified and promulgated the ommunity treaties and have incorporated them into domestic legislation, with the exception of Bahamas and Montserrat, which decided to not to join the CSME, and Haiti, which postponed its entry. Except for Bahamas, the countries in this sub-region have adopted a common external tariff, which has been significantly reduced from 20% in the 1990s to 10% in 2009. CARICOM has also adopted a common trade policy towards external partners, although with certain exceptions. The free intra-subregional movement of goods is very advanced, given that tariffs on goods from CARICOM countries were largely eliminated in the 1990s. However, intra-subregional trade is concentrated in a few countries and products. CARICOM: AVERAGE ANNUAL RATES OF THE VARIATION OF THE VALUE OF EXPORTED GOODS AND SERVICES 2003 to 2008, 2009 and 2010 (Percentages)
20032008
Goods 2009
2010
a
Services 20032009 2008
CARICOM
23.5
-43.4
4.4
6.5
-10.4
Bahamas
17.5
-30.3
-23.9
4.4
-10.7
Barbados
12.5
-17.9
4.8
8.6
-9.9
Jamaica
12.5
-49.8
-13.0
5.5
-1.5
Suriname
28.5
-17.8
-0.7
37.0
0.7
Trinidad and Tobago
29.1
-50.9
10.8
6.2
OECD
7.8
-2.4
2.7
4.3
Others b
8.7
-2.6
-5.5
13.3
Source: Economic Commission for Latin America and the based on the International Monetary Fund (IMF), “Balance of and “Direction of Trade Statistics” and official country data.
... -7.3 ...
Caribbean (ECLAC) Payments Statistics”
business journal | september 2010
Challenges for Offshore Banking Editor’s note:
Threats by the Organization for Economic Co-operation and Development (OECD) to blacklist countries that serve as tax havens and which could face tough sanctions including the withdrawal of investment funding by the World Bank or International Monetary Fund have been a source of worry for offshore jurisdictions in the Caribbean. The Caribbean has become the fourth largest banking sector in the world, led primarily by Bermuda, the Caymans, the Bahamas and the British Virgin Islands. In Belize which has a GDP of over US$1 billion, the international banking sector maintains deposits in excess of US$250 million. We present excerpts of two speeches delivered by Prime Minister of Antigua and Barbuda, Baldwin Spencer and Secretary-General of the Caribbean Community (CARICOM) Edwin Carrington at the opening of the joint CARIFORUM-EU conference on financial services held recently in St. John’s, Antigua.
Baldwin Spencer
W
e are meeting at a time of great global economic uncertainty. Even with improved forecasts for global economic growth this year, small highly indebted middle income countries like Antigua and Barbuda, are not expected to be positively impacted anytime soon by the projected recovery. The offshore financial services sector is crucial for the provision of employment for Antiguans and nationals of other OECS, CARICOM and CARIFORUM countries. The sector has a significant multiplier effect on our economy. There are 16 International Banks and 1 International Trust registered with the FSRC. Some 700 Antiguans are directly employed in the sector with average annual salaries, statutory contributions and rental income amounting to approximately US$30 million. The financial services sector, it is an area in which Antigua and Barbuda has demonstrated competitive advantage, and we are determined to protect it. In so doing, we remain cognizant of our obligations in respect of the 20 Tax Information Exchange Agreements we have signed. Governments, when elected, are mandated to pursue sound macroeconomic and social policies to ensure growth for their countries and prosperity for their people. In the case of Antigua and Barbuda, we have managed to achieve these objectives without mineral wealth, with no highly mechanized industrial or agricultural sectors, and with no
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Silicon Valley of the industrialized countries. Moreover, we are not members of the G-8 or G-20 and are therefore limited in our ability to influence the global trading and economic environment. As small independent nations we struggle to keep pace with the constantly shifting global sands compounded by our own domestic challenges. The energy crisis, food crisis and the still evolving fiscal and economic crisis, threaten to undermine the very fabric of Caribbean societies. These problems, along with our inherited vulnerabilities, have the potential of stifling our chances of development. In the wake of the many challenges we face, the administration that I lead, has adopted a series of measures to correct a persistent fiscal imbalance we inherited here in Antigua and Barbuda. We have been criticized in some quarters for our fiscally responsible economic programme. This programme is designed to ensure the survival of our nation while guaranteeing and improving the standard of living of our people today and into the future. In the present environment, some sacrifices must be made for the greater good and survival of the country. Every country in the world is affected by the global fiscal and economic crisis and has been forced to adopt measures to mitigate those effects. There is no other alternative but to pursue a combination of adopting best practices in fiscal and economic reform, encouraging high quality investments, ensuring responsible spending, and maximizing revenue inflows.
Edwin Carrington
T
his conference comes at a most opportune time for the Caribbean Region. It will allow the region to review the current status of its Financial Services Sector, describe the challenges faced and assess the demands which will be made on the regulatory environment in the region. The conference will also afford the chance to explore how the Caribbean can convert the existing challenges into opportunities, not least in the continuing efforts at economic diversification in the region. It was with that diversification in mind that, in the 1980s, International Financial Institutions (IFIs) encouraged countries in the Caribbean to promote international financial services as a mechanism for economic diversification, income and employment generation and growth. A number of our Caribbean countries has become successful in implementing that policy initiative. However, over the last ten or so years, the very success deriving from the pursuit of that policy prescription has attracted negative attention of certain institutions including the Organisation of Economic Cooperation and Development (OECD). In this case success seems to have attracted more punishment than reward. There seems to exist the perception that successful international financial centres are havens for tax evasion and tax avoidance. Following the OECD 1998 Report on “Harmful Tax Competition: An Emerging Global Issue” which described the identifying and contributory characteristics of what was termed ‘tax havens’, Caribbean countries have had to subscribe to the OECD Model Tax Convention. In so doing they had to make amendments to their legislation and practices relating to international financial and banking activities and strengthen their network of double taxation treaties. This was all in an attempt to remove themselves from a blacklist, compiled by the OECD, which sought to name, shame and punish those countries that did not comply with the requirements of the OECD.
But that was not all. The goal posts were shifted from time to time. Apart from ‘committing’ to the OECD imposed tax standard, Caribbean jurisdictions were required to show a certain degree of compliance by signing at least twelve (12) Tax Information Exchange Agreements (TIEAs) with major capital suppliers - all of this at the height of the global financial and economic crisis. By July 2010, the vast majority of the CARIFORUM international financial jurisdictions were able to do so. The Caribbean has therefore been engaged in a continuous struggle to secure a level playing field in developments related to international financial services. The Caribbean Association of Regulators of International Business, followed by the International Tax and Investment Organisation, with headquarters in Barbados, was at the forefront of that effort. Despite those attempts, Caribbean jurisdictions are still treated less favourably than, for example, certain European jurisdictions for identical circumstances.
The OECD countries continue to put pressure on corporations in their jurisdictions with subsidiaries in International Financial Centres. In this regard, Caribbean jurisdictions will find themselves coming under increasing scrutiny. All of these developments continue to have negative implications for the Caribbean. Entities which might have been licensed, incorporated or registered in the Caribbean are taking their business elsewhere. Some others already located in the Caribbean are departing. The in-depth and comprehensive monitoring and peer review, decided by the September 2009 Global Forum Meeting in Mexico, will create further problems for Caribbean jurisdictions. business journal | september 2010
Unless that negative trend can be reversed, Caribbean economies will face tougher challenges to maintain jobs, earn income and generate foreign exchange from the sector. From a regional perspective, joint actions and strategies and the operation of joint and common institutions provide the most effective means of developing and strengthening the Region’s financial services sector. Such action also constitute the most viable mechanism for dealing with some of these global developments, including the negative perceptions which some may have of
the industry in the Caribbean. These institutions include the following: 1. The Caribbean Association of Insurance Regulators 2. The Caribbean Group of Bank Supervisors 3. The Caribbean Group of Securities Regulators; and (iv) The CARICOM Committee of Central Bank Governors. These together with a ‘Caribbean College of Regulators’ would go a long way in addressing the credibility of the regulatory environment in the Caribbean for Financial Services.
The Bahamas and Canada recently signed a Tax Information Exchange Agreement. From left: High Commissioner for Canada to the Bahamas Stephen Hallihan and Minister of Foreign Affairs of the Bahamas, Brent Symonette.
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High taxes and evasion eroding economic growth in Latin America and the Caribbean
New IDB study says governments must simplify tax systems and reduce evasion
C
omplex tax systems and widespread evasion are distorting investment decisions by companies in Latin America and the Caribbean, reducing the efficiency of markets and preventing governments from investing in infrastructure, education and other key public goods. This hinders the productive possibilities of the region’s economies, according to a newly released study by the Inter-American Development Bank (IDB). Latin America and the Caribbean have low tax collection by international standards, with collection concentrated on large corporations. Tax rates as percentage of profits are high, reaching an average of 48 percent compared with 41 percent in high-income countries. Moreover, taxes are also associated with high transaction costs. Latin Americans spend on average 320 hours a year to prepare, file and pay (or withhold) their taxes, almost twice as much as high-income countries. Processing taxes takes 2,600 hours in Brazil. Firms spent less time processing taxes in Grenada, Dominica and St. Lucia. High taxes can reduce the firms’ incentives to invest in technology and other productivity-enhancing strategies because taxes reduce the potential profits generated by those investments. As a result, productivity is reduced in the formal sector, hurting the overall long-term economic growth, the study
concludes. By shifting to smarter tax programs, governments can increase their revenue intake to finance much-needed social and investment programmes without hurting productivity and growth. The region needs to ensure its tax systems to promote a better allocation of resources that will pave the way for increased productivity, the study says. This means not only simplifying taxes but also reducing taxes for corporations, in general, to reduce the level of informality. Currently, 61 percent of the region’s tax revenues come from corporations while in the industrial world that accounts for only 25 percent of total revenues. Despite the high taxes on companies, tax revenues in the region, excluding social contributions, are only about 17 percent of gross domestic product (GDP), compared with 27 percent in the United States and 36 percent in industrial countries, according to the study. The findings are part of the IDB book ‘The Age of Productivity: Transforming Economies from the Bottom Up’. The book, part of the series Development in the Americas, the IDB’s annual flagship publication, offers a comprehensive analysis of productivity in the region, its impact on economic growth and recommendations for policymakers on how to address the causes of low and stagnant productivity.
business journal | september 2010
Column The new mega cities: changing business and international relations
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onsider the following: The 21st century will not be dominated by countries such as the United States, or the BRICS (Brazil, Russia, China or India), but by cities! More than half the world lives in cities, and the percentage is growing rapidly. If measured by knowledge base, commercial links, shared technology, travel, and access to information, most societies are now being woven into a global network of cities. The traditional global cities: London, New York, Paris that have evolved and adapted through centuries of dominance are being joined by Hong Kong, Singapore, Beijing, Cairo, Shanghai, Sao Paulo, Lagos, Sydney, Seoul, Tokyo and others, as magnets of national economies, innovators of political change and drivers of diplomacy. Today 100 cities account for 30 percent of the world’s economy, and almost all of its innovation. But things are changing fast and the advent of mega cities will present important challenges to the way in which we do conduct business and international relations in the future. There is some historical precedent for the domination of cities. In the current issue (Sept/Oct 2010) of Foreign Policy author Parag Khanna of the New America Foundation points out that a thousand years ago, in the medieval age, cities such as Cairo and Hangzhou were the centers of global gravity, expanding their influence beyond borders. When Marco Polo set forth from Venice along the Silk Road, he extolled the virtues not of empires, but of the cities that made them great. Historians will remind us that only in Europe were the Middle Ages “dark.” That very same period was the apogee of Arab, Muslim, and Chinese glory. 10
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As Khanna sees it, cities rather than states are once more becoming the islands of governance on which the future world order will be built. This new world is not one global village, but rather a network of different ones. Time, technology, and population growth have accelerated this new urbanized era. The Advent of Megacities In this century a new category of megacities is emerging that will dwarf today’s global cities. The megacity, usually defined as one with a population of 10 million or more, is not a new phenomenon. According to a recent United Nations State of World Cities Report, the largest of current megacities is the Hong Kong-Shenhzen-Guangzhou region in China, home to about 120 million people. But other mega-regions have formed in Japan and Brazil and are developing in India, West Africa and elsewhere. Cities such as Shanghai, Lagos, Karachi, Mexico City and Mumbai are growing so fast that their populations will be measured in the tens of millions. Within the next decade Lagos is projected to become the third largest city in the world, after Tokyo and Mumbai. By contrast Milan, and London will disappear from the 30 largest cities list. New York, and Osaka and Paris will have slipped farther down the list. The biggest mega-regions, (as opposed to cities alone) which are at the forefront of the rapid urbanisation sweeping the world, are: • Hong Kong-Shenhzen-Guangzhou, China, home to about 120 million people; • Nagoya-Osaka-Kyoto-Kobe, Japan, expected to grow to 60 million people by 2015; • Rio de Janeiro-São Paulo region with 43 million people in Brazil.
Above: Mumbai City, India (l) and Rio de Janeiro, Brazil (r)
The same trend on an even larger scale is seen in fast-growing “urban corridors”: • • •
West Africa: 600km of urbanisation linking Nigeria, Benin, Togo and Ghana, and driving the entire region’s economy; India: From Mumbai to Dehli; East Asia: Four connected megalopolises and 77 separate cities of over 200,000 people each occur from Beijing to Tokyo via Pyongyang and Seoul.
The emerging megacities (and mega-regions) will create challenges for the countries that are giving birth to them. They may punch below their economic weight at present, but that will change as the world gets accustomed to the phenomenon of 100 million people clustered around Mumbai or Shanghai. Megacity expansion ranges from new business districts, to specialized economic zones, and to entirely new cities being created virtually from scratch on a scale not previously imagined. They vary from the factory towns in China’s Guangdong province to the artificial “knowledge cities” rising in Middle Eastern deserts. These megacities are the engines of globalization and they, rather than their countries, are now driving wealth, and knowledge. This new world of megacities cities cannot be expected to obey the same rules as the old compact of nations. They will write their own opportunistic codes of conduct, connectivity, and security.
Business and international relations rivalry will take place even among cities within the same country, feuding over financial regulation or vying for leadership of a region. Port cities such as Dubai and other “free zone” cities worldwide, where products are efficiently re-exported without government bureaucracy, will develop new commercial axis with each other. Scholars such as Saskia Sassen of Columbia University argue that the supply chains and capital flows linking global cities today have already denationalized international relations. The power of megacities to conduct their own foreign diplomacy is already evident by their ability to bypass their nation’s capitals as they send delegates to worldwide conferences and fairs to attract foreign investment. Megacities are already competing alongside states for global influence and the conduct of diplomacy. On the positive side, the megacity will attract mobile managers, professionals, and scientists who can help accelerate the accumulation of material and symbolic capital. Scientists, engineers and entrepreneurs will be lured to urban places of employment and upscale living. Nomadic professionals will become crucial to the role and identity of the megacity. The State of World Cities Report details how shelter, society, environment, economy, and, above all, systems of governance can contribute to urban vibrancy and viability in a megacity. business journal | september 2010
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On the negative side, megacities are shifting away from their home states, a reality captured even now by the massive and potentially dangerous wealth gap between city and countryside. The growth of mega-regions and cities drives economic growth but also leads to urban sprawl, rising inequalities and urban unrest. Urban sprawl, say the authors of the State of the World Cities Report, is the symptom of a divided, dysfunctional city characterized by increases in transport costs, and energy consumption. The more unequal cities become, the higher the risk that economic disparities will result in social and political tension. The cities that will prosper are those that strive to reduce inequalities. The Chinese Megacity Revolution The mixed results of megacity trends can be forecast in China. By 2025 that nation is expected to have 8 megacities with an average population of more than 10 million (Europe will have none), 15 big cities with populations between 5 and 10 million, and 221 cities with populations over 1 million. It will build 20,000 to 50,000 new skyscrapers or the equivalent of 10 New York cities. The estimated 300 new cities that China has planned are a huge market opportunity for global companies. Urban consumption as a share of GDP is expected to rise from 25 percent to approximately 33 percent by 2025. Urbanization will become the engine of the Chinese economy. Rapid increases in roads, rails and skyscrapers will profile the urban shift. It is estimated that more than 170 Chinese cities will need mass transit systems by 2025. Those cities will also be home to the world’s largest middle class! Of all the megacities in the world Shanghai is growing the fastest, economically. It has money and lots of it!
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An ominous development is the radical shift in Chinese population distribution. Dexter Roberts writing in Businessweek (November 13, 2008) estimates that by 2025, almost 350 million rural residents (more than the entire U.S. population today) will leave the rural areas and move to China’s cities bringing the Chinese urban population close to 1 billion people. China will change into a country where more that 75 percent of its people will be city dwellers reversing its centuries-old identity as a largely rural country. The government in Beijing is already concerned that megacity urbanization could cause social unrest particularly because up to half of China’s urban population is likely to be migrants by 2030. Similarly, suppose Chinese megacities become more liberal enclaves at odds with the central government? The big question is will Beijing actually run China then or can the world’s most famous authoritarian centralized state be unraveled by its megacities? Megacities: Good or Bad? For the rest of the world, it is too early to predict whether megacities will be good or bad. One can expect both positive and negative developments. Perhaps the important characteristic is that a megacity’s success will still rest on the shoulders of local authorities. In which case the structures of governance will have to be more responsive to individuals, households and communities so that both national and local authorities can better serve society, each through separate but complementary instruments. Whether we live in a megacity or not, whatever takes place in the megacities will set the tone for what happens elsewhere. They will be the laboratories for solutions to many of the world’s problems. They will decide our priorities with respect to adequate housing, urban and rural poverty alleviation, full employment, governance, and the relationship between environment and development--in ways not yet imagined. Unfortunately, there is no roadmap; but there are emerging opportunities for innovation. Dr. Anthony T. Bryan Professor of International Relations
Column Caribbean-European Relations: Towards a New Strategic Partnership By Ambassador P. I Gomes On May 17 2010, CARIFORUM (the Forum of Caribbean Member States in the African, Caribbean and Pacific (ACP) Group of States) and the European Union (EU) endorsed a framework document for a Joint Caribbean-European Partnership Strategy (JCEPS). The occasion was the Fourth (4th) CARIFORUM-EU Summit held in Madrid, Spain that accompanied the 6th Summit of Heads of State and Government of the European Union and Latin America & the Caribbean (EU-LAC). The wider EU-LAC process has rotated their biennial Summits from 1999 in Rio de Janeiro, Brazil followed by Madrid (2002), Guadalajara, Mexico (2004), Vienna, Austria (2006), Lima, Peru (2008) and now once again (2010) in Madrid. Key aspects of the 2010 Summit illustrate a significant departure from and advance over previous Summits. These warrant reflection and debate on what Caribbean Indispensable to reflection the intends to pursue, and crafting initiatives for action ought to be in the context its overall answers of persistent of foreign policy queries such as: “what does the Caribbean political and to effectively directorate wish from its u n d e r s t a n d changing relations with Europe; with the and what vision the Caribbean policy o r g a n i z a t i o nal informs its engagement of with the European Union landscape Europe in the and, what principal political interests does the 21st Century. retrospect, Caribbean intend to defend In those questions or advance in a strategic partnership with Europe?” seem to have more It can no longer be merely deserved debate in the “trade and more aid”. negotiations for
the CARIFORUM- EU Economic Partnership Agreement (EPA). Clearly missing was an harmonious understanding of development and foreign policy inclusive of the “Caribbean”, understood as CARIFORUM, despite of course Cuba not being a Party to the EPA but certainly from a “development perspective” must be taken into account. CARIFORUM, as if we need be reminded, comprises CARICOM, the Dominican Republic and Cuba, which are the Caribbean Member States as signatories of the 1975 Georgetown Agreement that established the ACP Group. The pursuit, therefore, of a “new” strategic partnership, based on this definition of “Caribbean”, understood as CARIFORUM is most a welcome in a consideration of CaribbeanEU relations, from the perspective in which the Caribbean has a population of 35 million persons, considerable natural resources, skilled populations and quite remarkable technological know-how. Before the main features of the “Joint Strategy” (JS), a brief overview of the historical and policy context is presented to partially explain its rationale, followed by the thematic areas in the “Outline” document endorsed at the Madrid Summit. Finally, some thoughts on crafting an “agenda and process” to ensure “co-ownership” as the essential feature of a “partnership’ that is truly “joint” with recognition of the fundamental “asymmetry” of the partnership. Context The basis of “Caribbean-EU relations” is justifiably “underpinned by a rich heritage of shared history, values and culture”. This heritage entailed the extensive pursuit of colonial commerce in which capital accumulation and technology transfer were of minimal net benefit
to Caribbean economies. 25 years guaranteed nonThe “commodity exchange reciprocal preferential trade relations” relied on an with Europe by the ACP administrative apparatus and Group. Since Lome, ACP-European professional class that was extremely gifted in language, relations always went beyond literature and various skills. “trade and commerce” Inherent to these are British, narrowly defined, as French and Spanish views of “development aid” from the world, their norms and the European Development attitudes and so the “heritage Fund (EDF) provided of shared values” was well“projects and programmes” founded. for infrastructure, the Undoubtedly, these social sector, health and cultural and economic ties significantly education and brought with them what Frantz training. The success of Fanon portrayed in “Black the EDF, requiring systems Skins and White Masks” but of financial management, also exceptionally deep bonds addressing bureaucratic rules and culturally assimilated and procedures, assumed a scholars, statesmen, view of the world, thinking entrepreneurs and political and decision-making that leaders who championed contained shared values, “independence”. basic agreement on The “rich heritage of development policies and a shared values” built into trade level of political discourse Cuba and the Dominican Republic are and economic cooperation between the Caribbean and members of CARIFORUM from colonial times was Europe. However implicit or significantly transformed with unarticulated, a commonality the First ACP -EEC Convention signed in Lome, of purpose on “development goals”, “trust” in Togo in West Africa in 1975. This outstanding the conduct of business and supposedly “mutual political and economically progressive “trade and interests” of the partners, was being sought. The substantial resources of the EDF over economic cooperation” agreement established a fundamentally different premise on which the years have served as tangible evidence of future European relations with former colonies Europe’s advanced industrial countries of the would be based. “North” committed to the “development” of The concept of “partnership” assumed a a significant portion of the “underdeveloped deeper meaning of “shared values and culture”, South.” But should not be exclusively treated both in theory and practice. This was given life in as one-way flows of “donations” from “donor” legally binding Protocols to portray the intrinsic nations of the North to the “poor and powerless philosophical and ethical basis on which Europe of the South”. In the trade transactions of would engage the Caribbean and its sister Protocols for sugar, bananas, cotton, beef or states of the African, Caribbean and Pacific other primary commodities, the labour, real (ACP) Group, in the Georgetown Agreement of value of the land, skill and native intelligence 1975. The successive Lome Conventions over of the South enriched the total value of the “tradeables” that entered the markets of the It is sometimes overlooked that Cuba as a signa“North”. tory State of the Georgetown Agreement is a member of CARIFORUM but did not by choice subscribe to the Lome Europe’s “trade & development Conventions or Cotonou Partnership Agreement in 2000 cooperation” with the Caribbean, and ACP and hence does not participate as a beneficiary of the as a whole, aimed at reducing a sometimes European Development Fund but has been able to access European development assistance by other arrangements. apparent “aid-dependency” syndrome by a Our discussion of the “Caribbean” for the purposes of the radical departure from Lome Conventions with “outline document” is very conscious that Cuba is a core the perspective of “political partnership” that member of a “Joint Caribbean Strategy” with the contemporary EU.
business journal | september 2010
15
2.
informed the historic and visionary Cotonou Partnership Agreement for a 20 year period from 2000. Inherent in the notion of EU’s “privileged partnership” with the ACP under Cotonou is the political dimension based on “shared values” and a common political philosophy. This is defined in terms of western liberal democratic traditions in which “respect for human rights, democratic principles and the rule of law” are essential principles, as they are in the Cotonou Agreement. This is the stage of political engagement for the “bi-regional partnership” in which the Joint Caribbean EU Strategic Partnership (JS) is being formulated and will be characterized by “joint ownership, mutual accountability and solidarity, co-management and coresponsibility” as stated in the “Outline Document”, endorsed at the Madrid Summit in May 2010. The main themes of the document are treated in the synopsis below.
3.
4.
The Thematic Areas The following remarks are not exhaustive in describing the five substantive themes identified as “priority areas”, so far, in the JS. Briefly put, they refer to: regional integration and cooperation; Haiti’s reconstruction; climate change and natural disasters; crime and security; and joint action in the multilateral arena. 1. Regional integration and cooperation is taken to include the Caribbean beyond CARICOM and aims to promote sustainable 16
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5.
development, primarily in economic and environmental terms, as well as human and social development. Emphasis is to be given to capacity issues, human, financial and organizational, to overcome supply-side constraints. Also a major thrust will be on S&T research and innovation and infrastructure networks with ICT playing a crucial role. Reconstruction and institutional support to Haiti has been identified as a process of long term engagement based on development goals incorporating social, cultural and political needs and resources determined by Haitian society, as a whole. This can be urgently addressed in concrete ways since the Caribbean Regional Indicative Programme (CRIP) of the 10th European Development Fund (EDF) for 2008-13 contains explicit provisions for Haiti-Dominican Republic economic cooperation. Already an agroindustrial strategy for the border region of the two countries has been designed. Climate change and natural disasters logically demand comprehensive attention to address the ecological and structural vulnerability to which all of the Caribbean is heavily dependent. Under this theme, the JS intends to add value by leveraging additional resources and stimulating policymaking to complement on-going work of specialized agencies –whether regional, hemispheric or international. A promising means of additional resources is the “IntraACP” allocations of the 10th EDF and the Global Climate Change Alliance. Crime and security issues are severe threats to economic, social and political stability of Caribbean small states, located as a major artery to feed an insatiable demand for illegal drugs and violence of the North American and European markets. Enormous, deepseated and complex as these issues are in their root causes and consequences, they compromise and challenge the rule of law, human rights and democratic governance. Careful and considered attention cannot be overlooked in a political dialogue based on co-responsibility and mutual accountability. Joint action and collaborative policy positions in bi-regional, multilateral and global fora require regular debate in a political engagement of the Caribbean and Europe. In this area there is enormous scope for
promotion of human rights, democratic values, principles of multi-lateralism and peaceful resolution of conflicts among states. An Agenda of Joint Ownership My observations far from aiming to be prematurely judgmental of what is clearly an evolving process are meant to suggest aspects of a “partnership” that needs to be seen and treated as a dynamic and multi-focal and multilayered engagement. In this situation of relations with Europe, the Caribbean is defined as in the CARIFORUM membership of the ACP, small vulnerable but resilient societies, not with populations of 15 million persons of CARICOM but embracing the Dominican Republic and Cuba- an additional 20 million. But even with that size and far from
being an integrated regional entity, the other “partner” is Global Europe with its current “Strategy 20-20” reorganizing, reflecting and debating its place for nation-states of 500 million persons intending to ensure political, economic and trading prominence in the global arena, no longer dominated by a single superpower. At the outset of the discussions in Brussels on formulating a “new strategic partnership” between the Caribbean and Europe it was clearly understood and emphasized that any such partnership must rest on mutually shared ownership. In fact that “ownership” needs to benefit from a wider public discourse to which these few thoughts are meant to be a contribution. Readers of course will embellish, discard, question and reject in ways that can carve out, not only a “new” but “better and sustainable” path.
The Cotonou Agreement The European Union (EU) and the African, Caribbean and Pacific (ACP) nations signed their co-operation agreement in Lomé, Togo, in 1975. After four such Lomé conventions, a broader partnership agreement was signed in Cotonou, Benin, in June 2000. Known as the Cotonou Agreement, this was signed by the Heads of State of all EU and ACP nations. This international treaty defines how the EU and ACP will co-operate on political, development and trade issues.
Trade between Europe and the Caribbean The EU is the Caribbean’s second largest trading partner. Aluminium, rum, sugar and bananas (and oil) are the main exports to Europe. Trade in goods is worth just over €3 billion a year. This income is important for the Caribbean. But exports have not diversified into higher-value goods and services.
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‘ICT as a driver of growth in the Caribbean – policies to improve the Caribbean’s competitiveness in a knowledgebased economy’ Excerpts of a speech by Dr. Emsley Tromp, President of the Bank of the Netherlands Antilles at the opening of the 26th Annual Caribbean Association of National Telecommunications Organizations (CANTO) conference and trade exhibition held in Curaçao in July, 2010.
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he theme of this conference, “Embracing technology for economic success” is very timely. Today more than ever, technology, and specifically, information and communications technology, or ICT, is considered one of the main factors contributing to economic recovery and sustained growth. ICT has become an essential element of the infrastructure underpinning competitive economies. In today’s world, the ability to create, distribute, and exploit knowledge is a major source of competitive advantage, wealth creation, and improvements in the quality of life. Information and communications technology is the foundation of this knowledgebased world because it allows economies to acquire and share ideas, expertise, services, and technologies locally, regionally, and across the world. Furthermore, ICT stimulates innovation as it encourages the creation and development of new ideas, products, and services. Finally, increased use of ICT stimulates productivity growth. In fact, investment in ICT can spur gains in productivity in three ways. 1. Investment in ICT contributes to overall capital deepening, helping to increase labor productivity. (2) Technological progress may contribute to faster multifactor productivity growth in the ICT-producing industry. 2. Finally, but perhaps most important, greater use of ICT outside the ICT industry helps firms, public and private institutions to increase efficiency, develop new products and services and, hence, it increases multifactor productivity growth. As the world economy is recovering from one of the worst economic crises in decades, ICT is bound to play an increasingly prominent role in
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enabling economic growth. As you may know, following the escalation of the international financial crisis in 2008, global output contracted significantly in 2009. Output dropped sharply in the major industrialized economies and slowed down in the emerging economies. The Caribbean was not exempted from the global economic downturn. Most economies in the region contracted in 2009. The economic downturn in the region is primarily attributable to a decline in foreign demand that affected the main export industries, including tourism, financial & business services, and manufacturing. Fortunately, the world economy is showing signs of recovery and the IMF projects a global GDP growth for 2010. Output in our region is also expected to rise. For 2010, the IMF projects an average real GDP growth of 1.5% for the Caribbean. Countries are taking several measures to foster a sustained economic recovery. In general, the policy agenda includes fiscal measures to cut budget deficits and reduce public debt. In addition, the reform of the financial sector is considered high priority in most countries, especially the advanced economies. Furthermore, countries are taking measures to improve the efficiency of labor and product markets. Given ICT’s important contribution to efficiency and productivity, several countries have included measures and stimulus packages
to foster the creation and diffusion of ICT in their policy agenda. For example, the European Union has presented the Digital Agenda for Europe that includes measures to improve the speed of internet connections and to stimulate ICT research and innovation. In the United States, the government has increased its investment spending on ICT, including investments in broadband technology, electronic medical records, and new computers for schools and libraries in order to make the country more competitive while creating more jobs. In the case of the Caribbean, the development and diffusion of ICT has become crucial to competing effectively in the global world. In the Caribbean, the services industry is the main pillar of economic growth, and ICT plays a crucial role in a services-oriented economy. For example, destinations, accommodations, and attractions can be marketed efficiently in the tourism industry by using ICT. Furthermore, in higher value-added industries such as financial & business services, ICT makes it easier to access market and management data, share information, and build trading partnerships. In the area of logistics, ICT can improve efficiency by reducing delivery times and coordinating stock levels through improved monitoring of supply and demand, which in turn enhances customer service.
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Special Feature Can Trinidad and Tobago become the Caribbean’s powerhouse again? Editor’s Note: Up to a few years ago, Trinidad and Tobago with its abundance of energy resources was the fastest growing economy in the Caribbean, attracting such epitaphs as a powerhouse in the region and a tiger cat among the pigeons. Gas and to a lesser extent, oil were gushing from pipelines. Markets were opening up for exports, international prices for oil and gas and various petrochemicals were on the upswing and billions of dollars in revenues were flowing back into Port of Spain. Trinidad and Tobago is also home to 10 ammonia and 7 methanol plants. A US$1.7 billion Ammonia, Urea Nitrate and Melamine (AUM) complex has recently started operation
at the impressive PLIPDECO site which is home to over 100 industrial companies. The energy-based economy grew upward for over 12 consecutive years until 2009 when the international credit crisis and recession impacted negatively on commodity prices, resulting in a 3.2 percent negative growth compared to a 3.5 percent growth in the previous year. The new government of Prime Minister Kamla Persad-Bissessar tasked with managing the economy has said that the fiscal situation was worse than initially anticipated. The new government has promised more economic diversification particularly away from the energy sector to shield the country in times of slumped oil and gas prices.
Rebuilding the Platform for Growth
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rinidad and Tobago intends to pursue a programme of fiscal consolidation which will include increasing the revenue base, expanding the production space in the energy and non-energy sectors and converting social expenditure to social investment.
Winston Dookeran
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“There is still “wiggle room” for us to manage our economic prescription - to reverse the direction of our economic trends while building a competitive economy and enhancing our social strategy,” said Finance Minister Winston Dookeran adding that the country has always displayed a capability to offset the risks facing it with concrete and realistic policy initiatives. The risks facing the country are many, according to Mr. Dookeran, a former Central Bank Governor:
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The sharp decline in energy prices coupled with the slow recovery in the US economy led to a pronounced economic slow-down and a rapid deterioration in Trinidad and Tobago’s fiscal position; bad corporate governance and major regulatory lapses resulting in the near collapse of CL Financial and its subsidiaries including CLICO; Relatively low debt levels permitted the Government to accommodate a large fiscal deficit and sustained economic activity, which otherwise would have even been weaker; The high level of foreign reserves permitted the Central Bank to intervene in the foreign exchange market and sustain the exchange rate, despite a nearly 50 percent decrease in export earnings; For 2009/2010, a deficit of 4.1 percent of GDP is being projected with a downside risk and flat economic growth is the expected outcome; The overall deficit is likely to widen as the share of energy revenue to GDP falls. The debt burden (excluding open market operations) will rise to 48 percent of GDP in 2014/2015; After falling sharply, food inflation has again pushed the headline inflation rate upwards as food prices continue to rise despite a short drop in international food prices; and Bank credit growth continues to decline notwithstanding high excess liquidity in the banking system.
However, the Finance Minister is confident that the “wiggle room” could be expanded to create a new confidence in Trinidad and Tobago’s economic future. According to him, the confidence will require the country to find innovative ways to “de-risk” business loans in the commercial banking system; improve the tax regime to encourage exploration of oil and gas reserves and mount an aggressive “investment strategy” to materialize “new investment” in a clustertype development approach to investment in the energy sector. It will also demand that the country explore innovative ways to make “unbankable”
transactions “bankable” by the use of risk sharing models. This will include “mentoring” by specialists, offering young entrepreneurs a complete back office capability in IT, sales and financial management, legal and tax advice and small equity stakes. Acknowledging that turning the corner on food production is a Caribbean-wide problem, the government plans to revitalize the financing of agriculture through the Agricultural Development Bank while the Public Sector Investment Programme (PSIP) will focus on capital formation to provide adequate and growing infrastructure for food production and competitiveness, and accessing the growing out-sourcing markets in the world. The state enterprise sector including the special purpose companies will be subject to new governance accountability and the adoption of a “business risk radar” that anticipate threats, respond and adapt to effective investment that improve the performance of the enterprise. A wider restructuring exercise that incorporates public offerings and ownership is being contemplated. The Innovative and Competitive Council will be established to provide critical support to government in the execution of its policies and programmes as these relate to increasing public investment in human capital, generating industry relevant research, promoting industrial innovation, and enhancing coordination and simplification of the country’s competitiveness, diversification and innovation support systems. It will also develop an Execution and Implementation Plan based on the numerous competitiveness and innovation studies completed in Trinidad and Tobago and trigger organizational change in competitive, effective and innovative governance that will improve the country’s programme for sustainable development. Government also plans to establish a Development Board to design a new framework and process for the economic development of the Trinidad and Tobago economy. According to Mr. Dookeran, development is a process through which societies will widen the capabilities and facilitate investment in “nearby” goods, thus building linkages from within.
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Special Feature NEW ENERGY MINISTER WANTS AGGRESSIVE EXPLORATION
Carolyn Seepersad-Bachan
Carolyn Seepersad-Bachan has gotten down to the demanding task of managing Trinidad and Tobago’s Ministry of Energy and Energy Affairs and shows no sign of being daunted by the huge challenges that face her. There’s been no honeymoon period for her because of the importance of the Energy sector to the Trinidad and Tobago economy. In 2009, for instance, the Energy sector accounted for 48 percent of the country’s Gross Domestic Product (GDP). Due to falling prices for oil and gas on the international market, the economy in 2009 registered a decline of 3.2 percent compared to real GDP of 3.5 percent in the previous year when prices were still buoyant. The Central Bank expects 2010 to end with a modest one percent growth. Ms. Seepersad-Bachan has early on expressed concern about the relatively flat 3P (Proven, Possible, Probable) natural gas reserves position of the country over the last nine years. To satisfy its huge daily natural gas demand, Trinidad and Tobago is utilising its natural gas reserves at an annual rate of 1.4 trillion cubic feet of gas (TCF). “Our goal is 100% replacement of annual gas production; therefore there is a critical need for Trinidad and Tobago to encourage exploration, appraisal and development drilling to move resources into one or more of the reserve categories,” said Ms. SeepersadBachan, the first woman appointed to head the 22
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Ministry of Energy and Energy Affairs in Trinidad and Tobago. “Based on the current production and on the quantum of gas discovered in recent exploration successes, there must be significant and sustained exploration activity to maintain the reserve base,” she said adding that continuous exploration activity must be maintained at an optimum level. Exploration work has already started in the areas of the five Production Sharing Contracts signed in 2006: the Central Range, Shallow and Deep horizons block, Block 2ab and Guayaguayare Shallow and Deep horizons blocks. Ms. Seepersad-Bachan said the ultimate goals of the current upstream strategies are to attract companies to the new exploration provinces including the deep water, while encouraging existing companies to develop their licensed/contracted acreage. Government has reduced the petroleum profits tax from 50 percent to 35 percent to attract bidders to energy blocks that are in water depths in excess of 400 metres which represent the new exploration frontier for the country. “Our own technical analysis suggests that there are fields in this region with potential resources in the order of 1.8 billion barrels of oil or 6.7 trillion cubic feet of gas (TCF) as an upside,” the Energy Minister added. Blocks in the average and deep water environment in excess of 400 metres incur higher exploration and production costs as much as three to five times the cost of exploration in shallow water. Earlier in April, seven blocks were offered in a round of Competitive Bidding - four in the North Coast Marine Area, two on the East Coast and one on the West Coast. Ms. Seepersad-Bachan said the blocks are prospective more for natural gas than oil though there may be both hydrocarbon types in three of the areas. Together these blocks comprise 870,000 hectares and are primarily gas prone with significant quantities of identified exploration resources. The acreage is close to existing production facilities, adjacent to successfully explored blocks and in one of the blocks, proven resources have been identified.
Dr. Rupert Griffith
Trinidad and Tobago’s Tourism Minister Dr. Rupert Griffith says the time has come for the industry to unleash its true potential and boost economic growth. “I think that we can all acknowledge that tourism in Trinidad and Tobago has not yet reached its full potential,” he said noting that the sector is a powerful catalyst for economic growth and diversification, job creation and poverty alleviation. Over the last five years, Trinidad and Tobago has received an average of just over 442,000 international visitors - a considerably small share of the overall Caribbean market. The cruise industry recorded 121, 712 passenger arrivals in the 2009-2010 season – again a tiny share of the Caribbean market. The industry contributes US$2 billion to Trinidad and Tobago’s total Gross Domestic Product (GDP) and directly and indirectly provides 88,000 jobs.
In Tobago, tourism generates 37 percent of estimated Gross Domestic Product (GDP) and just over 50 percent of all employment. “ This just goes to show just how much we stand to gain if our tourism industry keeps lifting its game and of course how much we stand to lose if we falter,” adds Dr. Delmon Dexter Baker, Minister in the Ministry of Tourism. To emerge from its lethargic state, Dr. Griffith suggests a structure where the private and public sectors work in partnership. He plans to take before Cabinet, the installation of an official Trinidad Tourism Standing Committee comprising key public and private sector players to guide the development of the tourism industry. “New opportunities in the sector must be explored including but not restricted to the development of the recreation, sport, health, leisure, business, festivals, cultural and ecotourism niches,” he remarked. A review of the National Tourism Policy will also be carried out to develop and implement the national tourism sector strategy whose goal will be to inspire and drive the responsible growth of the tourism industry. Another area requiring much greater focus is marketing. “Trinidad and Tobago must no longer be the best kept secret of the Caribbean,” he said adding that it is crucial that marketing efforts are focused on the right markets. Tourism is an important player in the worldwide economy. In 2009, it accounted for just over 9% of global GDP and employed about one in twelve workers, according to the World Travel and Tourism Council.
Trinidad & Tobago Tourism Development Company
TOURISM STILL TO REACH ITS POTENTIAL
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Special Feature
Profile: Senator Kevin C. Ramnarine Parliamentary Secretary in the Ministry of Energy and Energy Affairs
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enator Kevin C. Ramnarine has brought his vast experience in the energy sector to the Ministry of Energy and Energy Affairs. S e n a t o r Ramnarine was an Energy Research Specialist at the South Trinidad Chamber of Industry and Commerce now the Energy Chamber where he worked on a range of policy issues impacting the national energy sector including fiscal reform, natural gas reserves, local content, downstream development and the strengthening of the local energy services sector. He later went to work with Trinidad and Tobago’s second largest producer of natural gas BG Trinidad and Tobago (BG T&T) as a Lead Economist for the East
Coast Marine Area (ECMA) – one of the most prolific gas producing acreages in the country. Senator Ramnarine describes his time at BG T&T as extremely valuable to his professional development in terms of giving him an in-depth knowledge of the workings of a multinational oil and gas company. At BG T&T he was exposed to Production Sharing Contracts (PSC’s), natural gas pricing, project economics, production optimization, business planning, opportunity screening and determination of natural gas reserves. Senator Ramnarine graduated from the University of the West Indies with a B.Sc. degree in Chemistry and a M.Sc. degree in Petroleum Engineering. He also has an International MBA from the Arthur Lok Jack Graduate School of Business.
BG, Centrica make bids for Trinidad’s energy blocks British Gas and Centrica were among several companies offering bids for five shallow water blocks which the Trinidad and Tobago government closed on September 8. The bid round which was launched last April also attracted three bids from Canadabased Voyager, one of which was a joint venture with RWE Promoters from Germany. Energy Minister Carolyn Seepersad-Bachan said formal contacts will be signed in December following consideration of the bids by an evaluation committee. Ms. Seepersad-Bachan also launched the deep water bid round which involves 11 blocks in water depths of between 1,000- 2,500 metres. Sizes of the blocks range from 1000-3,200 sq km. Bids will close in mid-January. Trinidad and Tobago is moving aggressively to attract investors to the energy sector to carry out appraisal and development drilling to locate new gas resources to replace the annual utilisation of 1.4 trillion cubic feet (TCF). A 2009 gas audit by US-based independent petroleum consultants, Ryder Scott showed that the country’s proved gas reserves dropped to 14.4 TCF down from 15.4 TCF in 2008 and 17 TCF in 2007.
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BP Economist: Developing countries boost energy consumption
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nergy consumption among developing countries increased in 2009 despite a global economic slowdown, according to BP chief economist Christof Ruehl. Mr. Ruehl was in Trinidad at the end of July to deliver presentations based on the 2010 BP Statistical Review of World Energy to members of government and representatives of the business community. His visit is part of an annual initiative by bpTT to share the Statistical Review and offer an understanding of the global energy market. The Statistical Review is one of the most authoritative and highly regarded publications in the world on the petroleum industry. The publication’s focus on objective data has been its hallmark for the last 59 years. According to the 2010 edition, although energy consumption among developed countries fell by 1.1 percent, the first decline since 1982, among developing countries consumption increased by 2.7 percent. Globally, consumption of oil, natural gas and nuclear power declined, while coal consumption was essentially flat; only hydroelectric output and other renewable forms of energy increased in 2009. The data on energy consumption suggests that global carbon dioxide (CO2) emissions from energy use fell for the first time since 1998. For the year as a whole, prices for all forms of traded energy fell, with the sharpest declines seen for traded natural gas and coal in North America and Western Europe – though Asian coal prices fell less sharply in face of strong Chinese import growth. Oil prices declined for the first time since 2001. During 2009, prices for oil and coal in competitive markets hit their low points early in the year, with oil prices recovering first, while spot natural gas prices in North America and Western Europe continued to decline well into 2009. In addition to varying demand stories by fuel and region, the different price paths were also driven by supply-side stories. In the oil
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market, sustained OPEC cuts led production to fall even more rapidly than consumption did. For natural gas, sharp production declines in Russia, Turkmenistan, and Canada were partly offset by growth in LNG and the US. In turn, robust US gas production growth - the strongest in the world for three consecutive years - was driven by unconventional supply, especially shale gas. The Review reports proved oil reserves of 1,333.1 billion barrels at the end of 2009, including Canadian oil sands under active development and an upward revision in official Venezuelan reserves. Global reserves are sufficient to meet 2009 production for 45.7 years. On the same basis, reserves of gas are sufficient for 62.8 years and coal for 119 years. Natural gas Globally, natural gas was the fuel that experienced the most rapid decline in consumption, falling by 2.1 per cent, the largest decline on record. Consumption declined in all regions except the Middle East and AsiaPacific. Russia had the world’s largest decline (in volumetric terms), with consumption falling by 6.1 per cent. OECD consumption fell by 3.1 per cent, the largest decline since 1982. Global gas production declined for the first time on record. Production fell sharply in Russia (-12.1 per cent) and Turkmenistan (-44.8
per cent), driven by declining consumption – in Russia and much of the rest of Europe – and the availability in Europe of competitively-priced LNG. Continued expansion of unconventional supplies allowed the US to record the world’s largest increase in production for the third consecutive year, surpassing Russia as the world’s largest producer. Oil Dated Brent averaged $61.67 per barrel in 2009, a decline of 37 per cent – the largest decline (in percentage terms) since 1986. Prices began the year below $40 and rose steadily throughout the year, reaching a peak of more than $78 in mid-November. Sustained OPEC production cuts and improving economic prospects as the year progressed supported prices. Global oil consumption declined by 1.2 million barrels per day (bpd), or 1.7 per cent, the largest decline since 1982. OECD consumption fell by 4.8 per cent (2 million bpd), a fourth consecutive decline. Outside the OECD, consumption growth slowed to 860,000bpd, or 2.1 per cent, the weakest percentage growth since 2001. China, India, and Middle Eastern countries accounted for all of the non-OECD growth.
Global oil production dropped even more rapidly than consumption, falling by 2 million bpd, or 2.6 per cent, the largest drop, again, since 1982. OPEC production cuts implemented late in 2008, were maintained throughout 2009, resulting in a decline of 2.5 million bpd, or 7.3 per cent. Every OPEC member participating in the production-cutting agreement reduced output in 2009. OPEC’s Middle Eastern members accounted for nearly 75 per cent of the overall reductions. Oil production outside OPEC grew by 0.9 per cent or 450,000bpd. US production increased by 460,000bpd, or 7 per cent, the largest increase in the world last year and largest US percentage increase in our data set. Elsewhere, production growth in Russia, Brazil, Kazakhstan, and Azerbaijan was offset by continued production declines in China and mature OECD provinces of Mexico, Norway, and the UK. Russia surpassed Saudi Arabia as the world’s leading oil producer in 2009. Global refining capacity in 2009 grew by 2.2 per cent, or 2 million bpd, the largest increase since 1999. Non-OECD capacity surpassed OECD capacity for the first time. Higher refining capacity and declining consumption pushed global refinery utilization to 81.1 per cent, the lowest rate since 1994. Other fuels Global coal consumption was flat in 2009, the weakest annual change since 1999. The OECD (-10.4 per cent) and the FSU (-13.3 per cent) experienced the steepest consumption declines on record, due to the combination of recession and competitively-priced natural gas. Elsewhere, consumption grew by 7.4 per cent, near the historical average, with China accounting for 95 per cent of the increase.
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ECLAC Economic Survey 2009-2010:
Latin America and the Caribbean to Grow 5.2% in 2010 The region is expected to expand only 3.8% in 2011 due to the uncertain outlook of the world economy, particularly in Europe. Latin America and the Caribbean has consolidated its economic recovery as of the latter half of 2009 and will grow 5.2 percent this year, resulting in a 3.7 percent rise in per capita GDP, according to ECLAC’s most recent economic review. “This growth rate is higher than expected, but economic performance in the region is very diverse. What stands out are the members of Mercosur and countries with greater capacity to implement public policies, as well as those with strong domestic markets spurred by regional activity and their exports to Asia,” stated ECLAC Executive Secretary Alicia Bárcena during the launching of the report Economic Survey of Latin America and the Caribbean 2009-2010 in Commission headquarters in Santiago. The highest growth rates in 2010 are in South America, led by the biggest economy in the region, Brazil, which is expected to grow 7.6%, followed by Uruguay (7.0%), Paraguay (7.0%), Argentina (6.8%) and Peru (6.7%). Other countries in the region will have lower growth rates, such as the Dominican Republic (6.0%), Panama (5.0%), Bolivia (4.5%), Chile (4.3%) and Mexico (4.1%). Colombia will grow 3.7%, Ecuador and Honduras 2.5%, Nicaragua and Guatemala 2.0%, and Venezuela will experience negative growth: -3.0%. The Haitian economy will fall -8.5% as a result of the earthquake last January, while other Caribbean nations will also have negative growth. In general, the region’s greater economic activity reduced unemployment, which is expected to drop from 8.2% in 2009 to 7.8% in 2010.
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The consolidation of some the region’s economies this year is a result of three factors: private consumption, which reacted positively to the gradual improvement of employment and greater lending, higher investment and to a lesser extent, an increase in exports. The swift economic recovery following a crisis of proportions rarely experienced in modern economic history has been driven largely by public policies, says ECLAC. The macroeconomic soundness observed in most countries of Latin America and the Caribbean in the years preceding the global crisis made a significant difference. Governments made the most of a period of exceptional international economic and financial boom to straighten their public accounts, reduce and improve the profile of their debts and increase their international reserves. This process allowed them to apply countercyclical public policies that contributed to economic recovery starting the second half of 2009. Fiscal and monetary stimulation programmes, receding uncertainty, the relative normalization of financial markets, greater access to loans and a more dynamic world economy led to a gradual recovery throughout the year, with this process consolidating in 2010. Prospects for 2011 Although recovery has been relatively quick, lingering questions and doubts regarding the evolution of the global economy may dampen the regional outlook in the medium-term. The economic crisis in some European countries may have negative consequences on the volume and price of regional exports, as well as in the amount of remittances to Latin America and the Caribbean. In Ecuador, the fall in remittances may have a significant impact, given that remittances from Spain make up 3% of Ecuador’s GDP.
There is also concern about some highlyindebted Caribbean economies, which are already in a situation of great vulnerability. The average indebtedness of Caribbean nations reached approximately 50% of GDP in 2009 and in some cases it is even higher, such as in Grenada (83%) and Barbados (93%). Growth is expected to slow down around the second half of 2010. Although the region will continue to expand in 2011, it will do so at only 3.8% approximately - equivalent to a 2.6% increase in per capita GDP.
With the exception of Chile and especially Haiti, given the need for reconstruction and recovery after the earthquakes that struck them earlier this year, economic deceleration in the region will be generalized, particularly in South America, whose 5.9% growth in 2010 is expected to drop to 4.3% in 2011. Faced with this scenario, ECLAC calls on countries in the region to maintain public policies geared at protecting the most vulnerable as part of a broader strategy that encompasses not only social areas but also macroeconomic and production policies.
UWI AND ACCA SIGN MOU
Mr Roger Acton (left), Regional Director - Europe and Americas, Association of Chartered Certified Accountants (ACCA) and Professor Clement Sankat, Pro Vice Chancellor & Campus Principal, The University of the West Indies (UWI) St Augustine Campus after signing of a Memorandum of Understanding (MOU) between the University and the ACCA.
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Regional Economic Updates Uncertainty hangs over Barbados The remainder of 2010 is clouded in uncertainty about the strength of the recovery in Barbados’ main tourism markets, prospects for tourism globally and regionally and future energy prices in the wake of the oil spill in the Gulf of Mexico and volatility in international financial markets, according to a mid-year Central Bank economic review. The imposition of an airline passenger tax by the UK government is another possible difficulty in the path of recovery for Barbados’ tourism. The review states that growth in Barbados’ real output in 2010 is still expected to be marginal and unemployment is unlikely to be ameliorated before the end of the year. There may be an increase in energy prices, which would result in a rising tendency in the inflation rate. In order to protect the foreign exchange reserves and preserve Barbados’ external credit rating, government continues on a path of fiscal consolidation, toward the achievement of the goals of its Medium Term Fiscal Strategy. According to the Central Bank, it is essential to maintain macroeconomic stability and a balance of foreign exchange outflows and inflows, so that the economy remains poised to take early advantage of recovery in tourism demand and other foreign exchange earning activities. Although visitor numbers were up during the first half of the year, Barbados’ tourism performance was not robust enough to provide the usual boost in foreign exchange reserves. Reserves declined by $68 million, leaving reserve cover at about 19.3 weeks of imports, significantly more than at the end of June 2009. Overall economic growth contracted by 1.0 percent over the January to June period, compared to the first half of 2009, and unemployment increased to 10.6 percent over the first quarter, up slightly from 10.1 percent in the first quarter of 2009. Output in construction continued to contract, and demand for domestic goods and services remained weak. However, the average inflation rate for the 12 months ending March remained steady at 3.3 percent. 30
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Decline tapering off in Trinidad and Tobago There are signs that the decline in economic activity in Trinidad and Tobago may be levelling off, but most of the expansion to date comes from the energy-based sector. The Central Bank in its latest July 2010 Economic Bulletin also said short-term outlook for the economy is uncertain and will be dependent on the strength of the ongoing global recovery and the level of fiscal support that the Government will be able to provide. “It is reasonable to expect that for the next several months, the level of external demand will continue to facilitate expansion of the petrochemical sector at current price levels,” the Bulletin said. On this basis, even if the non-energy sector remains flat, Central Bank is projecting real GDP growth for the year as a whole to reach 1 to 1.5 per cent. According to the Central Bank’s quarterly GDP estimates, the economy grew by 2.3 per cent in the first quarter of 2010 representing the second consecutive trimester of growth after continuous quarterly contractions between October 2009 and September 2010. Similar to the fourth quarter of 2009, the growth was however concentrated in the energy sector, which grew by an estimated 5.5 per cent. Performance of the non-energy sector meanwhile was relatively flat in the first three months of 2010, following steady declines throughout 2009. Expansion in the energy sector was primarily due to increased production of natural gas and petrochemicals which overshadowed lower output of crude oil, liquefied natural gas and refined petroleum products. Energy Sector Higher production of natural gas and petrochemicals drove the 5.5 per cent rise in energy sector real GDP. The petrochemical subsector, in particular, expanded by 20.0 per cent. This performance reflected significant improvements in the output of fertilizers (26.9 per cent) and methanol (13.5 per cent) following depressed demand during the first quarter of 2009.
Overall, exploration and production in the energy sector rose despite slipping oil production. Higher natural gas production (6.9 per cent) overshadowed a reduction in crude oil production (5.4 per cent). The rise in natural gas output was enhanced by the commissioning of the energy plants at the MTHL’s Ammonia, Urea and Melamine (AUM) mega complex. Marketing and distribution also experienced growth (5.6 per cent) resulting from a rise in natural gas utilization (6.8 per cent). In contrast, refining activities waned due to declines in refinery throughput (14.3 per cent) and LNG production (1.8 per cent). Non Energy Sector There are tentative signs that the decline in the non-energy sector may have levelled off. Nonenergy GDP contracted consistently throughout 2009 and recorded no growth in the first quarter of 2010. However the situation was not consistent across sectors.
Economic crisis far from over for Eastern Caribbean The Eastern Caribbean Currency Union will continue to face tremendous challenges over the next few years. The current crisis is not yet over and the Eastern Caribbean Central Bank (ECCB) is projecting a contraction in economic activity of approximately 2.4 per cent in 2010. Sir Dwight Venner, ECCB’s Governor gave the dismal outlook during a presentation on the bank’s 2009/2010 Annual Report at the end of June. Government revenues have decreased and there has been a fall in employment and an increase in poverty levels in member countries. “The economies are extremely small, open and vulnerable, as the crisis has clearly revealed and will need to be substantially transformed if they are to exhibit significant levels of resilience,” said the ECCB Governor. He noted that the international outlook remains uncertain, international markets have been extremely volatile and some currencies such as the Euro have experienced major depreciations. The decline and possible cessation of foreign aid emanating from the continuing woes of the international community could also impact on the currency union. “The advanced countries are experiencing major fiscal and debt problems and high levels of unemployment and it will therefore become both fiscally and politically difficult for the currency union to attract sizeable amounts of aid. “The countries have relatively high per capita incomes and are not geopolitically important, nor do they have large domestic markets. Consequently, the region will find it virtually impossible to attract aid flows in competition with Sub-Saharan Africa and Haiti in this hemisphere,” Sir Dwight said. Members of the Eastern Caribbean Currency Union are Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines.
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Regional Economic Updates Weak growth for Jamaica Jamaica which has embarked on a comprehensive programme of policy reforms expects to end their 2010/2011 fiscal year with weak growth in the range of 0.0 per cent to 1.0 percent. Brian Wynter, Governor of the Bank of Jamaica said although the outlook for growth in the global economy remains positive, there are concerns about the pace of recovery. “These concerns are related largely to the sustainability of the pace of recovery in the United States as well as the health of the European economy, particularly in light of the fiscal austerity measures implemented by Greece, Portugal and Spain,” said Wynter. Jamaica’s reform programme is aimed at transforming the economy from the vicious cycle of high interest rates, excessive debt, recurrent instability and low growth to a benign cycle of lower financing costs for the public and private sectors, more stable financial markets, less volatility in domestic
prices and sustained growth. Mr. Wynter said during the June 2010 quarter, the bank continued to see signs of a transformation while the perception of a positive outlook for the Jamaican economy has been strengthening. This is manifested in the continued appreciation of the exchange rate, lower market-determined interest rates, a decline in inflation expectations and strong net international reserves. Since the completion of the Jamaica Debt Exchange and the signing of a Standby Arrangement with the International Monetary Fund, there has also been a gradual improvement in Jamaica’s macroeconomic fundamentals. “All targets were met under the first review of the IMF Stand-by Arrangement and, from all indications, the targets under the second review will also have been met. In addition, no financial institution requested assistance under the Financial System Support Fund,” Mr. Wynter said.
CARIBBEAN AT SHANGHAI WORLD EXPO
Grenada’s Prime Minister Tillman Thomas, Foreign Affairs Minister of Barbados, Maxine McClean and Guyana’s President Bharrat Jagdeo (L-R) at the World Expo in Shanghai. The Expo, which opened to the public in May, comes to an end in October. The World Expo also commemorated a CARICOM day. 32
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Trinidad and Tobago and Venezuela sign Unitisation Agreement
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rinidad and Tobago and Venezuela entered into a new era of energy cooperation following an historic signing of a unitisation agreement in Caracas in mid-August to develop an estimated 10 trillion cubic feet (TCF) of gas in the Loran-Manatee fields that lie along their maritime border. The signing of the unitisation agreement came more than 12 years after talks started between the two neighbouring countries. The signing of the unitisation agreement was also the first of its kind in the Western Hemisphere. Technical teams from both countries agree that 73% or 7.3 TCF of the reservoir lies on the Venezuelan side of the border with the remaining 27% or 2.7 TCF on the Trinidad side. Trinidad and Tobago’s Energy Minister, Carolyn Seepersad-Bachan who signed the agreement with her Venezuelan counterpart, Rafael Ramirez said the signing signals the beginning of a closer collaboration on energy matters between Port of Spain and Caracas. Technical studies to determine the size of gas resources in two other cross-border maritime fields, the Kapok-Dorado and Manakin-Coquina are also continuing.
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Q&A with Ms. Seepersad-Bachan Business Journal engaged Ms. Seepersad-Bachan in a Q&A interview
Q: In your view, how significant is this signing, coming more than 14 years after negotiations began and as the western hemisphere’s first unitisation agreement? This agreement between the Governments of the Republic of Trinidad & Tobago and Bolivarian Republic of Venezuela on the unitization of the Loran Manatee cross-border gas field is a welcome conclusion to a thrust that was pioneered over 14 years ago in fact. For us here in Trinidad and Tobago, of particular significance is that now, we have approximately 1.2 trillion cubic feet of natural gas, that was already on the Ryder Scott audit books as you would recall, to finally move forward with into production and monetization. I mention the Ryder Scott Report because when audits and reserves are reported, the report deals strictly with technical information. It is not for Ryder Scott to consider whether the gas can immediately be put into production; that’s our job as Government. Also, of great significance is that it seeks to strengthen our cross border relationships and opens the potential to deepen bonds and cooperation even further in energy. The agreement, by its very nature, and as a result of commitments made during my discussions with His Excellency Rafael Ramirez, The Minister of Petroleum and Energy in Venezuela, affords each country an opportunity to widen energy sector growth and development programmes and create new avenues for revenue generation. We have also considered that here in Trinidad and Tobago, natural gas consumption is approximately 4.0 billion cubic feet per day (bcf). Of that amount, 1.4 bcf represent domestic sales. Therefore, with the 27 percent out of the 10 tcf, the development of the Loran/ Manatee Field, will fortify natural gas supplies for existing consumption and help us forward towards securing supplies for future projects. 34
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Q: Following the unitisation agreement f o r m a l signing, what are the next steps leading to the actual monetisation of the energy resources in the fields? Upon signing, the agreement brought into effect a Joint Ministerial Commission comprised of the Energy Ministers of both nations and two other representatives, and a Steering Committee comprised of Technical Experts from both countries. It is now for us to move towards the appointment of a Unit Operator for the project. I should tell you that some discussions centred on the involvement of state entities in the operatorship of the acreage, but the details are still to be worked out by the teams. I should also mention that these teams are responsible for the management of the relationship established by the Framework Treaty. Q: What sort of collaborative projects do you see on the horizon between Trinidad and Tobago and Venezuela coming out of this signing, if any? Well the possibilities are all now subject to further discussion and agreement. Most important is that the door to collaboration has been opened and some aspects raised in our discussions included aspects of collaboration in technology, knowledge and capacity as well as skills development, which will all ultimately benefit the energy sectors of both countries. As regards actual projects, we are now
focused on moving forward with the Loran Manatee and also looking toward forming an agreement on the Manakin Coquina which is also a cross-border field along the delimitation line between our countries. Beyond these, discussions must now be taken forward, and will be shortly, on exactly how our commitment to energy cooperation will take shape. Q: Has the signing initiated a resumption of close relations between Trinidad and Tobago and Venezuela which in the past recent years ran cool? The agreement is certainly a new dawn in the relations between our two nations. Both Trinidad and Tobago and Venezuela are major energy producers in the Western Hemisphere and to now be moving towards deepened relations where we will be sharing and collaborating in technology, capacity, skills and so on, it is a very significant development in deepening our relations. Indeed, the agreement also signals a great advancement towards building unified approaches with partner nations for the development of our own people and countries.
STANDARD AND POOR’S RE-CONFIRMS CDB’S AAA RATING
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he international credit rating agency, Standard and Poor’s (S&P), has once again rated the Caribbean Development Bank (CDB) as a ‘Triple A’ institution in its just-released full analysis of the Bank’s operations. In identifying the major rating factors, S&P listed CDB’s strong capitalization, its diversified and well-performing loan portfolio, its prominent position as a lender in its borrowing member countries (BMCs), the recent demonstration of strong shareholder support in the form of a large paid-in capital increase, and adequate liquidity. S&P stated that “The performance of CDB’s loan portfolio to date has been excellent. The bank has reportedly never written off a loan (although some have been rescheduled), and its impaired loans totaled less than US$11 million, 1.3% of total loans, as of year-end 2009. More than 95% of CDB’s loans were to or guaranteed by its member countries as of that date. CDB’s core income increased to more than US$30 million during 2009 from less than US$25 million one year earlier, with the ratio of core income to average assets increasing to nearly 2.6% from 2.3% and the return on average shareholders’ equity to almost 6.0% from 5.1%.” With regard to the rating outlook for CDB, S&P characterizes this as ‘stable’, adding that it “expects any reductions in CDB’s capitalization or liquidity to be modest and consistent with the current rating.” CDB’s Management has welcomed this development, and regards it as vote of confidence in its stewardship of the Bank’s assets as it seeks to promote the social and economic development of its BMCs.
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Perspectives
Why would an oil producing country contemplate “green business?”
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he answer is, for many reasons but principally to provide alternatives, to keep abreast of international development trends, to take cognisance of the fact that fossil fuels are environmentally harmful and finite, even with new technologies to enable better access and recovery, (Trinidad is already producing far more gas than the more lucrative oil), to help foster energy independence and security, to promote job creation and to maintain a competitive edge in the new global economy in which the corporate world will be required to go “green.” Used in this paper, the expression “green business” will have two meanings. It will apply to those businesses which produce “green goods and services,” from organic farming, to energy audits, to building construction using green principles and products such as solar water heaters, to the creation and manufacture of renewable energy products and technologies. The second example of a green business is one which seeks to shrink its own carbon footprint by reducing and minimising waste and the consumption of finite materials, utilises green building practices such as recycling water, using low flush toilets, is energy efficient through the use of sensors and timers for turning on and off lights and taps to prevent wastage, minimises the use of disposable materials such as paper and plastic, “greens” its supply chain and in general carries out low carbon living and operations. Green business does not threaten the existence of oil producers because development demands will result in the economies of a number of countries, such as the oil dependent USA and the populous nations of India and China, continuing to consume fossil fuels. 36
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Nonetheless, national energy policies will increasingly dictate that a certain percentage of the national energy mix be met from renewable energy sources, defined by the United Nations as “solar, wind, biomass, geothermal, hydropower, and ocean resources and some waste.” Strong environmental rules are evident in trade, with the advent of strict Phytosanitary rules, fair trade principles, organic and pesticide free rearing, low impact harvesting and sustainable production methods. Under current trade rules, unless a business seeking to trade can meet the environmental standards, the viability of the business will be jeopardised. The environmental impacts on business are not limited to trade in agricultural commodities. On the eve of the Christmas sales in 2001, 1.3 million of Sony’s playstations intended for the Dutch market could not be sold because the wires contained cadmium, an element which caused the games to fail the Dutch environmental standards. Refitting the boxes and identifying where in their 6000 manufacturing plants the cadmium was entering the process and then ensuring its exclusion, eventually cost Sony in excess of US $130 million. Nor are oil producing companies and countries exempt from the new Green Economy. Prior to the recent spill, BP was a leader in sustainable development in the oil industry and from the late 1990s invested US $20 million to re-engineer its processes in order reduce its greenhouse gas emissions and carbon footprint. By 2007, BP’s new environmental thrust had an unanticipated impact – the realisation of savings and increased profits of US $2 billion, forcing former CEO Lord Browne to observe “We set out to do good .... and we ended up doing well.” The marriage of the oil and renewable
energy producer has already taken place in Brazil which is a world leader in the production of ethanol with sugar cane as the feed source. Despite oil production and significant hydrocarbon reserves, the Brazilian economy is 57% powered by renewable energy. The fact that it has become more profitable for US farmers to sell corn and soya bean for biofuel than for food is an indication of the potential of green business to transform markets. In an attempt to get ahead of the curve, although significant oil producers, the United Arab Emirates, specifically Abu Dhabi is developing Masdar City, “the world’s first zero carbon, zero waste, clean technology cluster powered by renewable energy.” See http://www.masdarcity.ae/en/index. aspx. Corporate Social Responsibility and Green Business The recent BP Oil Spill will further spur international negotiations on climate change and sustainable development, as did the Exxon Valdez and the Erica spills before it and will result in a swathe of new legislative and regulatory regimes, management and policy approaches in the energy and environmental sectors, particularly for the oil industry, but more so in the government and business interface. The threat to global development being posed by climate change, coupled with calls for global development to be predicated on sustainable principles are already permeating
international policy and corporate thinking with corporate social responsibility (CSR) considered as beneficial and its definition including doing no environmental harm. Thompson Strickland and Gamble (2005) in their popular work on strategic management made these observations about CSR, environment and business profitability - “corporate social responsibility is defined as a company’s duty to operate its business by means that avoid harm to other stakeholders and the environment and further, to consider the overall betterment of society in its decisions and actions.” They also suggest that corporate responsibility “generates internal benefits…reduces the risk of reputation damaging incidents and can lead to increased buyer patronage.” UN Green Economy Initiative The push toward a global green business strategy will be given impetus by the United Nation’s Global Green Economy Initiative (GEI). The move to a global green economy is considered as “being able to both create green jobs, ensure real, sustainable economic growth, and prevent environmental pollution, global warming, resource depletion, and environmental degradation.” According to the UN its “Green Economy Initiative is designed to assist governments in “greening” their economies by reshaping and refocusing policies, investments and spending towards a range of sectors, such as clean technologies, renewable energies, business journal | september 2010
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water services, green transportation, waste management, green buildings and sustainable agriculture and forests. Greening the economy refers to the process of reconfiguring businesses and infrastructure to deliver better returns on natural, human and economic capital investments, while at the same time reducing greenhouse gas emissions, extracting and using less natural resources, creating less waste and reducing social disparities.” The advantage that “green gold” has over “black gold” is the environmental “savings” and the amalgam of ecological and economic sustainability. Simply put, “green business” will create value for shareholders, stakeholders and society. What greater justification could there
Liz Thompson is a 2008 winner of the prestigious UNEP “Champion of The Earth” Award. She is leader of Opposition business in the Parliament of Barbados. An elected Parliamentarian from 1994 to 2008, she is a former Minister of Energy and Environment. Senator Thompson is a lawyer, trained at the University of the West Indies. She holds an LLM in Oil and Gas Law from the Robert Gordon University in Scotland and an MBA from the University of Liverpool. Her LLM dissertation is in legal and policy measures for the transboundary management of offshore oil and her MBA dissertation in energy policy management in developing countries.
CDF OFFICIALS BRIEF TRINIDAD & TOBAGO FINANCE MINISTER The Chief Executive Officer of the CARICOM Development Fund (CDF), Ambassador Lorne McDonnough and the Deputy Chairman of the Board of Directors, Dr. Ronald Ramkissoon met with Trinidad & Tobago’s Minister of Finance, Winston Dookeran in early September to brief him on the CDF’s operations. The CDF which opened its doors to business in August 2009 recently approved national country programmes in Belize (US$4.3 million) and Saint Lucia (US$3.4 million). It is anticipated that by the end of 2010 it will have national programmes in at least five CARICOM Member States. The CDF was established by Article 158 of the Revised Treaty of Chaguaramas to provide financial and technical assistance to disadvantaged countries, regions and sectors within CARICOM, and by so doing, promote greater economic and social cohesion within the Community.
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CONFIDENCE IN FDI RECOVERY GROWING AS TNCs LOOK BEYOND THE CRISIS
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ransnational corporations (TNCs) are increasingly optimistic about the international investment environment and their own prospects for foreign direct investment (FDI) this year and beyond, this year’s World Investment Prospects Survey 2010–2012 (WIPS) shows. The results point to a recovery in global FDI flows in 2010 and further growth in 2011 and 2012. The annual survey seeks to ascertain the FDI plans of the world’s largest TNCs. This year’s results are based on the responses of 236 TNCs and 116 IPAs (investment promotion agencies) to an UNCTAD questionnaire. Reflecting other forecasts of improving global economic activity, TNCs’ perceptions of the international investment climate are on an upswing. Compared to last year’s survey, in which some 47 per cent of respondents expressed pessimistic views regarding 2010, only 36 per cent of respondents this year expressed pessimistic views for the current year. Looking beyond 2010, the outlook is markedly brighter, with 47 per cent of respondents expressing an optimistic view for 2011 and a solid majority (62 per cent) expressing an optimistic view for 2012 (fig. 1). These results suggest that while TNCs are continuing to face short-term difficulties, the crisis has not structurally shifted their plans for the future. The results from the survey also suggest that the crisis was less destructive to FDI than had been feared. While investment budgets, including those for FDI, were squeezed during the crisis, TNCs did not engage in wholesale divestment of their foreign affiliates (fig. 2). The crisis did, however, accentuate one recent trend, namely the shifting of
TNCs’ geographical focus to developing and transition economies. These economies, which weathered the downturn better and are leading the global recovery, are playing an increasingly important role in TNC strategies. Nine of the top 15 priority FDI destinations for the period ending 2012 are developing or transition economies. Increasing optimism and the lessening impact of the crisis have encouraged TNCs to maintain, and in some cases revise upwards, their international investment programmes, suggesting favourable prospects for FDI flows. Some 43 per cent of respondents intend increasing their international investment expenditures in 2010 as compared to the low levels of 2009. Roughly 58 per cent of respondents predict increases in 2011 and 2012. TNCs based in developing economies are more optimistic about the growth of their FDI expenditures over the next few years than their developed-economy peers, especially when compared to TNCs headquartered in Europe. On the basis of these findings and other indicators of TNC and FDI activity, UNCTAD’s World Investment Report 2010 estimates a base-case scenario which assumes world economic growth of 3.0 per cent in 2010 and 3.2 per cent in 2011. It predicts that global FDI flows could reach $1.3–1.5 trillion in 2011 and $1.6–2.0 trillion in 2012, up from an estimated $1.2 trillion in 2010. A rebound in the cross-border mergers and acquisitions market would be the major driver of this growth, whereas the contribution of greenfield investments – new or additional investments in offices or factories where no production existed before – is expected to be more limited.
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Perspectives Implementing Human Rights in the Caribbean: Globalisation and the Universal System of Human Rights by Dr. Hans J. Geiser
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n today’s world, globalisation has become a key word, a driving force in the conduct of international relations. For many it simply means the freeing of trade and investment, the free flow of capital and labour, the shrinking of national borders and an ever increasing interconnectivity of people and ideas through the latest technologies. For some others, however, this global process has become a real challenge, a struggle to keep pace and to reap possible benefits. To paraphrase the former UN Secretary General, Kofi Annan: “Globalisation is like a hurricane, impossible to escape from it, but all the more important to mitigate its negative effects and to set up necessary protective measures at the global level as well.� Among the countries which are particularly exposed and vulnerable to the negative effects of globalisation is the Small Island Developing States (SIDS), including those in the Caribbean. Their quest for sustainable human development is often hampered or even denied by the powerful global forces at work, man made and nature made. In this context, it is often ignored that there is indeed another side of the globalisation coin, namely an ever growing universal system of principles, standards and norms, set up precisely for the promotion and protection of human rights, a universal system within the framework of the United Nations for the pursuit of sustainable human development of its Member Countries. Thus, the three main pillars of the basic UN architecture as envisioned in the Charter
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have been joined: Peace and security, human development and human rights! Human Rights: Situation Analysis What does the universal system consist of? Basically, it is a set of international treaties or covenants to which large majorities of Member States have become contracting parties and have assumed rights and obligations on behalf of their people. Inspired by the Universal Declaration of Human Rights (1948), there was first the adoption of two basic human rights Covenants (1966), one on Civil and Political Rights, and the other on Economic, Social and Cultural Rights. In subsequent years, a number of additional international human rights instruments were adopted, guaranteeing the rights of specific groups of vulnerable people, i.e. children (Convention on the Rights of the Child, 1990), women (Convention on the Elimination of Discrimination against Women, 1981), migrant workers (Convention on the Protection of Migrant Workers and their Families, 2003), disabled persons (Convention on the Protection of Persons with Disabilities, 2008). Part of this universal system is also the large body of ILO Conventions guaranteeing the basic rights of workers in their various dimensions. Where do we stand in the Caribbean? It has to be noted that overall, the SIDS in the CARICOM region have a relatively good record in terms of accession/ratification to the basic human rights instruments. A majority of them have indeed ratified
Mrs. Eleanor Roosevelt of the United States holding a Declaration of Human Rights poster
the Covenant on Civil and Political Rights as well as the one relating to Economic, Social and Cultural Rights. Even those States which have not formally ratified the two basic Covenants (Antigua & Barbuda, Bahamas, St.Kitts & Nevis, and St.Lucia) have introduced in their respective constitutions the necessary guarantees and provisions relating to the basic human rights and fundamental freedoms. All CARICOM SIDS have ratified the Conventions on the elimination of discrimination against women and on the rights of the child, as well as the Convention against all Forms of racial discrimination. It is hoped that the CARICOM Countries will eventually also ratify the Convention on “Migrant Workers” and the one on “Persons with Disabilities”, two instruments of special interest and relevance in the Caribbean context. The Meaning of Economic, Social and Cultural Rights There exists some misunderstanding, if not confusion in the Caribbean as to the true nature and value of economic, social and cultural rights as enshrined in the corresponding International Covenant. Some would argue, even regional Governments, that there is no such thing as a right to food, a right to decent work, a right to water, a right to housing, a right to health, a right to education, to mention only the more
prominent ones. Accordingly, these are not understood as real rights that can be immediately applicable and “claimable” before a national court. These are only opportunities - the argument goes - offered to the people by well intentioned Governments. Wrong! At least in the opinion of the international human rights community and by the pronouncements of the international human rights bodies over time. While it is admitted that economic, social and cultural rights are not immediately applicable in national jurisdictions, they constitute nevertheless specific entitlements (claimable) by the people vis-à-vis the State, and specific commitments and obligations of the State vis-à-vis its people. The main obligation of the States who have signed and ratified these international norms, is to undertake every effort towards the progressive realization of the economic, social and cultural rights, to adopt necessary legislation and policies, to establish priorities and allocate maximum resources to the realisation of these rights over time and, importantly, to report periodically to the international human rights bodies on progress made in implementing these rights. Implementation: Issues and Challenges in the Caribbean Implementing human rights in the CARICOM region poses some special challenges: Lack of capacities, lack of political will, lack of resources, misplaced priorities and lack of a rights-based approach to sustainable human development, or possibly all of the above! The fact is that in terms of implementing necessary policies and legislation Caribbean Governments are lagging behind. Trinidad & Tobago, for example, has ratified some 20 years ago the Convention on the Rights of the Child, and is still not having the necessary children legislation in place. Similarly, the Convention on the Elimination of Discrimination against Women which Trinidad & Tobago ratified in 1990 requires States parties to adopt comprehensive gender policies. Such a policy is still missing. CARICOMwide, the question of implementing human rights norms at the national level invariably comes up.
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For example: The The Millennium Development CARICOM Heads of Government Goals and Human Rights had signed in February 1997 a declaration adopting a CARICOM From 20 to 22 September Charter of Civil Society, 2010, world leaders will further defining a number of meet in summit at the UN in economic, social and cultural New York to assess progress rights to be implemented in the made towards achieving the Caribbean context, and in so Millennium Development Goals doing, strengthen civil society (MDGs), five years before the organisations throughout the target date of 2015. The MDGs, adopted by the CARICOM region. However, up to today, Millennium Summit in 2000, are there is hardly any reference calling for a number of goals to and trace found of this and specific targets, and they Charter in the various national have become the cornerstone of jurisdictions of CARICOM the international development States. There is not even a faint agenda. Moreover, the MDGs awareness of the existence of such a Charter. are greatly reinforcing the The CARICOM States implementation of the major also are lagging behind in economic, social and cultural living up to their reporting rights. They set specific, Human Rights and the Millennium obligations assumed under measurable and agreed Development Goals in Practice: various international human targets to reduce poverty and A review of country strategies rights instruments. hunger, to combat HIV/AIDS, and reporting To take the example again to improve child and maternal of Trinidad & Tobago: The last health, to gender equality, to periodic report on the Covenant environmental sustainability of civil and political rights was and to global partnerships. As such, the MDGs serve submitted to the Human Rights Committee in September as clear benchmarks for the 1999, and the report on the realisation of the economic, Covenant on economic, social social and cultural rights. Some and cultural rights reached the 190 Member States of the UN corresponding UN Committee have committed themselves to in September 2000. work towards achieving these Granted, human rights’ reporting has goals and targets and to participate in the become quite a heavy burden, especially for summit assessment in New York, including all the Governments of small Countries in the the CARICOM States. This is what gives concrete meaning to Caribbean, given the multitude and complexity of some of these international instruments. a human rights based approach to sustainable There is however technical assistance human development. available from the UN and also, certain Governments at times have called on relevant Dr. Geiser is a former UN Diplomat and an Hon. national NGOs and Civil Society Organisations Senior Fellow, Institute of International Relations, to bring their expertise to the preparation of University of the West Indies (UWI), St. Augustine, national reports. Such was the case where Trinidad. the national report of Trinidad and Tobago on the implementation of the Convention on the Elimination of Discrimination against Women benefitted from the substantial input by the Network of NGOs. UNITED NATIONS
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The OAS is indispensable By Dr. Riyad Insanally
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ecent developments regarding the creation of new regional groupings have led to some observers issuing dire forecasts about the end of the Organization of American States. Notwithstanding periodic outbreaks of political tension in the hemisphere, such predictions are premature. The OAS is still highly relevant and necessary and Secretary General José Miguel Insulza has noted that any new entity serving to strengthen regional integration, dialogue and cooperation must be good for the Americas. The OAS, founded in 1948, is the premier forum for political dialogue in the hemisphere, bringing together the countries of North, Central and South America and the Caribbean, spanning huge differences in size, population, economic power, language and culture, to act collectively on common challenges. Currently, most of these – the global financial crisis; climate change and natural disasters; extreme poverty; organised crime; terrorism – are trans-national in scope and, ideally, require a multilateral, inclusive approach to address individual and collective vulnerabilities. As Secretary General Insulza stated at the opening of the 40th General Assembly in Lima, Peru, in June this year, “The way to make headway in these matters is to develop cooperation, in the conviction that we share a common future, based on solidarity.” Indeed, the principle that inter-American multilateralism, solidarity and cooperation are indispensable for achieving the long term peace, security and development of the hemisphere – the main objective of the OAS – was a central feature of the dialogue of the 34 leaders of OAS member states attending the 5th Summit of the Americas, in Port of Spain,
Trinidad and Tobago, on April 17-19, 2009. In this context, the OAS bases its work on four mutually reinforcing pillars: democracy, human rights, multidimensional security and integral development. To put it simply: promoting democracy and strengthening security are essential for overall stability, which in turn helps to lay the groundwork for economic development and thereby contributes to raising the standard of living of all citizens and taking people out of poverty. It is a virtuous circle which the OAS is working to close, through a dynamic agenda of cooperation, capacity-building and institutional strengthening, in response to the needs of its member states. Thus, the OAS is involved in a number of activities embracing: the promotion of good governance, including opening up space for civil society; advancing the rule of law and robustly defending human rights; election observation; mediation in political crises, conflict resolution and peace-building; combating organised crime; improving education, health and opportunities for decent work; sustainable development and environmental protection; and growth with equity. It makes little sense to attempt to replace or duplicate the work of the OAS. Over the past two decades, Latin America has been undergoing a transcendental period of political transformation, as dictatorship has given way to democracy and the rule of law, and the OAS has been playing a vital role in helping to safeguard and consolidate democracy. This process was bolstered in 2001 with the unanimous adoption of the InterAmerican Democratic Charter, which, inter alia, business journal | september 2010
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Regular Session of the Permanent Council
Meeting of the Group of Friends of Haiti on the support to the electoral process
Seventy-seventh Regular Session of the InterAmerican Juridicial Committee (IAJC)
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recognizes that “democracy is essential for the social, political, and economic development of the peoples of the Americas”. Free and fair elections are therefore a core objective. In the past five years alone, the OAS has observed almost 50 electoral processes across Latin America and the Caribbean, developing best practices and standards, in the course of providing specialized technical assistance to member states on electoral reform and the strengthening of electoral mechanisms. Of especial significance is the mounting of a historic, first OAS/CARICOM Joint Mission to observe the Haitian presidential election process, from the registration of candidates through to the publication of the official results. The Mission, led by CARICOM Assistant Secretary General Colin Granderson, is a concrete example of cooperation between the OAS and CARICOM to contribute to restoring the institutional viability of the Haitian state. The Democratic Charter also inherently recognizes that democracy does not depend on the holding of elections alone and the OAS has developed its work programme accordingly. In the area of human rights, the OAS supports the autonomous work of the Inter-American Human Rights Commission and the Inter-American Court of Human Rights, which are the organs that the OAS Charter and the Inter-American Convention of Human Rights have authorized to pronounce on cases and situations in member states. In addition, the OAS is working to end all forms of discrimination and to protect the rights of the marginalized in society and those of indigenous peoples. The OAS also places a high premium on youth affairs and women’s issues. Through the Inter-American Commission of Women, for example, there is a strong focus on ending violence against women and promoting equal employment opportunities and women’s rights in health and education. In the context of the critical nexus between democracy and development, the OAS, based on the mandates of the various Summits of the Americas, is pursuing initiatives such as the creation of the Inter-American Social Protection Network, which aims to support the most vulnerable in society, by providing expertise on systems of micro-credit and ways to improve health, education, housing standards and social
services. With regard to democratic governance, the OAS has developed programmes to support civil registries, judicial cooperation, electronic government and the implementation of the Inter-American Convention against Corruption. In the latter regard, the OAS is organizing at the end of September, in collaboration with the Government of Trinidad and Tobago, a Workshop on the Implementation of the Inter-American Convention against Corruption, to develop with stakeholders a national action plan. The OAS takes a holistic approach to security, through its Secretariat for Multidimensional Security, which coordinates the work of the Inter-American Drug Abuse Control Commission, the Inter-American Committee against Terrorism and the Department of Public Security. The focus is on training programmes, exchanges of experience, judicial reform and the strengthening of crime databases, to address trans-national security threats such as narcotrafficking, money laundering, terrorism and trafficking in persons and arms. In all of the above, the OAS premises its actions on building common standards and the principle of consensus. The Organization also
links much of its work with the Inter-American Development Bank, the Pan-American Health Organization, the Inter-American Institute for Cooperation on Agriculture and other specialized agencies of the inter-American system, as well as with the other partner institutions of the Joint Summit Working Group, charged with coordinating the implementation of mandates of the Summits of the Americas. The OAS moreover works closely with the United Nations system and remains committed to cooperating with the hemisphere’s sub-regional and regional groupings, both old and new. As Assistant Secretary General Albert Ramdin, said to the OAS Permanent Council earlier this year, “I believe that the OAS is indispensable… it remains the only hemispheric political entity in the Americas with a broad mandate to strengthen the peace and security of the continent and to facilitate common action to address the many cross-border challenges our countries face.” Dr. Riyad Insanally is the OAS Representative in Trinidad and Tobago.
Caribbean group lobby London against punitive tax hikes Caribbean ministers of tourism along with Caribbean Tourism Organization (CTO) officials were in London in early September for talks with travel industry and parliamentary bodies on the Air Passenger Duty (APD). The Caribbean delegation was lobbying for a fairer alternative to the APD system,which currently taxes flights from Britain to the Caribbean more heavily than travel to Hawaii, and is set to rise for the second time in a year within the next two months. The ministers are lobbying for their region, officially the most tourism-dependent in the world (14.5 per cent of the region’s GDP and, for some islands, over 70 per cent) to potentially be moved into the same band as the USA and Bermuda, or for the APD system to be replaced with a fairer structure.
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NEWS BRIEFS JAMAICA, IDB SIGN US$200M LOAN
Jamaica’s Minister of Finance and Public Service of Jamaica, Audley Shaw and Inter-American Development Bank President, Luis Alberto Moreno have signed a US$ 200 million loan for a fiscal consolidation programme. The Government of Jamaica said the unprecedented support from the IDB will strengthen the country’s fiscal policy and will support among others, reforms in education, protection of human capital and competitiveness. This brings loan approvals this year to US$400, in line with expected total approvals of US$600 million in 2010. Disbursement of this first fiscal policy loan of a series of three potential operations, is based upon fiscal measures taken by the government since the end of 2009 and the first semester of 2010 to restructure public debt, increase revenue and control spending to meet the targets set out in its reform agenda also supported by a stand-by agreement with the International Monetary Fund. The second and third operations would aim to support the government’s efforts to undertake deeper structural fiscal policy reforms in order to reduce the country’s debt burden and financing needs in the mediumterm. In the context of the deterioration of the global economy, a deep recession and low growth, the Jamaica government said it is
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committed to implementing far-reaching policy and institutional changes to solve the fiscal and current account deficits that make the country significantly more vulnerable to economic shocks. This fiscal consolidation programme will support the government of Jamaica’s efforts to achieve a stable, sustained growth in a context of sound macroeconomic policy; a consolidated fiscal balance, focusing on increasing tax revenue, streamlining expenditure and reforming the public sector. It will include a comprehensive debt management strategy that addresses the debt overhang; a strengthened fiscal responsibility framework; and increased customs efficiency. The Ministry of Finance and Public Service will carry out the programme. The IDB loan is for a 20-year term, with a 5-year grace period, at a Libor-based variable interest rate. It will be disbursed in a single tranche.
LATIN AMERICA AND THE CARIBBEAN IS WORLD’S MOST UNEQUAL REGION, UN REPORT SHOWS Populations in Latin America and the Caribbean have the world’s highest levels of differences in wealth and income, the United Nations Development Programme (UNDP) says in a new report that calls for social policies which tackle the problem of inequality in the region. “This inequality is persistent, selfperpetuating in areas where social mobility is low and it poses an obstacle to progress in human development,” UNDP said in its first Development Report for Latin America and the Caribbean, entitled ‘Acting On The Future: Breaking the Intergenerational Cycle of Inequality’. Ten of the 15 most unequal countries in
the world are in the region, according to the report. The report also finds that it is possible to reduce inequality through the implementation of public policies that lift the region out of the inequality trap. The policies must have an impact on people, address the set of constraints that perpetuate poverty and inequality, and empower people to feel they are in charge of their development destinies, according to the report. “Inequality is inherently an impediment to progress in the area of human development, and efforts to reduce inequality must be explicitly mainstreamed in the public agenda,” said UNDP Regional Director Heraldo Muñoz. For UNDP “equality is instrumental in ensuring meaningful liberties; that is to say, in terms of helping all people to share in meaningful life options so that they can make autonomous choices,” he added. Women, indigenous populations and those of African descent are the groups hardest hit by inequality. Women in the region are paid less than men for the same work, they have a greater presence in the informal economy and they face a double workload, the UNDP report pointed out. Compared to those of European descent, twice as many members of indigenous and African descended populations, on average, live on US$1 per day.
IMF Cancels Haiti’s Debt and Approves New Three-Year Programme to Support Reconstruction and Economic Growth The Executive Board of the International Monetary Fund (IMF) has approved the full cancellation of Haiti’s outstanding liabilities to the Fund, of about SDR 178 million (equivalent to US$268 million). The Board also approved a new threeyear arrangement for Haiti under the Extended Credit Facility (ECF) requested by the authorities to support the country’s reconstruction and growth program. Both decisions form part of a broad strategy to support Haiti’s longer term reconstruction plans, following the devastating earthquake of January 12, 2010. The cancellation of existing debt was advocated by IMF Managing Director Dominique Strauss-Kahn in the days
following the disaster as part of a concerted international effort to launch a “Marshall Plan” for the reconstruction of the country. The new program provides a strong and forward-looking framework to support economic stability and reconstruction in the country, and will also help catalyze donors’ contributions. “Donors must start delivering on their promises to Haiti quickly,” Mr. Strauss-Kahn said, “so reconstruction can be accelerated, living standards quickly improved, and social tensions soothed.” At a high-level donors’ conference in March, the international community pledged US$ 9.9 billion to Haiti’s reconstruction, of which US$ 5.3 billion is to be disbursed over the next 18 months. CDF APPROVES US$8.3 million in COUNTRY ASSISTANCE – BELIZE AND ST. LUCIA to BENEFIT The Board of Directors of the CARICOM Development Fund approved its first Country Assistance Programmes (CAPs) to the Governments of Belize and St. Lucia to the value of US$3.4million and US$4.9million respectively. A loan of US$3 million will be extended to the Development Finance Corporation of the Government of Belize in support of Small and Medium sized Enterprises and Microentrepreneurs. In addition, a grant not exceeding US$200,000 drawn from the technical assistance resources donated by the Government of Finland will be allocated for “green projects”. Two grants totalling US$175,000 were also approved from Belize’s Statutory Grant Allocation. In the case of Saint Lucia, a loan for US$3.7 million was approved for a line of credit to be administered by the St. Lucia Development Bank (SLDB) for on-lending to the private sector. It is expected that the line of credit will finance, at a minimum, 62 loans to small and medium sized businesses to enable them to initiate, retrain, retool, expand or diversify business operations and to create additional employment. A US$1.1 million grant was also approved to finance the Establishment of a Trade Export Development Agency (TEDA) in St. Lucia.
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Perspectives GDP Indexed Bonds Can they help to stabilise Caribbean debt? by Michele Robinson
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ike most small, v u l n e r a b l e economies, Caribbean countries are suffering from the effects of the global economic slowdown. Growth has slowed in virtually all Caribbean countries over the past two years. Even more strikingly, nine of thirteen Caribbean community (CARICOM) countries are in economic decline. Accompanying the regional economic slowdown have been increasing levels of public debt. This, perhaps, is not surprising. Amid weak economic activity and declining government revenues, expenditure cuts have not been sufficient to close the holes in the budget. Many governments have had no recourse but to increase their borrowing. In many Caribbean countries, however, public debt is already at unsustainable levels. At the end of 2009, four of thirteen CARICOM countries (Barbados, Guyana, Jamaica and St. Kitts and Nevis) had public debt to GDP exceeding 100 percent. At a time when growth has slowed, little can be spent to help the poorest or to revitalise the economy. Are there instruments available to governments to link debt service payments to the level of economic activity in their country? The answer is yes; if Caribbean governments issue growth-indexed bonds. Consider a bond which, unlike conventional bonds, is indexed to GDP growth. Debt service payments would be higher during an economic upturn and lower when economic activity slowed or contracted. This is how GDP-indexed bonds are structured. They account for both GDP growth as well as current market rates of interest. The benefits of such a bond are twofold. First, the burden of debt service payments is automatically eased during an economic 48
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slowdown as payments would be lower than those paid on conventional bonds. Second, GDP-indexed bonds help stabilise government spending. With smaller debt service payments occurring during an economic slowdown, governments have less need to make expenditure cuts. Governments are better able to protect the poor and vulnerable in their economies and help buoy growth. At the same, government spending is automatically restrained during an economic upturn, as debt payments increase. There is a third benefit. GDP-indexed bonds can help avert debt defaults or a full-blown debt crisis s because payments are more directly linked to a government’s capacity to pay. Why then have so few GDP-indexed bonds been issued internationally? There are five main reasons. First, there are concerns about the accuracy, reliability and timeliness of GDP figures in many countries. Such data is essential in calculating payments on GDP-indexed bonds. Second, there are concerns about GDP data revisions as these can complicate payment calculations. Third, there are concerns about whether callability provisions existent in most bonds runs the risk of allowing a government to benefit from lower payments in an economic downturn but recalling the bond when debt service payments rise. Fourth, there are concerns about how to price the instrument. Finally, there is concern about the issuance costs especially since such bonds typically pay a premium over the rate of conventional bonds when GDP growth is in line with expectations. These concerns have limited the acceptability of these bonds. However, the momentum is shifting as many of the hurdles
in issuing these bonds have been overcome. Increased interest has led to the call for multilateral financial institutions (MFIs) to take the initiative in developing the market for GDPindexed bonds. Suggestions are for the World Bank to make loans linked to GDP growth and then onsell such debt to the financial markets. Others have been for the World Bank to purchase GDPindexed bonds from sovereign issuers them and again on-sell them to the markets. GDP-indexed bonds are an innovative financial instrument that Caribbean countries who issue securities, particularly in international
capital markets, may wish to consider. Given the recent sharp declines in growth, issuing bonds linked GDP may be an option whose time has come. Michele Robinson is a public debt management consultant with over 20 years experience at the national and international level. She is currently the publisher of the widely circulated debt management newsletter, Debt Watch-Caribbean, on her website www. michelerobinson.net
SAINT LUCIA TOURISM IN TOP FORM Tourism officials in Saint Lucia are reporting that record growth in visitor arrival figures for the first half of 2010 are being matched by impressive global accolades for the island, and for many of the hotels and resorts that offer outstanding hospitality on the island. Recent awards include “Best Caribbean Island in 2010” by Porthole Magazine and “World’s Leading Honeymoon Destination” at the World Travel Awards for the seventh year, reflecting the country team’s commitment to providing visitors with an excellent product with high standards of service and legendary hospitality. “Although we don’t focus on winning awards, when we do win them, it reassures the entire nation that our efforts to give of our very best are bearing fruit,” said Director of Tourism, Louis Lewis. Some of the major recognitions include Ladera making Condé Nast Traveler’s “2010 Gold List” which includes the best places to stay in the world, while Fond Doux Plantation was named second “Best Plantation Retreat in the World,” by The Guardian in the UK. The acclaimed Jade Mountain luxury resort recently received the AAA Five Diamond rating, and the top rank for “World’s Best Service” in a recent edition of Travel & Leisure Magazine.
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Perspectives Self-service can lead to good customer service “Everyone you meet in business - your customers and your employees - wants to know one thing: Do you care about me? Do you appreciate the important part I play in making your business a success?” That view was expressed some time ago by retired American football coach Lou Holtz. Holtz, who is also a motivational speaker, says “When you concern yourself with the welfare of others, you bring about loyalty and respect. You create value. If you handle your customers with care, they won’t look for another place to shop. If you treat employees with care, they won’t look for another place to work.” Customer service is a term thrown around quite a bit in business, but I don’t often witness its application. How often do you get that warm, satisfying feeling of being treated with respect at the checkout counter; the bank teller; the mechanic or by the shop assistant? I have, on occasion, walked out of shops and left my items on the counter rather than hand over my hard earned cash to someone who makes no effort to answer my questions; who acts as if I am a disturbance to her day, or who talks to me as if I am something he has to scrape off the sole of his shoe. “Some of us view service as being subservient to others and that’s where many of the problems are rooted,” says customer service trainer Sandee Bengochea. Sandee did her Masters in Training and Development in Customer Service looking specifically at the Caribbean environment. Sandee and her husband, marketing specialist Hilary, have many years experience as business trainers and they recently established the Customer Service Academy of Trinidad and Tobago. A big problem for companies in Trinidad 50
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and Tobago is poor service to the internal customer, that is, employees and co-workers. Some managers believe the front line, where employees interface with the external customer, is the place where customer service happens. But Sandee’s experience tells a different story, “We have found that when you fail to view staff and co-workers as your internal customers, you don’t deliver to your colleagues. This blocks the flow of work and causes problems for the person facing the external customer.” When conducting Customer Service training Sandee often hears participants ask; “How can I be nice to my customer when I’m being disrespected by my colleagues and when there’s so much confusion in the company?” Many times trainers are asked to fix the problems with the front line staff. But that’s like applying a plaster to a gaping wound; it does nothing to resolve the underlying issues that result in poor quality customer service. Sandee believes good customer service comes from understanding that you are your first customer. “If you don’t look after yourself and are not at peace with yourself, then the minute you walk out of your bedroom somebody’s going to get on your bad side. Looking after yourself is about caring for your whole being, your whole person; operating from the centre; looking after your mind, your body, your spirit and your emotional intelligence.” To be a more interesting and exciting person you need to take an interest in what’s happening around you, read, spend some time with people who mentally stimulate you. All this helps to develop the mind and is a significant element of looking after yourself. Taking care of your body, ensuring it has what is required to function efficiently is
also important. “If you get up on time; eat a healthy breakfast; take the time to think about what you’re going to eat during the day; make sure you schedule some exercise, you will likely develop a feeling of confidence that will last through the day.” Sandee has found that making the time to nurture the spiritual self is invaluable when it comes to serving yourself. She advises “Whatever your concept of God, wherever you find that inner peace, go there and rejuvenate, minister to yourself.” Nature forms part of this prescription. “Take the time to find beauty in nature. Smell the rain, look at the flowers, walk barefoot on the grass; do things to reconnect yourself with nature and embrace your humanness. This helps us to connect to the rest of humanity and brings the recognition of our inter-dependency. “ Then there’s Emotional Intelligence. Some people describe E.I. as knowing how to move and when to move; knowing what to say, when to say it and when to keep quiet. There are many books and countless workshops and seminars on the subject. The Cambridge Advanced Learner’s dictionary defines Emotional Intelligence as the ability
to understand the way people feel and react and to use this skill to make good judgments and to avoid or solve problems. This all sounds far removed from the cut and thrust of the business world and Mrs. Bengochea acknowledges that concern, “When conducting training and this aspect of being your first customer comes up, I hear excuses like ‘That’s easy for you to say, but you don’t have a boss like mine. Even if I do all of this to myself, when I walk into the office and I see that woman’s face, that’s it… I loose that calm.’ My response is that if you hadn’t taken care of yourself before leaving home and you walked into the office feeling lousy, just imagine how much worse things might have been.” It’s about people Sandee says and she quotes the tag line of an old advertising campaign for a Trinidad and Tobago insurance company ‘People are people… you know what I mean?’ “If the human essence in me can recognise the human essence in you and acknowledge that we are here on this earth for a short while, then I will treat you in the way I would like to be treated. I could sit down and listen to you; listen to your needs and try to help you as much as I can. Sometimes you can’t do much more than listen, but if you do that effectively, you would be providing good customer service to others.” I asked Sandee what she would say to a business operator who claims his products are selling well regardless of how his staff treats customers. Why would he be interested in Customer Service training? “The customer has the potential to destroy your company a lot faster now than ever before. If you give me shoddy service and bad attitude I can take a picture with my cell phone camera and put that on Facebook or You Tube and it becomes viral in no time. Within a few days the picture or video clip is seen by thousands of people locally and around the world. I can even send the picture instantly via email. It has happened to some very big companies recently.” Another consideration is the fierce competition in a packed marketplace. “There’s very little difference between brands and people are looking for that special customer service experience. As a customer you
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want to feel the company respects you and values your business.” In tough times, keeping customers happy is crucial. “When the global economy went into a tailspin at the end of 2008 into 2009, we saw several companies focus on keeping their clients by developing stronger relationships with them and providing an improved quality of service.” A shift is taking place here in the Caribbean towards greater customer satisfaction. “Not so long ago, companies were very keen to call in consultants to do strategic marketing, project management and related training, but in recent times they have started to ask for customer service training for all levels of staff.” Looking to the future, Mrs. Bengochea believes Caribbean companies should become more conversant
with the interactive, multimedia dimension of the Internet and use it to their advantage by setting up e-customer service, on-line customer service, Facebook pages, interactive websites and related systems. Many of their customers are on line, therefore companies need to be there monitoring what’s happening. “Customer service is like the new sales and has become a very sophisticated area. Previously the focus was on how you look, how you smile, what shoes you wear, how to answer the phone. All that is still valid, but there is a new level of sophistication as people recognise that you can’t just wait for customers to come to your door, you have to find out where people are and attract them to you.”
METHANEX AND MHTL EXPLORE METHANOL’S POTENTIAL IN FUEL BLENDING Left to right: Vishard Chandool (MHTL), Rampersad Motilal Managing Director/CEO, MHTL; Charles Percy – Managing Director/ CEO, Methanex Trinidad Limited; Mushtaq Mohammed – Director, Corporate Resources, Methanex Trinidad Limited
Two of the world’s leading methanol producers - Methanex Trinidad Limited and Methanol Holdings Trinidad Limited (MHTL) – have teamed up to explore the possibilities of blending methanol in gasoline to provide a cleaner burning fuel for the Trinidad and Tobago market. A Memorandum of Understanding signed in early September provides the framework for cooperation in the development and execution of a pilot programme that primarily will test the technical aspects of blending these products and will also evaluate its commercial and strategic benefits for Trinidad and Tobago. A potential benefit from this fuel blending initiative is to free up subsidized gasoline for export which would in turn lead to higher revenues for Trinidad and Tobago.
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We can halve hunger, if we change the way we do business By Shenggen Fan Director General, International Food Policy Research Institute (IFPRI)
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decade ago, the international community committed itself to halving the percentage of people who go hungry. When world leaders meet next week to review implementation of this and other Millennium Development Goals (MDGs)[1], they need to reexamine their policies and their commitment. Last year alone, the number of people deprived of food rose from 915 million to 1.02 billion, according to the Food and Agriculture Organization of the United Nations. Although recent estimates suggest that number has dropped to 925 million in 2010, the goal of halving hunger by 2015, enshrined in the first MDG[2], remains extremely challenging. The situation demands more innovative, better focused, and cost-effective action. To reduce hunger: 1. We need to increase combined investment in agriculture and social protection. Interventions combining agriculture and social protection have high payoffs, since they can protect the poorest in the short term and increase their productive capacity in the long run. Evidence from Ethiopia shows that households with access to a safety net program and a complementary agricultural intervention are more likely to be food secure, borrow for productive purposes, and use improved agricultural technologies than households that have access to just one component. 2. The private sector and emerging economies must be encouraged to play a greater role in reducing hunger in developing countries. Firms must be given the right incentives to move beyond a short-term focus on corporate philanthropy and to develop inclusive business initiatives that help fight hunger and integrate smallholders into the global value chain. Many of the world’s poorest people are smallholder farmers, and moving them out of poverty will involve increasing their productivity and linking them to high-value markets. Emerging economies need to be fully integrated into the global food security agenda, since they are ever more prominent in trade and investment, and in providing development assistance. 3. Developing countries must lead the fight against hunger with their own strategies. Some issues—such as climate change, trade, and disease control—need to be addressed at the international level, and individual countries must set their strategies in a global context. But on many other issues, experience teaches us that the most effective, efficient, and sustainable policies are those most attuned to local reality.
After all, China, India, Vietnam, and others have enjoyed agrarian and economic success thanks to country-led policies, such as partial liberalization, that were considered unorthodox because of their content, sequencing, or both. 4. Innovation must be encouraged. Pilot projects and experiments have the potential to improve policymaking by giving decision-makers information about what works before policies are implemented across the board. Experimentation can improve the success rate of reforms as successful pilot projects are scaled up and unsuccessful ones are eliminated. Policy-makers need to allow experiments to be monitored impartially, and they must rapidly transform the lessons learned into large-scale reforms. 5. Decision-makers at the global, regional, and national levels have made commitments to enhance food security but they have often not followed through. Governments and other institutions do need to keep their promises. Mechanisms to effectively ensure accountability and measure progress are urgently needed. In addition, the global food governance system itself needs to be reformed to work better. For example, the extremely volatile wheat prices seen in recent weeks remind us of the need for global institutional arrangements to prevent export bans, other forms of ad hoc protectionism, and excessive speculation. With only five years remaining until the deadline of 2015, the objective of halving world hunger can be achieved—but only if we pursue it with increased vigor and innovation.
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Region advances towards millennium goals but doubts remain about full compliance
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atin America and the Caribbean have made significant progress towards meeting the targets included in the Millennium Development Goals (MDG), but the recent global crisis has cast doubts about the possibility of achieving them all by 2015, according to the report ‘Achieving the Millennium Development Goals with equality in Latin America and the Caribbean Progress and Challenges’. The document, which examines the state of progress in the region towards the fulfilment of the MDGs, was prepared within the framework of the United Nations Regional Coordination Mechanism by 18 UN agencies, funds and specialized bodies in the region. The report was released in New York by Antonio Prado, Deputy Executive Secretary of ECLAC, which coordinated the inter-agency work, Pedro Medrano, Regional Director of the World Food Programme (WFP), and Niky Fabiancic, Deputy Regional Director of the United Nations Development Programme (UNDP). The document asserts that a significant part of the progress made by the region as a whole in advancing towards the MDGs, particularly with regard to reducing extreme poverty, took place in the six years prior to the global crisis (2002-2008). During that time, Latin America and the Caribbean had relatively high growth rates, with several countries improving income distribution, raising per capita social public expenditures and applying macroeconomic policies that avoided a harsher impact of the crisis. However, although some countries have attained several of the targets and others are en route to doing so, several countries will have difficulties in achieving full compliance if they continue at the same rate of progress observed so far to 2015. The report emphasizes a rights perspective and the reduction of gender, ethnic, socio-economic and territorial inequalities. It analyzes the post-crisis scenario in Latin
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America and the Caribbean and looks into productive employment and decent work, environmental sustainability, innovation and the technology gap and South-South cooperation. The region has progressed 85% in reaching the goal of halving extreme poverty (MDG 1). If it continues at this rate, Latin America could achieve this objective by 2015. Brazil and Chile, for example, already have, while Peru is close to doing so. However, the outbreak of the global crisis in 2008 may imperil the achievement of this target in other countries, having halted the trend of the previous six years (20022008), in which extreme poverty dropped from 19.4% to 12.9%. Moreover, poverty is greater among children, women, indigenous peoples and Afro-descendants and in rural areas. Regional progress towards the goal of halving the number of people who suffer hunger was 55% by 2006, according to FAO estimates. With regard to the new Millennium target of achieving full and productive employment
and decent work for all, the report notes that from 1990 to 2008, the indicators have evolved relatively well, although the low productivity growth and structural heterogeneity in the region have impeded real wages and income distribution from improving sustainably. In education (MDG 2), Latin America and the Caribbean have progressed significantly in terms of coverage and access. Most countries have registration rates close to or over 90%, similar to developed countries. However, there is still much to do in coverage and quality of high school education. As for gender equality (MDG 3), the gaps with regard to men have diminished over the past 15 years, but the rate of progress has been slow. The report states that the three necessary pillars for attaining gender equality are economic independence, physical autonomy and participation in decisionmaking. In relation to the right to health, expressed in MDGs 4,5 and 6, the health conditions of the population have no doubt improved, but progress is very unequal and heterogeneous, and with regard to some indicators, insufficient. For example, only a third of countries may be able to meet the goal of reducing infant mortality by 50%, given that regional progress in 2009 was 79%. With regard to MDG 7 referring to environmental sustainability, the consumption of ozone-depleting substances has diminished, the surface of protected areas has increased over the past decade and coverage of potable water and sanitation services has improved. However, Latin America continues to have some of the highest deforestation rates in the world and carbon dioxide emissions have grown steadily. Regarding MDG 8 on fomenting a global partnership for development, the region made significant progress in its international insertion between 2005 and 2009, although the international crisis caused its exports to drop drastically. In reference to Official Development Assistance (ODA), the report says that donor countries have yet to mobilize the necessary financial resources. The relative participation of the region as recipient of ODA fell from 9%
in 1990 to 7% of the total in 2008. Current ODA levels are far below the target established in the Monterrey Summit (2002) - 0.7% of gross income of donor countries. Fulfilling this commitment could contribute to achieving the MDGs. The document provides countries with a series of policy recommendations for the achievement of the Millennium Goals. These are South-South cooperation, including the principles of sustainable development in their national programmes, closing welfare gaps, implementing productive and technological policies to encourage job-creation and improve income, and paying urgent attention to the most extreme situations of poverty and hunger, all essential to gaining equality in the region.
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Industry Updates ALTA Releases 2010 Latin America and Caribbean Capacity Analysis ALTA, the Latin American and Caribbean Air Transport Association, in cooperation with OAG released its updated 2010 Latin America and Caribbean Capacity Analysis. The report is a comprehensive compendium of the region’s air transport statistics, including a ranking of the most important airports and city pairs in the region in terms of volume and growth. This year’s results highlight the region’s growth despite being faced with challenges due to the world crisis. Among the many notable facts included in the report are: • Brasilia-Sao Paulo surpassed Mexico-Monterrey to become the second busiest city pair in the region after Rio de Janeiro-Sao Paulo. The top five city pairs in the region include four Brazilian domestic city pairs. • Mexico City’s International Airport (MEX) is the largest airport in terms of departures, with about 440 departing flights per day (69% more than BOG, the second largest airport). • Bogota’s El Dorado International Airport (BOG) is the fastest growing airport in the region with 13,122 added flights, 16% more than last year. • Tocumen International Airport (PTY) in Panama is the fastest growing airport in terms of international departures, with 4,947 (15%) additional flights in 2009 vs. 2008. • Seventeen out of the top 20 city pairs from the Caribbean connect the region with the U.S. and Europe, while only three are to Latin America. The analysis identifies the top and fastest growing airports (in terms of flights) and city pairs (in terms of available seats) across the region, and is organized in a hierarchical way that allows readers to quickly identify given information. The analysis includes information on 510 airports and 2,192 city pairs from throughout Latin America and the Caribbean, and compares overall 2009 figures with 2008, as well as the average annual growth rates between 1999 and 2009.
Lasco enjoys significant growth in local and international markets Jamaica-based LASCO is enjoying triple-digit growth in exports to the United States and similar buoyancy in all its local and international markets. The LASCO companies are poised for even more phenomenal increase in sales with Lascelles Chin, Chairman/CEO of the LASCO Group of Companies announcing that LASCO is enjoying great momentum in its output and sales, despite the global economic recession. Mr. Chin said that LASCO is now supplying its products to renowned international purveyors of food products such as Tesco of the United Kingdom, ASDA (Walmart in the United Kingdom) and Walmart and Publix in the USA. He says LASCO products are a hit among the Caribbean territories, as well as the Caribbean Diaspora in USA and United Kingdom. “We at LASCO began exporting our products in the 1990s and are currently exporting to over 14 Caribbean territories. The export business has been growing extremely well in both the local and overseas markets. We are now taking steps to expand our business on a massive scale to keep up with the high demands for our products,” said the LASCO Chairman/CEO. Dr. Eileen Chin, Head of the LASCO Manufacturing Ltd., reported that the company’s export business to the United States “grew by 200% last year, and we are now employing additional efforts to boost that business.” LASCO exports to the US surpassed the company’s general export growth rate of 60% last year.
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Amor Group gets NGC’s contract Trinidad and Tobago’s state-owned National Gas Company (NGC) has awarded the Amor Group a contract to design and install a gas management system for the Cross-Island Pipeline system at a cost of US$750,000. The pipeline was completed in December 2005 and can transport up to 2.4 billion cubic feet per day of gas. The new gas management system will increase efficiency of the pipeline system. NGC has also awarded a contract to Netherlands-based Allseas for the installation of two offshore natural gas pipelines. The lines will send gas from new production fields off Trinidad’s northeast coast to industrial plants in Trinidad and Tobago. Republic Bank records big group profit Republic Bank Ltd recorded a group profit attributable to shareholders of $747 million (US$119 million) for the nine-month period ended June 30, 2010 compared to $741 million (US$118 million) for the same period last year. The group’s total assets now stand at $44.7 billion (US$7 billion), which represents a 7.7 per cent increase over the prior year. Republic Bank chairman, Ronald Harford said high levels of liquidity and depressed loan demand characterised the period under review. “In this environment, we have experienced declines in net interest income and other income due to reduced business activity. The levels of loan provisioning in this financial period have been significantly lower than the exceptional provisioning required in the comparable period last year,” he said in his Chairman comments. Noting the overwhelming victory in the General Elections and later the Local Government Elections for the current ruling administration, Mr. Harford said the Trinidad and Tobago government has a very strong base of national support for its economic and development plans, which the business community hopes will stimulate the economy.
Expanded Market for Jamaican Coffee in China Jamaica’s Ministry of Agriculture and Fisheries and the Coffee Industry Board have signed a Memorandum of Understanding (MoU), with Hangzhou Coffee and Western Food Association from China, creating another market for the distribution of premium Jamaican coffee. Under the agreement, the Hangzhou Coffee and Western Food Association will be the exclusive importer of Jamaican coffee into China for a period of two years. “The association will work with the Coffee Industry Board in the first instance to develop a critical marketing and distribution strategy to expand and promote as a premium product, the Jamaican coffee and blue mountain coffee brand within the Chinese marketplace,” said Minister of Agriculture and Fisheries, Dr. Christopher Tufton. The MoU will also facilitate the purchase 7,000 kilograms of coffee valued at some US$1.7 million over a 12-month period. “We believe we have an excellent partner. The Hangzhou Coffee and Western Food Association represent over 800 cafes, coffee roasters and specialists within China and have built up a tremendous reputation over the past 10 to 15 years as a pioneer and premier set of organisations in the Chinese marketplace,” Dr. Tufton said.
Above: Minister of Agriculture and Fisheries, Dr. Christopher Tufton (right) and President, Hangzhou Coffee and Western Food Association, Jin Mei Yang, toast each other after the signing of a MoU for the export of coffee to China.
business journal | september 2010
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Industry Updates Major Challenges for Tourism Hugh Riley, Secretary General & Chief Executive Officer of the 34-member Caribbean Tourism Organization said the industry has been actively taking up the challenges of the global recession through a number of initiatives: • Increased collaboration between governments, unions, and the private sector in an effort to reduce layoffs and employee dislocation; • The creation of national and regional coalitions including the financial services sector; • Stimulus packages of one kind or another; • Improved access to capital for maintaining and upgrading facilities; • A dedicated focus on training and improvement in service quality; • Encouragement of entrepreneurship; • Attempts at collaborative marketing on a regional basis; • Renewed emphasis on new-market strategies; • The aggressive pursuit of new air services; • Re-engagement of Caribbeans living overseas – an impressive example being Barbados’ own BFF program which I think is just excellent; • A renewed interest in intra-regional tourism; • Renewed search for extra-regional funding; and • An intense interest in research. So in short, the Caribbean didn’t create the recession, but we’re not standing by as mere spectators waiting for it to end; we’re dealing with it,” Mr. Riley said at the opening of Hotel and Restaurant Workers’ Week in Barbados.
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Mobile Banking is now available to Scotiabank Customers Scotiabank has announced that mobile banking services are available to Scotiabank customers who will be able to perform many banking functions from the convenience of their webenabled mobile device. “We understand that a lot of people in Trinidad and Tobago rely on the convenience of mobile devices to help them manage their busy lifestyles. “Scotiabank customers have asked for that convenience to extend to banking services, and that is exactly what we will be delivering,” said Richard Young, Managing Director, Scotiabank.
IMF Managing Director encourages Caribbean to push forward with economic reforms
D
ominique Strauss-Kahn, the Managing Director of the International Monetary Fund (IMF) said Caribbean countries have an opportunity to put an end to the negative cycles of high debt and low growth that have been affecting their economies and set forth towards a path of long-term, sustainable growth. Mr. Strauss-Kahn was among special guests who gathered with Caribbean leaders in Montego Bay, Jamaica, for the 31st Regular Meeting of the Caribbean Community (CARICOM) in early July. It was the first ever participation of an IMF managing director in the CARICOM meeting. In a presentation to leaders and other Caribbean officials, Mr Strausse-Kahn said the Caribbean has been significantly affected by the global crisis. High debt burdens and tight financing left Caribbean leaders with little room for fiscal stimulus, while the room to lower interest rates has been constrained by fixed exchange rate regimes, he said. In some countries, strains have appeared in the financial sector, and the proposed tightening in international standards for offshore financial centres will also pose
challenges. Now that global growth is resuming, the Caribbean mirrors the global trend of a multi-speed recover, according to Mr. StraussKahn. Countries that rely largely on commodity exports may expect, in general, an easier and stronger recovery in economic activity than those depending largely on tourism—which is affected by the sluggish labour trends in advanced economies. “This reality implies that the road to a sustainable recovery will need to be tailored to your own specific circumstances,” he said. “And, as in the advanced economies, it will be critical for those of you facing high fiscal and debt vulnerabilities to commit to comprehensive medium-term fiscal reforms, and to implement decisive adjustment efforts.”
OAS SECRETARY GENERAL MEETS WITH PRESIDENT OF COSTA RICA
The Secretary General of the Organization of American States (OAS), José Miguel Insulza, spoke with the President of Costa Rica, Laura Chinchilla Miranda, during a meeting in San Jose in which they analyzed current events in the American continent. Specifically, Secretary General Insulza and President Chinchilla talked about the possible return of Honduras to the Organization, international aid to Haiti and the security and drug trafficking challenges faced by the region.
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World Trade Report 2010
WTO report calls for more cooperation among governments in natural resource trade
Trade in natural resources
Trading in natural resources creates a great many » Why are challenges both for importing and exporting countries natural and governments need to cooperate more intensively resources special? if these challenges are to be adequately addressed, » Does every according to WTO economists. country gain In the WTO flagship publication World Trade Report from natural resource 2010, the economists maintain that “in a world where trade? scarce natural resource endowments must be nurtured » How do and managed with care, uncooperative trade policies economic policies could have a particularly damaging effect on global affect trade in resources? welfare.” » What are the The World Trade Report 2010 focuses on trade in challenges natural resources, such as fuels, forestry, mining and of resources trade fisheries. The Report examines the characteristics regulation? of trade in natural resources, the policy choices available to governments and the role of international cooperation, particularly of the WTO, in the proper management of trade in this sector. Director-General Pascal Lamy, in his foreword, said: “I believe not only that there is room for mutually beneficial negotiating trade-offs that encompass natural resources trade, but also that a failure to address these issues could be a recipe for growing tension in international trade relations”. “Well designed trade rules are key to ensuring that trade is advantageous, but they are also necessary for the attainment of objectives such as environmental protection and the proper management of natural resources in a domestic setting,” he added. The key elements of the Report: Natural resources have a number of distinctive features — the skewed geographical distribution of natural resources, their exhaustibility, the widespread occurrence of economic effects of natural resource exploitation disregarded by the market (externalities), high natural resource dependency in some economies, and tendencies towards high price volatility in natural resource markets. These specificities affect the modes of resource trade as well as the effects that international commerce in natural resources has on welfare. Gains from resources trade — Due to the geographical concentration of natural resources, trade has the potential to improve efficiency and increase welfare by shifting resources from regions of relative abundance to regions of relative scarcity. However, welfare comparisons are complicated by dynamic factors, namely the exhaustibility of natural resources, and pervasive market failures. The latter include imperfectly competitive markets and open access to resources when property rights are poorly defined. Four other major issues are commonly associated with natural resources trade — the presence of environmental externalities, the effect of technology on the sustainability of resources, the so-called “curse” faced by resource-rich economies, and the high volatility that characterizes some resource sectors. International trade interacts with all these factors in complex ways, in some cases exacerbating existing problems and at times providing solutions. 60
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Trade policy in resource sectors — Resource-rich countries often restrict exports through a variety of means such as export taxes and quantitative restrictions, whereas tariff s and other import restrictions in resource-scarce countries are low. There are, however, two important qualifications to this general rule. First, domestic policies that are likely to affect trade flows, including subsidies, technical regulations and consumption taxes, are frequently used. Second, the structure of protection that resource exporters face tends to rise with the stage of processing (tariff escalation). Policy interventions in natural resource sectors are justified on welfare grounds by the specific features of natural resources. Governments employ trade policies as instruments to achieve a number of legitimate objectives, such as improving resource conservation or stimulating Natural ofresources at thefrom root of much diversification exports are away dominant resource sectors. However, three significant economic activity. Their share in world trade is growing, • The total value of world trade in natural resources was caveats need to be kept in mind. First, trade measures are often a second best policy to address US$ 3.7 trillion in 2008, or nearly 24 per cent of world they are a key component of many economies, and their use problems associated with natural resources. Second, restrictions have beggar-thy merchandise trade. This on valuetrade has increased more than and extraction have important effects on the environment. neighbour effects, either because they may affect sixfold world prices they shift profits between 1998or and because 2008. This Report analyses patterns and characteristics of between exporters and importers. Third, trade and domestic measures in natural resource • The share of fuels in natural resource trade rose from trade in resource sectors, natural resources trade theory sectorsand are close substitutes in some cases. 57 per cent in 1998 to 77 per cent in 2008. Fish and policy and the role of international cooperation,
Key facts
forestry products each represented 3 per cent of world
particularly of the WTO, in the proper management of
tradeofinthe 2008, while mining products were responsible Resources regulation — Theis general multilateral trading system provide trade in trade these sectors. The aim of the Report to promote principles for 18 per cent. greater understanding of this complex policy area. a framework for limiting non-cooperative trade policies, including within resource sectors. SeveralTheWTO have in relation to • the specific features of natural resources. The top 15 exporters of natural resources were responsible Reportrules also focuses on relevance the special economic for 52 per cent of world resource shipments in 2008,always WTO rules, however, were not drafted to regulate natural resources trade and may not features that characterize natural resources. These while the top 15 importers received 71 per cent of traded respond adequately to sectoral specificities. features make standard trade policy prescriptions resources.
problematic. Gains from open trade can be realized if domestic policies and global rules that address the KEY FACTS markets are in place. On • The particularities total value of ofnatural worldresource trade in natural resources basis3.7 of this analysis,inthe2008, Report or identifi es several wasthe US$ trillion nearly 24areas per centwhere of world This value has intensifimerchandise ed cooperation intrade. the regulation of resources increased more six fold between 1998 and trade could lead than to mutual gains . 2008. • The share of fuels in natural resource trade rose from 57 per cent in 1998 to 77 per cent in 2008. Fish and forestry products each represented 3 per cent of world trade in 2008, while mining products were responsible for 18 per cent. • The top 15 exporters of natural resources were responsible for 52 per cent of world resource shipments in 2008, while the top 15 importers received 71 per cent of traded resources.
• • Applied Applied tariffs (on 23 average) 23 in per cent lower tariff s are (onare average) per cent lower natural in natural resource sectors relative toAverage merchandise resource sectors relative to merchandise trade. bound rates in natural bound resource sectors cent in trade. Average ratesarein1.7 per natural resource developed 30.4cent per cent developing and sectors countries are 1.7andper in in developed countries least-developed and 30.4 countries. per cent in developing and leastdeveloped countries. taxes cover 11 per cent of natural resources trade • • Export Export taxes cover 11 per cent of natural compared to 5 per cent of merchandise trade. Export resources trade compared to 5 per cent of other restrictions on natural resource products represent merchandise trade. Export restrictions on natural 35 per cent of notified export restrictions. resource products represent 35 per cent of notified export restrictions. • Several natural resource sectors appear prominently in • the Several natural resource subsidy notifications. Available research sectors suggests that appear prominently in the subsidy notifications. Available global subsidies to fisheries are in the order of US$ 25 and research suggests that global subsidies to 29 billion annually. fisheries are in the order of US$ 25 and 29 billion annually.
Figure 6: World World naturalnatural resources exports exports by product, 1990-2008 (Billion dollars) resources by product, 1990-2008 (Billion dollars) 4000 Fuels Mining products
3500
Forestry products 3000
Fish
2500 2000 1500 1000 500
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0
Source: WTO Secretariat estimates Source: WTO Secretariat estimates. business journal | september 2010
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Books ENERGY
The New Agenda The global energy situation is reaching a crisis Director of the Petroleum Corporation of Jamaica, ENERGY has experience and expertise in a wide range of point in terms of sustainability. The depletion The New Agenda energy matters. He is trained as a geologist and is of fossil fuels (coal, oil and gas) will continue a former Commissioner of Mines and Geology. He T unabated is reaching a considering the increasing rate of has co-edited a major work, Geological Society of crisis point in terms of sustainability. The depletionenergy of fossil fuels (coal, oilconsumption and gas) will continue worldwide. It is expected America Memoir 182, Biostratigraphy of Jamaica, unabated considering the increasing rate of published in 1993. He has published widely in energy consumption worldwide. It is expected that global energy demand will nearly double that global energy demand will nearly double by various international journals and books on many 2050. The new and long term energy futurenew and long term energy future by 2050. The that we envisage will be powered by alternative subjects including energy, environment, resource energy and cleaner fossil fuels. that we envisage will be powered by alternative policy, micropaleontology and stratigraphy. He has “There are enormous challenges in the energy sector, and there is a need for a technological Billions of dollars must be expended on upgradand cleaner ing energy electricity transmission networks to handle and societal shift towards a new energy future. This book fossil is not onlyfuels. timely, but it examines been a consultant on energy programmes and demand and the variable input of the technologies thatincreased will allow a cleaner energy system. It is written at a level be which expended both policy for a number of multilateral and bilateral such as wind Billions dollars must on renewables and solar. Much ofof the laymen as well as students can be introduced approaches to global energy security. It capital financing will come from private to investagencies on most continents. Dr Wright holds a upgrading electricity transmission networks to ment, but Governments will need to continue to should be required reading for the citizens of our planet!” PhD from Stanford University, an MPhil from implement policies that foster investment by handle increased demand and the variable input private companies in order to encourage the University College, London and a BSc from – Lawrence Kazmerski, Science and Technology Partnerships National Renewable Energy growth of renewables. ofenormity renewables as wind and solar. Much of Durham University. The of the challenge also means such that Laboratory Golden, Colorado, USA. Governments should do their part to encourage Dr Wright has received several awards, includthe capital financing will come from private the societal and technological shift towards new ing the Commander of the Order of Distinction “This book points the towards a greener energy andway improved energy systems. As civil society andeconomy. It provides an easy to read, investment, but Governments will need to continue political leaders face the difficult and varied yet detailed assessment of fuels, technologies and issues that will shape our energy future.” (CD) conferred in 1989 and the Chubb Award for choices, they should remember that failure to act to implement policies that foster investment by Excellence from the Geological Society of Jamaica now could force society into more painful choices – Akintayo Adedoyin, University of Botswana, Botswana in the future. private companies in order to encourage the in 1993. At the 2002 World Renewable Energy We can no longer afford to ignore the clarion of the future. Instead we must ahead and and also those of the future. The book Congress in Cologne, Germany, he was awarded “Energy is one of thecallmost critical issues ofplan our times growth of renewables. strive toward energy sustainability and security. the accolade of Pioneer in Renewables. His most gives an interesting overview on energy, its history and future challenges with a balanced Despite the hurdles confronting us, the drive to The enormity of the challenge also means create a new energy system can only be beneficial recent awards are the inaugural CARICOM viewpoint.” to everyone. This new and cleaner energy system that Governments should do their part to Science Medal for the excellence of his contribuwill assist in reducing the rapid rise in greenhouse – Ilkka Savolainen, VTT Technical Research Centre of Finland gas encourage emissions that is now accepted as a contribu-societal and technological shift tion to the earth sciences in the Caribbean, and the tor to global warming. Competition among energy the Jamaican National Medal for Science and sources will stimulate innovation, keep energy towards new and improved energy systems. As affordable and increase global energy security. Technology (2008). Thatcivil is the mission, and the New Agenda. society and political leaders face the difficult and varied choices, they should remember that failure to act now could force society into more RAYMOND WRIGHT, painful choices in the future. a former Group We can no longer afford to ignore the Managing Director clarion call of the future. Instead we must plan of the Petroleum ahead and strive toward energy sustainability Corporation of Jamaica, and security. Despite the hurdles confronting us, has experience and the drive to create a new energy system can only expertise in a wide ISBN: 978-976-8217-82-0 be beneficial to everyone. This new and cleaner range of energy energy system will assist in reducing the rapid matters. He is trained rise in greenhouse gas emissions that is now as a geologist and is a accepted as a contributor to global warming. former Commissioner Competition among energy sources will stimulate of Mines and Geology. He has co-edited a innovation, keep energy affordable and increase major work, Geological Society of America global energy security. That is the mission, and Memoir 182, Biostratigraphy of Jamaica, the New Agenda. published in 1993. He has published widely in various international journals and books on many subjects including energy, environment, resource policy, micropaleontology and stratigraphy. He has been a consultant on energy programmes and policy for a number of multilateral and bilateral agencies on most continents. Dr Wright holds a PhD from Stanford University, an MPhil from University College, London and a BSc from Durham University. Dr Wright has received several awards, including the Commander of the Order of Distinction (CD) conferred in 1989 and the Chubb Award for Excellence from the Geological Society of Jamaica in 1993. At the 2002 World Renewable Energy Congress in Cologne, Germany, he was awarded the accolade of Pioneer in Renewables. His most recent awards are the inaugural CARICOM Science Medal for the excellence of his contribution to the earth sciences in the Caribbean, and the Jamaican National Medal for Science and Technology (2008). RAYMOND WRIGHT, a former Group Managing
HE GLOBAL ENERGY SITUATION
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Books New IDB study calls for more trade, cooperation between India and Latin America Commercial opportunities and competitive challenges arising from stronger integration between distant partners. India could become a fast-growing market for Latin American and Caribbean commodities but governments in this region must foster closer ties with the South Asian giant and reduce trade costs to tap into that opportunity, according to a new study by the InterAmerican Development Bank (IDB). With 1.1 billion people and a scarcity of natural resources, relative to other continentsize nations, India has the potential to be a large buyer of agricultural and mineral goods, Latin America’s main exports, according to the study. Currently, India represents just 0.8 percent of this region’s overall trade, compared with China’s 7.7 percent share.
India: Latin America’s Next Big Thing?
India: Latin America's Next Big Thing?
The book “India: Latin America’s Next Big Thing?,” published by the IDB’s Integration and Trade Department, looks into recent development and economic trends in India and their possible impact for Latin America and the Caribbean. The study argues that India has the potential to mirror the recent economic performance of China, which has become a major market for Latin American and Caribbean exports but also poses a challenge for the region’s manufacturing sector. “The region and India are increasingly together at the table when major decisions are taken,” IDB President Luis Alberto Moreno said. “We are starting to see greater integration among them and there is a tremendous opportunity for more trade and cooperation. Latin America and the Caribbean are poised to advance confidently into a promising future and India is increasingly interested in being an active partner in that process.”
India: Latin America's Next Big Thing? Mauricio Mesquita Moreira Coordinator
Special Report on Integration and Trade
Inter-American Development Bank
business journal | JUNE 2010
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The Lighter Side...
The actors change, but is it the same old show?
I
recently had to attend a meeting with the director of a statutory body. The aim was to clarify pertinent areas regarding implementation of a community project. This brief meeting lasted over three hours. I am still in the process of deciphering what took place and the outcome. What appears certain is that the areas needing clarification seem as complex and opaque as ever. There is a tendency in all strata of society to talk a lot of nothing about something and even to talk a lot of something about nothing. Ole talk is “we ting” – as we would say in our Trinbagonian dialect. We enjoy cooling out, making a ‘lime’, chatting with friends and neighbours. That kind of old talk is healthy and vital, but what are we to make of the situation when we find ourselves overwhelmed with lectures, speeches, confessions and information constructed with the singular aim of being condescending and misleading? The voices are raised, “We want to know. We demand an official response!” So, we wait and wait and when we get tired of waiting we even wait some more. The official response is a production number, delivered with all the melodrama of an opening night monologue that has been written and rehearsed to ensure the minimum amount of information is passed on. The speech is so well padded that even 64
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if it were made of glass and dropped from the top of one of those towers on the Port of Spain waterfront it would land, unbroken, on the road. Sometimes the simplest question is so skillfully dodged that one has to wonder if the speaker had studied dance. The dissemination of information is so choreographed that you become giddy watching the jumps, the twirls and pirouettes. And don’t forget the spin. Like any show, after a number of performances you soon become familiar with the moves, the entrances and exits. Even if there is a change in the cast, you can still predict the action. From time to time you will notice that the old theatre group has to leave and a new group comes onto the stage with a new production team, new lighting and sound designers and even new props and stage settings. It is a pleasing change. However, the novelty soon wears thin, as you recognise it is the same production as before, with the same story line, the same moves, same dialogue and same old talk. If you stand up and question the producer about the repetition you will be told you are clearly mistaken and that this is an entirely new production. Any resemblance to any other production, past or present, is purely coincidental. So you return to your seat and watch.
Strangely enough, as time passes, you forget the previous presentations and are drawn into the “new” themes, sub-plots and by-plots. Amidst all this “newness” you begin to sense that something is cockeyed. You look at the synopsis printed in the programme and realise the story is deviating from the one advertised, just as it did with the last theatre group. You stand up and question the director. You are greeted with an exasperated tone, “Aren’t you aware that the director reserves the right to alter the story at his discretion?” “Yes”, you think to yourself, “I should have known that. That is theatre. Why get yourself so anxious about the play, you are only a patron, you have no knowledge of the science and art of theatre. Why not just sit down and stop disturbing people, you want to run the show or what?” So once again you take your seat and become engrossed in the new re-play. After the fourth scene you are aware that most of the actors are acting contrary to the lines they are delivering. Obviously this has a deleterious effect on the performance and the illusion that good theatre should create is shattered. You jump to your feet and scream at the stage, “What on earth are you all doing? Why are you making contradictory statements? Why in heaven’s name are you saying one thing and doing something else?” The reply comes back to you from the stage with full force, “Don’t you understand the subtlety of poetic license?”
The play has once again become a comedy of errors. The farce you are now watching is not what you paid to see. You turn on your heels and walk briskly to the foyer. As you reach the doors of the theatre a pleading voice calls from within: “Hold on! Come back! I know you believe you understood what you think I said, but I am not sure you realise that what you heard is not what I meant.” That does it. You rush out of the building, into the arms of the cool evening air and breathe deeply. An old friend used to tell me, “There are many varieties of hood: brotherhood; motherhood; fatherhood; neighbourhood; priesthood, to name a few. However, the worst kind of hood is the hoodlum who hoodwinks you with falsehood.”
business journal | september 2010
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Discover Caribbean PR Agency Online
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