Trends in FDI - STAR Businessweek

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TRENDS IN FDI Global FDI may be faltering, but the Caribbean is still proving attractive to overseas investors — particularly in tourism, services and manufacturing.

EU prepares crackdown on ‘citizenships for sale’ Brussels is preparing to crack down on EU governments, including Malta and Cyprus, that award citizenships to rich people from outside the bloc, as concerns mount about so-called dirty money from Russia Pages 3

BY CATHERINE MORRIS, STAR BUSINESSWEEK CORRESPONDENT

In the wake of the worldwide recession, international investors tightened their belts. Global Foreign Direct Investment (FDI) has been on a downward trajectory for the past decade, and fell further in 2017 with a 23% drop to US$1.43tr. The one bright spot in the contracting economic landscape is the Caribbean, where FDI remains resilient, largely thanks to its thriving tourism sector.

TOURISM GAINS

FDI inflows to the Caribbean rose by 20% last year to reach almost US$6bn, according to the Economic Commission for Latin America and the Caribbean (ECLAC).

The Dominican Republic was the region’s strongest performer, amassing over US$3.5bn in 2017.

Continued on page 4

The war on drugs has been lost Get ready for some high old times.

Three phenomena are conspiring to upend the global market in illicit narcotics, which are set to become more available and be better quality than ever before Page 7

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WHAT’S THE VALUE OF A TRADE UNION MEMBERSHIP IN 2018?

BY ED KENNEDY, STAR BUSINESSWEEK CORRESPONDENT

The STAR Businessweek

BY CHRISTIAN WAYNE – EDITOR AT LARGE

In December 2017 The STAR Businessweek published an article entitled “Keeping up with Compliance” that focused on the shifting regulatory goal posts for international banking and global financial reporting, and the difficulty less-resourced countries like Saint Lucia have in meeting their reporting obligations. Featured in that article was an interview with Mr. Calixte Leon, Executive Director of Saint Lucia’s Financial Services Regulatory Authority – the regulatory body that licenses and supervises the operations of the country’s financial services sector. In that interview, Leon bemoaned the difficulties Saint Lucia’s financial sector faces in attempting to keep pace with constantly evolving reporting requirements that, for the most part, are one-sided directives given by wealthier nations to smaller ones. Leon also stated that what Saint Lucia needed to do was “shore up” its reputation as a “compliant hub” to facilitate growth in the sector. In the December interview, Leon noted that the department (at the time) was currently focusing on getting ready to comply with the Common Reporting Standards, a new series of global reporting mandates which his office had found to be very costly to implement.

Fast forward eight months and the deadline for CRS compliance is upon us, and countries that risk noncompliance are also now risking their reputations—being blacklisted, and the unspecified consequences associated with the relegated status. In a recent opinion piece by Sir Ronald Sanders (Antigua & Barbuda’s ambassador to the US) entitled “EU and OECD have the Caribbean on the ropes again”, Sanders makes the case that the majority of the region is just not prepared for the September deadline for CRS, and that countries will be punished more severely than ever before. Those punishments are still semi-veiled, but if last year’s blacklist-encounter faced by Saint Lucia was any indicator, it’s likely not something our financial sector, our prime minister or his Ministry of Finance, should be taking lightly.

It’s Nothing Personal. It’s Business.

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Labour Commissioner, Ray Narcisse (left) with representatives of Flow management and staff and of the National Workers Union

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s our world shifts to a truly digital and truly global economy, there’s extensive discussion about emerging technology and future possibilities. This is great and appropriate, but oftentimes the focus on the new roads ahead make it easy to overlook the institutions that were previously a key part of our economic growth and societies.

In recent years many have begun to question the value of a trade union membership. It can be a challenging one to define; while the way in which we work and live has changed, and is continually changing, unions also exist in a different dynamic.

Business and commercial groups must drive forward and perpetually outpace one another. Put simply, they play offence. Unions play defence, chiefly looking to ensure workers’ rights, conditions and standards are maintained. So, given not only the changes we’ve seen but the trends we know lie ahead, does union membership require a rethink?

THE HEART OF A UNION Once upon a time unions were not

only at the epicentre of working life in many nations, but the community as a whole. The reasons for this were many and varied, and depended on local factors.

Nonetheless, it’s a reality that at the heart of this was often not a mere simple division between employer and employees, but broader social factors that often heavily informed whether a working adult found themselves on the employee or union side of a workplace.

Today the erosion of union membership across many nations may be seen as lamentable for union members, but is also an indicator of success in other areas of society.

Educational levels have grown, multiculturalism has flourished, and historic sectarian divides that grew on an ‘us vs. them’ justification for active union participation, have eroded.

The history of the struggle has a strong presence within our region’s history, going far beyond annual Labour Day holidays, to something deeper.

In 1838 the ‘Masters and Servants Law’ in Barbados was enacted. The odorous title of the law is rightfully consigned to history, but the law itself

continues to be an important example of contracts at the time. It prescribed that any worker who worked five consecutive days was classified as a regular employee of the employer for one year thereafter. The contract could then only be broken with one month’s notice. The momentum of the unions began swelling from then as calls for greater workers’ rights grew.

Then there was the Jamaican labour unrest of the 1930s, a time that proved to be pivotal for the ultimate recognition of unions in the Jamaican Constitution of 1962. Here in Saint Lucia, the St. Lucia Teachers’ Union (SLTU) traces its founding all the way back to 1934, under the leadership of Mr. Henry J. Belizaire.

To understand the value of union membership, it’s essential to acknowledge the strong cultural identity of unions in the Caribbean, even if their influence has diminished elsewhere. This decline is not a question of culture, but of structure.

BUILDING COMMUNITY AND CONSENSUS

As traditional trade jobs in manufacturing and primary production jobs have diminished, and social mobility has grown, many nations have seen union membership drop, with young workers finding greater freedom to navigate their careers. The digital world has loomed large; the jobs network a union once provided can today be replicated with a simple Linkedin profile.

In generations gone by, the need to organise collective community discussion, and come to a shared position on an issue, was often painstaking. All that snail mail, all those phone calls, and all those community meetings. Today this can easily be done by creating a Facebook group.

This reality is no derision on unions, nor their members, but just instead a necessary acknowledgement that a key element of the unions’ appeal — the power to gather people and have them speak as a common group — has been significantly eroded by the rise of social technology.

Social media technology could be seen as a liability, but it’s also a potential asset.

Continued on page 5

MONEY LAUNDERING

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EU PREPARES CRACKDOWN ON ‘CITIZENSHIPS FOR SALE’ Concern about Maltese passports for Russians ahead of push against money-laundering

BY MEHREEN KHAN, FINANCIAL TIMES CORRESPONDENT IN BRUSSELS

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russels is preparing to crack down on EU governments, including Malta and Cyprus, that award citizenships to rich people from outside the bloc, as concerns mount about so-called dirty money from Russia.

Vera Jourova, the EU’s commissioner for justice, told the Financial Times that “citizenship for sale” schemes in eight member states will come under tougher scrutiny from Brussels as part of a wider drive against money laundering and corruption.

She also alluded to worries about the origins of the wealth of Russian applicants for Maltese citizenship.

“In cases of any doubt, a person should not have the privilege of citizenship,” Ms Jourova told the Financial Times. “We have no power to ban such a practice but we have an obligation to put high requirements on the member states to be careful. They are granting citizenship for the whole of Europe.”

The EU states with “citizenship by investment” schemes include not only Malta and Cyprus, but also Austria, Greece, Hungary, Latvia, Lithuania and Portugal.

Such schemes can require applicants to make substantial investments in property or bonds. In return they allow the new passport holders to work and live in any EU country and to travel freely inside the Schengen area.

EU member states are free to set their own criteria for citizenship. But the commission will publish a report in

Vera Jourova, EU Commissioner for Justice, said that ‘citizenship for sale’ schemes in eight member states will come under tougher scrutiny © Reuters

the autumn that is likely to fault government schemes for not carrying out enough due diligence on applicants and the sources of their wealth.

The report is part of the more general drive against money laundering, in conjunction with the European Central Bank and the European Banking Authority, which is intended to strengthen provisions against illicit cash.

High-profile money laundering scandals involving banks in Malta and Latvia have made citizenship schemes more contentious by drawing attention to the lack of controls on Russian funds entering EU countries.

Ms Jourova said she was especially alarmed by Malta’s scheme, in which an individual can gain citizenship in return for a Euro 650,000 contribution to the country’s development fund and the

purchase or lease of property, as well as investments of at least Euro150,000 in stocks and bonds.

Family members can be added for an additional fee of Euro 25,000 to 50,000 per person.

“It is a big concern when a Russian citizen who has worked his whole life in middle or senior management — where salaries aren’t very high — suddenly has the money to buy citizenship in Malta,” the commissioner said.

Malta’s scheme, put in place in 2014, has brought Euro 590m to the country from more than 700 investors, according to Identity Malta, the government body that runs the programme.

The Maltese government has begun to publish the names of individuals granted citizenship. In 2016, the list included Boris

Mints, the Russian billionaire owner of investment company O1 Group, and Arkady Volozh, the founder of Yandex, Russia’s biggest search engine.

In March, a report by Transparency International with the Organized Crime and Corruption Reporting Project found the passport schemes posed a “major corruption risk” to the EU. Ms Jourova said: “We want the states to do their due diligence and not to enable criminals to come to Europe and have equal rights as people who came years ago, who work, who pay taxes and have children and have to wait for citizenship.”

Golden visas represent only a small proportion of new EU passports. In 2016, 994,800 citizenship applicants were granted across the EU, according to Eurostat, with just 0.1 per cent of applications made under investment schemes.

The Investment Migration Council, the industry body that represents investors and governments who take part in the schemes, insists the most popular programmes — in Austria, Malta, and Cyprus — pose no security threat to Europe.

“Significant time and capital is spent by professional firms and governments to ensure the tightest levels of security and background checks are carried out by European and global security agencies,” said Dimitry Kochenov, chairman of the IMC. Ms Jourova said the commission would also work faster in updating its blacklist of countries that have a high risk of money laundering.

Russia is not on the list at present.

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TRENDS IN FDI Continued from page 1

The bulk of the investment was directed into the tourism industry. While Saint Lucia has not yet released its 2017 FDI data, the country certainly saw a major uptick in tourism-related projects last year.

Developments announced or completed in 2017 include Curio by Hilton; the luxury mega-hotel, Royalton Saint Lucia Resort and Spa; the Fairmont Saint Lucia in Choiseul and the Black Bay Master Development which is being funded by Dubai-based Range Developments. In total, the country expects to have around 2,000 new hotel rooms by 2021.

Some projects, such as the US$2.6bn Pearl of the Caribbean development backed

by Hong Kong developers Desert Star Holdings Ltd., seek to use Saint Lucia’s Citizenship by Investment Programme under which foreigners are offered citizenship in exchange for investing in a national fund or government-approved project. These types of schemes have been used successfully by most Eastern Caribbean states to boost their FDI and attract investors from outside their core markets of Europe and the United States, gaining interest from Asia and the

Middle East.

NICHE SECTORS

While the tourism industry is the main recipient of FDI dollars across the Caribbean, inflows have been more diversified in recent years as the region, along with the rest of the world, embraces the Fourth Industrial Revolution. Other industries attracting foreign interest in 2017 were services and manufacturing, in particular renewable energies and telecommunications.

In the past two years, around 12% of total FDI inflows to Latin America and the Caribbean have gone to the telecommunications sector while 15% funded renewable energies. This rising interest in connectivity, technology and sustainable energy generation is reflective of global trends. As technology advances, there are more opportunities for Caribbean countries to capitalise on these niche markets.

Saint Lucia’s national investment agency, Invest Saint Lucia, is focused on diversifying the country’s FDI offering and

Royalton Resort , Saint Lucia. With over 12,000 rooms under management throughout Cuba, Jamaica, the Dominican Republic and Antigua, the vertically integrated travel and leisure conglomerate shows no signs of slowing growth

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recognises that solely relying on tourism doesn’t provide long-term security. The agency is now looking to lure investors in smart manufacturing, including agro-processing and smart technology manufacturing. It has also been successful in attracting Business Process Outsourcing (BPO) operations such as KM2, Ark Teleservices and Artifical Intelligence specialists Ojo Labs.

Not every Caribbean country is suited to the same type of FDI. While Saint Lucia has the resources to accommodate BPO services and the proven demand to sustain its tourism offerings, other countries can play to different strengths. The Dominican Republic received US$410m last year into its mining sector, Guyana attracted US$90m in its energy industry and Jamaica received US$60m from a Chinese iron and steel company to reopen aluminium plant Alpart.

QUALITY NOT QUANTITY

The amount of FDI a country receives is

important, but the quality of that investment is equally crucial. In 2015, the United Nations created a set of 17 Sustainable Development Goals (SDGs). These include affordable and clean energy, climate action, quality education, an end to poverty, gender equality and sustainable cities and communities.

ECLAC suggests that FDI has a vital role to play in helping the Caribbean meet its SDGs and advises countries to strategise on how to attract the right kind of investment, where it can be used most effectively and how FDI can contribute to structural change. “In order to meet the SDGs, greater investments will be needed to increase productivity, reduce poverty and broaden basic services, and some of these will need to come from FDI,” according to a recent ECLAC briefing paper.

ECLAC predicts that global FDI will remain weak but stable in the short-term. As FDI in the Caribbean remains solid, another major source of external finance is waning. Official Development Assistance (ODA) is declining as a percentage of National Gross Income (NGI). In the 70s, 80s and 90s, the Caribbean ODA was an average of 0.4% of regional NGI. In 2016, it amounted to just 0.17%.

It’s clear that if Caribbean countries want to make progress on the SDG roadmap, set out in the 2030 Agenda, they cannot rely on ODA alone. FDI must play a bigger part in meeting those goals.

FDI can be leveraged to benefit local communities in a lasting way, building links between international firms and local SMEs so that skills and expertise are assimilated by the host country. Investments into renewables can lower electricity costs, conserve the local environment and reduce pollution. Funding for emerging tech in fields such as agriculture will help countries in their bid for food security. FDI at work in the manufacturing sectors should involve on-the-job training to reduce unemployment and create opportunities for local youth. In this way, the benefits can be felt throughout the local population and into the future.

“It is not simply about creating the conditions for foreign capital to enter,” said ECLAC Executive Secretary Alicia Bárcena, “it is about attracting investments that become sources of technological, productive and employment-related overflow, and that are oriented towards sustained, inclusive and sustainable economic growth.”

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WHAT’S THE VALUE OF A TRADE UNION MEMBERSHIP IN 2018?

Continued from page 2

The bedrock of a union will always be advocacy for workers’ rights and conditions, but there’s a way today for these groups to offer a wider array of services and benefits to their members, especially in areas that are natural arenas for advocacy and community engagement.

These include providing links to child care services while advocating for more maternity leave, support services to women while pushing to shrink the gender pay gap, and retraining courses for middle-aged professionals who seek a new job in economies with low hiring rates for seniors.

DIVISIVE UNIONISM

Strictly speaking, the best case scenario in a workplace is one where there is no need for a union. Just the same as the best case scenario for a society is where there is no need for a police force. The old saying, ‘If all people were angels, we wouldn’t need governance’ applies.

Union identity has changed but many workers will find ongoing value in membership of one.

On the other hand, unions can no longer

pretend it’s the same fight and same personnel it once was. The professionalisation of unions has often shifted leadership from the factory floor to office towers. The argument endures that union leaders should be union workers, those who truly understand what it’s like to lead a movement and lead a shift on the shop floor.

It also can’t be overlooked that unions can play a negative role: intimidating employers, intimidating workers who are not members, and doing a disservice to their members as episodes like constant demands for pay rises can strangle a small enterprise’s capacity to grow, ultimately cutting out the chance for workers to earn more in the long run!

FINDING COMMON GROUND While unions must be prepared to aggressively advocate for their members, they’re also required to be true leaders in a national economy. As academic Akhentoolove Corbin noted in 2015, unions “must become more strategic and, in a spirit of social partnership, be a critical and accepted stakeholder in national education strategies and plans”,

adding, “they may be better placed to influence from the inside”.

The briefing of Saint Lucian unions on the state of the economy by the Chastanet government back in April is a solid example of this ethos in practice. When all stakeholders have a seat at the table, invariably there’s a better understanding of the challenges that exist on both sides, and this can grow a culture of good faith instead of mistrust. Alongside the aforementioned areas, further work in this field in Saint Lucia and the Caribbean is surely a great way to demonstrate the present value of union membership in 2018.

Today the erosion of union membership across many nations may be seen as lamentable for union members, but is also an indicator of success in other areas of society

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EL SALVADOR SEEKS TO RIDE AN INVESTMENT WAVE MICHAEL DEIBERT, FDI INTELLIGENCE

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ot satisfied with a tourism industry largely built around surfing, El Salvador is hoping its hard-won political stability and skilled workforce can help the country become a future investment magnet.

Fanned by robust Pacific breezes, the veranda of the Puro Surf Hotel – on El Salvador’s coastline – overlooks the ocean’s elegantly breaking waves. As sun-tanned surfers haul their boards down past an infinity pool and clutches of coconut trees while a fiery sun begins its descent into the sea, a more brochure-worthy tourist image would be hard to imagine.

Long dogged by scenes of violence and a resulting image problem – a civil war that lasted from 1980 to 1992 and, in recent years, a further war between the state and the MS-13 and Barrio 18 street gangs – El Salvador receives the smallest level of foreign investment of any country in Central America, with the exception of Belize. With a population of about 6.4 million, this country with a sparkling coastline and atmospheric mountain towns

is making a pitch for foreign investment as it prepares for presidential elections in 2019, which will mark the sixth peaceful transition of power since its war ended.

San Salvador, Capital of El Salvador— El Salvador receives the lowest amount of FDI in Central America, apart from Belize

GETTING A BREAK

“I fell in love with El Salvador a long time ago, and I always had the dream of developing surf-specific projects here,” says Pedro Querejeta, a Cuban-American developer from Miami and Puro Surf’s co-founder. “I had travelled many places all over the world to surf, and I saw a lot of potential in El Salvador. There was a lot of potential for this to be a destination, not just because of the waves – the quality of waves are world-class – and the proximity to [capital city San Salvador], but the people, who are amazing.”

A boutique hotel of just 13 rooms fronting the beach at El Zonte, Puro Surf, as its name would imply, houses a surf school and a restaurant as well as a hotel. Though the ambience of Puro Surf suggests an appeal to well-heeled beach bums, it also has a community development aspect: the hotel has partnered with the US Agency for International Development and the

Salvadoran NGO Glasswing International to help ameliorate conditions at a local school and local healthcare facilities.

With El Salvador’s Pacific Coast consistently rated among the top 10 surfing destinations in the world, Puro Surf is not the only outfit seeking to capitalise on El Salvador’s endless summer vibe. Just down the coast there is Palo Verde, which bills itself as tapping into the sustainable luxury market, and whose ocean-front location, bathed in greenery, offers

classes in Spanish and yoga as well as surfing.

CUTTING ITS CLOTH

In 2016, El Salvador received $373m in foreign investment, or about 2% of GDP, according to Unctad. Its rate of unemployment is relatively low, at about 7%. As a signatory to the Dominican Republic-Central America Free Trade Continued on page 8

The Saint Lucia Government Gazette Company Registration Name: 4 J’s Vacation Apartments Inc.

Name: Nash-Carib Mechanical Services Ltd.

Description: Short term vacation apartment

Description: Mechanical Services

Directors: Joanna Epiphane-St. Hill;

Directors: Russell Nash; William Nash;

Junius St. Hill

Michael Nash; Michael Pruiett

Date Incorporated: 27-Jul-18

Date Incorporated: 3-Aug-18

Chamber: SEDU, Saint Lucia

Chamber: Amicus Legal Chambers, Saint Lucia

Name: Ridge Fire Protection WI Inc.

Name: C’bbean Pastoosh Ltd.

Description: Fire protection system designs,

Description: Restaurant

installations, and inspections

Directors: Max Tanic

Directors: Antonius Clarke; David Rooke;

Date Incorporated: 7-Aug-18

David Adams Rooke

Chamber: Peter I. Foster & Associates Chambers,

Date Incorporated: 31-Jul-18

Saint Lucia

Chamber: Self-incorporation Name: Golf Course Villa Ltd. Name: C&M Touring Services Inc.

Description: Rentals

Description: Touring services

Directors: Ramrathan Ince Rambally

Directors: Patrick Michaud

Date Incorporated: 8-Aug-18

Date Incorporated: 31-Jul-18

Chamber: Clarence Rambally Chambers,

Chamber: SEDU, Saint Lucia

Saint Lucia

Name: WAT Holdings Ltd.

Name: CJ Strategy 2 Construction Consulting Inc.

Description: Property Holding

Description: Construction

Directors: Adrian Theobalds

Directors: Verginia Serieux ;Gheorghe Cornel Stirbu

Date Incorporated: 31-Jul-18

Date Incorporated: 10-Aug-18

Chamber: Brickstone Law Chambers, Saint Lucia

Chamber: Jeannöt-Michel Walters Chambers, Saint Lucia

CANNABIS INDUSTRY

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THE WAR ON DRUGS HAS BEEN LOST

As production moves to the developed world, policymakers are struggling to keep up

BY MISHA GLENNY, FT CORRESPONDENT

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et ready for some high old times. Three phenomena are conspiring to upend the global market in illicit narcotics, which are set to become more available and be better quality than ever before.

First there is the relationship between North America and marijuana. Nine US states and the District of Columbia have already legalised marijuana, while it is available for medical use in 30 states.

Were New York to join California in legalising, as seems quite possible, then over a quarter of the US population will enjoy unfettered access to weed.

But the real game changer comes in October when smoke shops open across Canada. Official estimates put turnover in the country’s marijuana industry at over $8.2bn, but analysts agree the figure was arrived at assuming the low price of $7.15 a gramme. Pension funds, banks, venture capitalists and entrepreneurs are punching and kicking to secure a place in the starting grid of investment in the new industry.

The US attorney-general, Jeff Sessions, has repeatedly threatened to apply federal law, which still considers marijuana illegal, against states that have legalised, California in particular.

Yet so far, President Donald Trump’s administration has shied away from making good on those threats, almost certainly because resistance on the West Coast would be fierce and the political risk to Mr Trump too high.

In Britain, the government has finally been shamed into allowing very limited access to medicinal marijuana to children with the most severe forms of epilepsy. One of the problems that a century of the so-called war on drugs has thrown up is that governments across the world have not allowed any serious research into the effects and medical impact of a drug like marijuana. This is despite the fact that all empirical research makes it clear that the damage wreaked by alcohol on the human body and society far outweighs that inflicted by marijuana.

Yet because of an ideological obsession around the drug, its often miraculous medicinal properties have been ignored until very recently.

Death by marijuana intoxication is so rare as to figure in no government statistics around the world. But the second phenomenon turning the drugs

Death by marijuana intoxication is so rare as to figure in no government statistics around the world © AFP

market upside down is by no means so benign. In the US in 2016, 42,000 drug deaths involved opioids. This was not caused by the Mexican cartels or the Taliban in Afghanistan. The origins of America’s opioid tragedy lie in the strategies of big pharmaceutical companies, Purdue Pharma in particular, which, for almost 25 years, have been aggressively pushing painkillers containing synthetic opioids through the US private healthcare system. This has resulted in millions of Americans becoming hopelessly addicted.

Physicians still prescribe these drugs in large quantities every year, ensuring the addiction wave will continue. But when patients can no longer afford the drugs, or they cannot get them prescribed, they are turning to heroin or, more recently, fentanyl, a ferociously powerful opioid that North American dealers have been ordering in large quantities from Chinese manufacturers.

In order to deal with this, the US government will need to rein in Big Pharma and introduce drug law reform.

That is almost certainly too big an ask for the Trump administration. Indeed, Mr Sessions has indicated that his preferred approach to the problem is to police his way out of the crisis. The deaths, in that event, will continue.

A major part of the opioid challenge is actually the third phenomenon that is

revolutionising the recreational drugs market. How do Americans buy their fentanyl? The answer is on the dark net, a part of the internet not accessible to search engines. Online drug sales have exploded. Dark net users say it is safer and more reliable than scoring off traditional dealers.

In the UK and most of Europe, the most popular drug sold over the internet is ecstasy (or MDMA). But unlike cocaine, which originates in the Andean region primarily, or heroin, which is sourced largely from Afghanistan, the centre of MDMA production is North Brabant in

Death by marijuana intoxication is so rare as to figure in no government statistics around the world. But the second phenomenon turning the drugs market upside down is by no means so benign

the Netherlands.

As synthetic drugs replicate the highs of organic narcotics with ever greater accuracy, or indeed surpass them, production is shifting to the laboratories of northern Europe, the Balkans, Israel, Canada and east Asia.

This shift is placing huge strains on police forces that are already badly stretched because of austerity policies introduced in the wake of the financial crisis of 2008. One of the unspoken reasons for the slow move towards the legalisation of cannabis is that police forces simply cannot cope, especially with a drug that does relatively little harm.

Until now, the deaths and chronic insecurity associated with drugs have been concentrated in zones of production and distribution. The war on drugs has enabled the Taliban to resist Nato for 17 years as it funds its weaponry and social base through the sale of opium. In Mexico, the state has ceded large parts of the country to the rule of the cartels, thanks to the money they make distributing cocaine and opioids around the US. While the deaths and violence have been largely restricted to those faraway places, the war on drugs, for all its consistent failures, has continued. But change is coming.

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EL SALVADOR SEEKS TO RIDE AN INVESTMENT WAVE Continued from page 6

Agreement, El Salvador benefits from various tariff waivers with the US, and about one-third of its foreign investment comes from that country, especially within the textile industry. From nine free-trade zones in 2004, El Salvador now boasts 17, mostly situated along or near the PanAmerican Highway.

“We are trying to bring textile companies here because the demand is really high, not only in El Salvador but in the region,” says Celia María Hernández, investment promotion specialist for textile and apparel and tourism with the Organismo Promotor de Exportaciones e Inversiones de El Salvador (Proesa), the country’s export and investment promotion agency. “There’s not enough space in those zones for what we want to bring here, so they need to expand.”

STABILITY DIVIDEND

One attraction for investors looking at El Salvador is that, despite sharp ideological divides, its political climate remains surprisingly stable: the former combatants of the right-wing Alianza Republicana Nacionalista (Arena) and the left-wing Frente Farabundo Martí para la Liberación Nacional (FMLN) have decided to resolve their differences politically rather than by

El Salvador has a coastline of 307 kilometers along the North Pacific Ocean and is the only country in Central America that does not have a coastline on the Caribbean Sea. It is one of the world’s most famous surfing destinations on the Pacific coast.

military means. Though the FMLN has governed the country since 2009, state seizures of private enterprises of the heavyhanded tactics of leftist leaders such as Venezuela’s Hugo Chávez and Nicaragua’s Daniel Ortega have not materialised.

“I think both parties have come to understand that investment from abroad through private companies is a very important part of what we have to do,” says Jessica Bukele, who heads Proesa’s offshore business services investment sector.

Some of El Salvador’s leaders, however, believe the country needs to take a more visionary approach to integrating foreign investment into its economy.

“We’re producing 5,000 jobs a year. We need 100,000 just to keep things like they are right now,” says Nayib Bukele, who served as mayor of San Salvador from 2015 until April 2018. Mr Bukele took office as part of the ruling FMLN, but has since been expelled from the party and become a fierce critic of both it and Arena.

During the 36-year-old Mr Bukele’s tenure as mayor of the capital, some believed they saw hints of what El Salvador as a whole could become. Reclaiming the capital’s once-disused and dangerous historic centre, his administration spearheaded initiatives such as the Mercado Cuscatlán, a public market adorned with evocative murals and featuring a public library packed at all hours, and a restoration of the Plaza Francisco Morazán, an important public square.

“One software engineer . . . could produce the GDP of El Salvador,” says Mr Bukele.

“Of course we should focus on things such as agriculture and agro-industry because we have to feed ourselves, but why are we not focusing on the jobs of the future, the things that will make us as individuals grow and our society grow?”

CALL FROM THE FUTURE

It would be a mistake, however, to view El Salvador’s investment potential to be strictly

married to tourism, manufacturing and agriculture.

The country is also viewed as increasingly attractive to firms operating call centres and other shared services given the relatively high level of English proficiency among a number of Salvadorans (particularly those who have spent time living in the US). Canada’s Telus Corporation, for example, a national telecommunications company, employs more than 2,500 people in El Salvador. The country’s stake in providing offshore business services has also grown sharply, with the sector growing by double digits over the past 20 years.

“We’re not the cheapest nor the most expensive labour force in the region, but we get the most return on investment per employee,” says Proesa’s Ms Bukele. “It’s attractive here mainly because of our labour force, which is very well known for its work ethic and skills.”

With presidential elections scheduled for next year and Nayib Bukele’s star as a potential independent presidential candidate on the rise, the next few months may well determine if and how El Salvador finally takes flight.

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