Guadeloupe membership ushers in a new era for the OECS

THE STAR Businessweek APRIL 27, 2019

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in this edition of

SBW THE STAR Businessweek

Are Seawalls a Solution to Coastal Erosion?

Climate change is a complex and diverse problem; a global issue that affects all nations but impacts them in different ways.

Page 3

OECS Chairman Ralph Gonsalves (seated left) and Ary Chalus, President of the Regional Council of Guadeloupe, sign the agreement making Guadeloupe part of the OECS

Guadeloupe membership ushers in a new era for the OECS

By Catherine Morris, STAR Businessweek Correspondent

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united Caribbean is a stronger Caribbean. That was the message from the Organisation of Eastern Caribbean States (OECS) as it welcomed Guadeloupe to its ranks last month. The French island brings the number of participating states (including protocol members, associated

ECCB launches digital currency It’s not often that the Caribbean is first to market in the technology space but in February the Eastern Caribbean Central Bank (ECCB) signed a landmark agreement pioneering the world’s first blockchain-backed currency issued by a central bank.

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members, and observer states) to 12, and comes five years after the accession of fellow Francophone island Martinique.

For Guadeloupe, an overseas region of France, accession into the OECS marks recognition of its Caribbean status, culture and identity as well as numerous opportunities for economic and social co-operation. For Saint Lucia and other

founding OECS members, it means strength in numbers — a more united and integrated Eastern Caribbean that has the potential to elevate individual states through greater collaboration in areas such as trade, education, sport, health and transportation.

Continued on page 4

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The star businessweek

APRIL 27, 2019

REGIONAL – CAPITAL MARKETS

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Sagicor To Float J$ 5bn ETF On JSE

By Steven Jackson

Kevin Donaldson , CEO of Sagicor Investments Jamaica Limited

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inancial conglomerate Sagicor Group Jamaica has bundled its holdings in financial stocks into a single entity, Sagicor Select Funds Limited, which it aims to float on the stock market as an exchange traded fund or ETF. It’s one of two ETFs that Sagicor intends to list on the Jamaica Stock Exchange. The other would bundle distribution stocks, but its timing would likely rest on the creation of a trading and distribution index by the JSE. Sagicor Group first disclosed plans for the Sagicor Select Fund in its annual earnings report released a week ago. It said then that the company would apply to list the Sagicor Select on the main market if the offer for shares in the ETF hit at least J$ 5bn of subscriptions.

However, the head of the conglomerate’s investment subsidiary, Kevin Donaldson, later clarified to the Financial Gleaner the J$ 5bn target related to both funds, but the company was weighing two alternatives. Sagicor would just do one ETF for now, he said, if the investor take-up of the first ETF hit the J$ 5bn target.

The Sagicor Select ETF will track the performance of the newly formed JSE Financial Index, which was launched by the exchange on March 1. The index comprises 23 stocks, inclusive of fincos, insurance and microfinancing companies on the main and junior markets.

Donaldson, CEO of Sagicor Investments Jamaica Limited, said Sagicor Select would hold investments in roughly 30 equities spanning the JSE main and junior markets. He added that the composition of the ETF would closely mirror the JSE Financial Index in terms of the weighting of the stocks in that index.

JSE managing director Marlene Street Forrest was in meetings and not reached for comment on what conditions Sagicor would need to satisfy to list its ETF, and the weightings applied to the financial index.

The advantage for investors in the ETF is that it would average down the risks but also the gains involved in purchasing the 30 individual stocks.

“We are responding to the demand of our clients,” said President & CEO Sagicor Group Jamaica, Christopher Zacca, when asked about the ETF. Sagicor currently leads the unit trust market, with Sigma branded products that also invest in individual stocks on the equities market. However, Sagicor Select would provide a different choice by allowing investors to specialise in specific sectors without the attendant concentration risk.

“Sometime, clients want exposure to finance or distribution,” said Zacca. “There is a real demand for it,” he said.

Exchange traded funds would add a new layer of sophistication to Jamaica’s stock exchange, with Sagicor Group seeming to be the first to market with its security. The prospectus is under review by regulators but Sagicor hopes to float the ETF in May. “We think that the next progression in our market will be ETFs,” said Donaldson.

“The JSE just created a financial index, so the ETF will follow that. That is the first ETF. And the second will follow all the distribution companies in the market.”

The JSE Financial Index commenced last month at a base of 100 points. It closed Thursday at 99.85 points, having bounced back from a low of 96.62 points on April 15.

When listed, investors can track the performance of the Sagicor Select ETF either through the net asset value of the fund or the movement of the financial index, Donaldson said.

Jamaica Stock Exchange first announced last year — in line with plans to grow trading activity on the stock market — that ETFs would be among the new products to be added to the platform.

Sterling Asset Management CEO Charles Ross noted at the time that ETFs would allow smaller investors an opportunity to invest in one security at a lower cost rather than spending more for the same basket of individual stocks. He added, however, that in an illiquid market, the ETF’s performance might vary away from the index movement.

Coastal Erosion

The star businessweek

APRIL 27, 2019

www.stluciastar.com

Are Seawalls a Solution to Coastal Erosion?

By ED Kennedy, STAR Businessweek Correspondent

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solutions but are rarely permanent or foolproof. Even for beaches where a seawall provides an effective barrier in the long term, it can easily become a case of a problem moved instead of fixed, as a barrier erected on one part of the beach causes a change in the wave flow and break. This can result in a seawall guarding against further erosion on one part of the beach, but seeing the tidal energy displaced further along the coast, and an even more destructive wave emerge to cause more erosion elsewhere.

This is not only an issue for city planners to consider, but potentially one fraught with legal risk.

If one beachfront hotelier were to erect a wall that stops minor erosion on their beachfront, and that thereafter sees a hotel further along the beach suffer massive erosion as a result, the latter could have a claim for pure economic loss alongside a slew of other potential claims if it could be shown that the loss of their beachfront delivers a decline in patronage to their hotel. This scenario further illustrates that quick fixes, like one small wall for a single hotelier over a longer one shared by many, are best avoided, even if they involve less cost, planning and red tape.

limate change is a complex and diverse problem; a global issue that affects all nations but impacts them in different ways. Though no nation is immune from the effects altogether, coastal and island nations face the direct danger of rising sea levels on their shores.

For nations of the Caribbean, where so much of the region’s tourism market relies on the shoreline as a base for beachfront hotels and resorts, rising sea level represents an immediate environmental and economic threat.

Many offer seawalls as a solution.

It’s an option that has been utilised successfully before but it not always a surefire fix.

So where around the world have seawalls proved to be a solution?

And what is required to ensure their successful installation? Let’s look now in-depth.

The Tide is Turning

Beachfront erosion can occur for a number of reasons. While rising sea levels as a result of climate change can be viewed as the major cause, other secondary factors play a role. For the Caribbean in particular, the impact of climate change in complement to the erosion that can be caused by storms and extreme weather like hurricanes adds an extra challenge when seeking local solutions to this problem.

Many beaches are eroded by a couple of inches per year. While not ideal, dredging can delay the impact of the erosion. But, when rising sea levels are combined with extreme weather, it represents ‘the perfect storm’ whereby erosion of a coastline is escalated.

Ultimately, erosion of a shoreline is usually a continuous and irreversible problem unless major action is taken.

Anyone who maintains that erosion can be cyclical (and that the tide may take out sand one year, only to return it the next) would run against scientific opinion. With the scope and difficulty of such problems now clear, what solutions can be pursued?

Who Pays for It?

Miami, Florida is one of the world’s most prominent epicentres in the battle against climate change. Not only is the city encircled by water, but it’s an iconic holiday spot within the world’s largest economy, ensuring that the impact of climate change there receives huge public attention in a way that can be elusive elsewhere. It is also among the world’s most vulnerable cities to rising sea levels, which have risen an

Standing On The Shore Processes called erosion, mass movement and weathering break down and remove material from the coast.

The material is moved along the coastline by the sea and deposited when there is energy loss.

average of eight inches globally since 1880.

In fact, Miami has also been cited by the National Wildlife Federation as the city with the most to lose through the effects of climate change, even when considered alongside other economic powerhouses like New York and Guangzhou, China. It also has form in utilising seawalls, all the way back in 1980 spending US$ 65mn on the reallocation of sand to ten miles of

Beachfront erosion can occur for a number of reasons.

While rising sea levels as a result of climate change can be viewed as the major cause, other secondary factors play a role

the city’s shoreline along the South Beach neighbourhood.

Today there are over 63 miles of seawalls in the famous Miami Beach area, yet notably only three miles are publicly owned. For affluent Miamians with waterfront property, the price of a raised seawall is a small one to pay considering the alternative of flooding. When it comes to public works, recent years have seen Miami set aside US$ 400mn for spending by 2025 on capital works that elevate roads, and provide new drainage channels for sewer and water systems.

This does not rule out the potential for the construction of more seawalls in future by public authorities, and undoubtedly Miami as a whole has the advantage of proactive private citizens, but it does show for those who currently own or operate beachfront property that the priorities of a public authority are more likely to reside with effective management of rising sea levels over attempts at holding it back.

Tomorrow’s Problems, Today’s Options

For any developers planning new sites, and current accommodation providers looking to expand, there’s a bitter and hard reality to confront here. Seawalls can serve as

As well as the option of seawalls when they can utilised effectively, there are alternatives out there. Alongside the construction of groynes, jetties, and other in-water structures that can help guard against erosion, the path of least resistance advocated by some environmentalists sees the use of construction setbacks, and the creation of an aquatic buffer zone between a hotel and the shore. The use of water trees and other plants in this zone can provide a natural wall while causing minimal environmental disruption.

More widely, there needs to be greater pursuit of crimes like theft of sand. In 2008, in St Patrick, Grenada, a seawall had to be built, not principally due to climate change, but to thieves stealing sand for use in local construction projects. Stronger policing won’t solve all problems but it could help save individual beaches.

There are also options for hotels looking to expand while anxious about the erosion of their shoreline. The development of accommodation like over-water hotels, with a generous height clearance from the water, should not been seen as an admission of defeat but, instead, a recognition that, in spite of global consensus and pursuit of strong climate change action, it will take many years to halt the detrimental effect of climate change, much less SBW reverse it.

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The star businessweek

APRIL 27, 2019

OECS / CCJ

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Guadeloupe membership ushers in a new era for the OECS Continued from page 1

Front left to right: President of the Regional Council of Guadeloupe, Ary Chalus; President of the Collectivity of Martinique, Alfred Marie-Jeanne; and Chairman of the OECS and Prime Minister of Saint Vincent and the Grenadines, the Hon. Ralph Gonsalves © Région Guadeloupe

Regional relationships

“If you look at the history of regional integration, one of the biggest ironies in the Anglophone Caribbean is that we were more united when we were British subjects than when we are independent subjects in control of our own destiny.”

Speaking at a town hall meeting in Guadeloupe last month, OECS Director General Dr Didacus Jules highlighted the importance of overcoming the Caribbean’s divisive history and moving forward as a fully integrated region.

“Now that we are independent and talking about shaping our own destiny together, we have to dismantle all of the limitations and barriers of the state in order to provide that freedom of movement, people, goods, services and ideas,” he said.

Guadeloupe is joining the OECS as an associate member but, according to Article 27 of the revised Treaty of Basseterre, this does not bar it from transitioning into full membership in the future.

According to Dr Jules, the French territory’s quasi-permanent status is actually an advantage as it allows for a more grassroots-driven integration.

“Associate membership does not mean a lesser form of integration. In fact, associate membership is the window that provides us with a unique opportunity to make regional integration really fire.

It provides an opportunity for us to do things at the level of people-to-people and communities; it does not rely on any dismantling of the bureaucratic apparatus

of state. We who are charged with the responsibility for moving this forward must have the humility to listen and take lessons from the people.”

Emphasising the importance of “people-centred initiatives” and how regional integration should be driven by communities rather than the cumbersome machinery of state, Dr Jules called on all sectors of society to get involved, saying: “The Caribbean is our home, our house.

We cannot be locked in a French room and an English room and a Lucian room and a Grenadian room. We need the support of all sectors of Caribbean and OECS society.

If you play your part, we’ll play our part.”

Work to do

The ink may be dry on Guadeloupe’s signing-in ceremony but its accession is only the first step in a long journey, according to Dr Jules who told delegates at the ceremony: “As with any relationship, the value that is derived from Guadeloupe’s associate membership will depend on the amount of work that is put into making the relationship work.

Both Guadeloupe and the OECS have an incredible amount of work to do. Today is only the beginning of something in whose ultimate possibilities we can only discern a truly ascendant Caribbean civilization.”

As an overseas French territory, there are certain limits to the depth of Guadeloupe’s regional relations. For instance, the country is not a signatory to the OECS’ economic protocol. In common with other European states, Guadeloupe’s currency is the Euro and there are no immediate plans

for the island to adopt the EC dollar.

“Its triple allegiance to the Caribbean, France and Europe must be approached pragmatically since this offers Guadeloupe substantive development opportunities and enhances the contribution it seeks to make to the OECS,” said President of the Regional Council of Guadeloupe, Ary Chalus.

In the negotiations surrounding Guadeloupe’s accession several areas were identified as “ideal for functional co-operation”.

These include integrated tourism development and marketing, health sector reform, education reform, trade and investment, agricultural development, technology transfer, sports and cultural development, regional air and sea transport and environmental management. “These are the opportunities for us to make a difference in the lives of our people,” said Dr Jules. “These are not hypothetical issues; these are real concerns, real opportunities.”

The OECS is particularly keen to set up a network of centres of excellence across the archipelago with islands investing in building expertise in areas such as sport, health and technology.

Another matter of “supreme importance” on the agenda, according to OECS Chairman and Prime Minister of St Vincent and The Grenadines, Dr Ralph Gonsalves, is transportation.

Dr Gonsalves told stakeholders in Guadeloupe: “You need efficient air transportation in these islands. Similarly, to get a system of marine transport. A lot of people talk about fast ferries but it is not easy so we have to talk. That is a work in progress. We have to get it right.”

He also raised the issue of climate change, as Guadeloupe hopes to join forces with its Eastern Caribbean neighbours to protect its environment and explore growth in its blue economy. “Climate change is an urgent matter, an economic matter, a matter of livelihoods. We can’t think about economy and production unless we mainstream climate change issues as part of planning and implementation.”

Guadeloupe faces many of the same challenges as its Eastern Caribbean neighbours: worsening natural disasters, energy issues, economic imbalances. The country and the OECS now hope that a united front will bring about innovative solutions to common problems. Dr Gonsalves said: “We are in the process of moving from a shared experience to a conscious expression of our Caribbean reality.

Without enhanced people-to-people contact and an embrace in the spheres of the economy, society, culture and polity, our progress would be stunted.

The governments and our people must make it work for their benefit and development.”

CCJ Rules For Dramatic Cut To Duty On Imported Cement Product

By McPherse Thompson

Regional cement importers have received a landmark tariff-related decision from the CCJ that will have repurcussions for the CSME

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he Caribbean Court of Justice, CCJ, last Wednesday ruled that the regional tax payable on ‘other hydraulic cement’ — a product used to stop water and leaks in concrete and masonry structures — should be set at five per cent.

The ruling endorses a rate that is a fraction of the 60 per cent tariff that Barbados-based Rock Hard Cement had once paid on the imports from Portugal and Turkey, and dealt a blow to regional cement producer Trinidad Cement Limited and its Barbados subsidiary Arawak Cement Company Limited.

The case was heard in the CCJ’s original jurisdiction, where the court interprets the Revised Treaty of Chaguaramas.

In 2001, CARICOM’s Council for Trade and Economic Development, COTED, granted Barbados an exemption of the regional Common External Tariff, CET, of zero to five per cent so that the state could apply taxes of 60 per cent to categories of cement described as ‘other hydraulic cement’.

The regional tariff is intended to offer goods produced and distributed in the region an advantage over imports. In 2015 Barbados decided to return to the CET and apply a five per cent tax on the ‘other hydraulic cement’ imported by Rock Hard Cement Limited.

In its ruling, the CCJ decided that where COTED allowed a member state to charge taxes higher than the regional tariff on the importation of goods from outside the region there was no need for the state to obtain approval from the council to revert to the CET. However, the court ruled that in such circumstances, the member state should give reasonable notice of its intention of returning to the regional tariff, saying it would ensure that regional businesses enjoy transparency, certainty and predictability of tax structures.

According to a statement from the court after the case was decided, it would be “reflective of good administrative practices, preserved the sovereign autonomy of the member state and ultimately enhanced the overall functioning of the CSME [Caribbean Single Market and Economy].”

The court also found that the regional manufacturers of cement — Trinidad Cement and Arawak Cement — which had brought the action against Barbados, had notice for several years of the country’s intention to revert to the regional tariff and therefore could not succeed in their action.

Continued on page 6

Road Safety

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APRIL 27, 2019

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Islandwide Road Safety Assessment Project

By ED Kennedy, STAR Businessweek Correspondent

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ast month saw Saint Lucia launch the Islandwide Road Safety Assessment Project (IRSAP) following the impetus from the International Road Assessment Programme (iRap). Improving road safety is always a worthy goal. Given that the shared experience and dangers of driving are universal around the world, a look at driver safety globally, alongside this project’s key aims, shows a real path to progress.

The Way We Were

Any fair assessment must come with a recognition of the progress made up until this point. Across the board, good work has been done by car manufacturers, public authorities and motorists themselves to see that our roads today are safer than they were for generations prior. But it has also been a long and slow crawl; the common sense policies that we see today were elusive for decades.

In previous eras the expectation of a driver’s behaviour was very low, and these lax standards often had a deadly result. It was only in the 1960s that many nations began to implement random breath tests and other drink-driving laws. The introduction of such laws wasn’t met with cheer by everyone; liquor and hotel associations railed against them, fearing it would lead to an end of patronage.

And while many point to the rollout of the first Model T Ford in 1908 as the beginning of the modern automobile era, it was only in the 1970s that seatbelts — until then an optional accessory — were made mandatory. The same with airbags, pioneered by Ford in 1971, and becoming available for sale for the first time with the 1973 Oldsmobile Toronado.

Emerging Road Safety Challenges

The limited safety technology and freewheeling consumption of alcohol made driving a deadly proposition before the 1970s. But just the same as car safety technology and road laws have decreased the

Minister for Infrastructure, Hon. Stephenson King, launched in January 2019 the Millennium Highway and West Coast Roads Upgrading project

danger on our roads, other phenomenons have arisen to pose new threats.

Many nations have recorded a decline in drink-driving, but one substance has been replaced by others, and oftentimes it’s multiple illicit drugs. If a driver never drinks, even in moderation, but opts for a hit of cocaine or meth, the results can be just as deadly. This can pose a particularly difficult problem as, perhaps unsurprisingly, those engaging in recreational drugs are also less likely to take a strict view to prudent driving.

Saint Lucia must confront the sad truth that the past decade has seen over 160 citizens of the nation die in fatal car crashes. As well as this, the occurrence of around 5,000 minor accidents, and almost 1,500 serious vehicular accidents, adds the chilling notion that more deaths could have occurred.

IRSAP comes in complement to the Chastanet government’s ongoing investment in installing more directional road signs along Saint Lucia’s roads, and over 340 metres of guardrails where off-road dangers exist, like water hazards and steep declines. These are strong steps being taken right now to diminish risk on the island’s roads but there is also the need to recognise that even the safest roads still see hazards daily. Ensuring that drivers’ licenses and obligations remain

contemporary and reflective of emerging issues, is vital.

Just over ten years ago, no driver in the Caribbean would have been at risk of getting distracted by their smartphone while at the wheel. Now, there’s the constant risk of distraction due to social media updates and other notifications when the phone isn’t on silent.

Finding the right balance in law here isn’t easy. Many jurisdictions allow for some variety of hands-free mobile phone use but the presence of the smartphone in the vehicle poses a new challenge that shows how achieving optimal driver safety is an ongoing goal, subject to evolution.

Realistic Goals and Gains

There’s the unpleasant reality that accidents will, of course, continue to happen. Human error, even when not the result of substance abuse, can still occur.

Vehicles can suffer mechanical failure, and a variety of rare but serious health conditions, such as heart attacks, can result in a driver suddenly losing control of a car and becoming a risk to themselves and others. So anyone waiting for the total erosion of car accidents will be waiting for a long time indeed. The good news is that the advancement of emerging technology means it is possible this day will come.

For all the attention being placed upon what our roads will look like in years ahead, thanks to the big changes of selfdriving cars, the smaller but outstanding changes we’re seeing introduced right now really are a quiet revolution. From anti-crash detection technology, to the development of technology that monitors a driver’s physiology in real time — just like a portable fitness tracker does — and brings the car to a stop in the event of a serious medical issue, we will not require driverless cars exclusively to see driver safety go to the next level in years ahead.

Use of existing technology could also offer a win-win for drivers when it comes to doing away with some of the most frustrating aspects of driving. Even though some thoughtless drivers regard red lights and speed limit signs as ‘advice only’, most drivers who acquire a road camera fine do so not due to deliberate recklessness but because of simple driver error. Yet, by building a habit of always using cruise control, the risk of acquiring a speed camera fine can essentially drop to zero.

The Road Ahead

The discussion and implementation of IRSAP’s recommendations will take time.

For now there remains work that can be done beyond the improvement of road infrastructure.

However it is examined and in any nation, younger drivers typically record a higher rate of accidents and incidents on the road. Some of this can be put down to simple inexperiece and mistake, that even the very best drivers on our roads can encounter at one time or another, but for any drivers who are older (and, we’d like to think, wiser!) the sharing of knowledge in life should never be confined to the office, the classroom, or even the home.

From smart driving trips, to advice about local intersections or blind corners that can be particularly hazardous, Saint Lucians have an opportunity to work in tandem with this project, and bring down road dangers. Talking and sharing experience with young drivers across the nation is a great place to begin.

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The star businessweek

APRIL 27, 2019

REGIONAL / COMMERCIAL FISHING

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Rainforest Seafoods invests in new facility in St Vincent

Dr. Ralph Gonsalves, prime minister of St. Vincent and the Grenadines (left), and Brian Jardim, CEO Rainforest Seafoods following the signing of an agreement for the development of a state-of-the-art seafood-processing facility

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ingston, St Vincent and the Grenadines — Rainforest Seafoods, the Caribbean’s trailblazing seafood processor and exporter, has signed an agreement with the Dr Ralph Gonsalvesled Government of St Vincent and the Grenadines to develop a state-of-the-art seafood-processing facility in Calliaqua, St Vincent.

Rainforest Seafoods CEO Brian Jardim, alongside Prime Minister Gonsalves, signed the agreement on Wednesday, April 10 at the newly constructed Argyle International Airport.

The company will invest EC$ 10mn on a 30,000 square foot, value-added processing plant which will feature 250,000 lbs of cold storage, blast freezers and processing rooms, along with state-of-the-art equipment that will allow for atsource retail packaging — ensuring that product presentation appeals to international markets.

The facility, slated to be completed in 18 months, will have the capability to process live and frozen lobster, conch, sea cucumber, and a wide range of finfish, according to a recent news release.

The company has already begun to meet with contractors with a view to breaking ground very soon, the release said.

Rainforest currently exports seafood to more than 30 countries across the world. The Calliaqua plant’s proximity to the Argyle International Airport will be critical for exporting live and fresh seafood to international markets.

Jardim offered special thanks to the Minister of Agriculture and Fisheries, Saboto Caesar, for his efforts in bringing the project to reality.

“With its high-quality, sustainable seafood, St Vincent and the Grenadines is a critical component of Rainforest’s strategic plans for continued vertical integration and our vision to be a regional seafood leader with global reach,” Jardim said.

Minister of Finance Camillo Gonsalves lauded the company for its plans to invest in St Vincent and thanked the Rainforest team for partnering with the Vincentian fishing community.

“Mr Jardim and Rainforest Seafoods have indicated their commitment to the community and the livelihoods of the fisherfolk from whom they buy.

Rainforest Seafoods has experience and expertise doing this, so we look forward to an abbreviated and accelerated construction schedule so we can get this plant up and running. Rainforest Seafoods is going to transform Calliaqua, it’s going to transform the fishery sector, and it will transform the lives of scores of, if not more, fisherfolk in St Vincent and the Grenadines,” the finance minister said.

Dr Gonsalves echoed the minister’s sentiments whilst describing the critical infrastructure his government has put in place to attract overseas investment, including the construction of a sophisticated international airport, ongoing investment in geothermal energy, and security measures to protect the island nation’s extensive territorial waters.

Rainforest Seafoods is the Caribbean’s leading seafood supplier, with headquarters in Jamaica and satellite operations in Belize and Saint Lucia.

The operation in St Vincent and the Grenadines will be Rainforest’s fourth location as it continues on its Caribbean expansion thrust.

Rainforest Seafoods currently employs more than 750 people across the region and plans to directly employ another 75 people in St Vincent and the Grenadines, as well as partner with hundreds of Vincentian fisherfolk.

Originally published in the Jamaica Observer

CCJ Rules For Dramatic Cut To Duty On Imported Cement Product Continued from page 4

Rock Hard Cement, as intervener in the case, had applied to discharge interim measures ordered by the court in a ruling on July 17, 2018, directing the state of Barbados to restore and enforce the 60 per cent rate which COTED approved in 2001 on ‘other hydraulic cement’ imported from outside the CARICOM bloc.

The claimants, Trinidad Cement and Arawak Cement, brought an application against Barbados claiming a declaration that the country contravened the Revised Treaty of Chaguaramas by unilaterally reducing and/or altering the CET on ‘other hydraulic cement’ from the rate approved by COTED from 60 per cent downward to five per cent.

They also claimed that Barbados misclassified extra-regional cement imported

by Rock Hard as ‘other hydraulic cement’.

Trinidad Cement and Arawak Cement obtained a court order for interim measures in reaction to Rock Hard’s importation of cement from Turkey into Barbados. It was on the basis that the COTED-approved tariff on ‘other hydraulic cement’ was 60 per cent that the court made the order for interim measures against Barbados.

According to a judgment delivered last year, Trinidad Cement and Arawak Cement’s underlying claim was that Barbados was obliged to levy a tariff of 60 per cent.

COTED, the organ of the Caribbean Community created by the Revised Treaty of Chaguaramas that sets the CET on goods originating outside the community, had set a tariff of 15 per cent on building or grey cement and zero to five per cent on ‘other hydraulic cement’.

The claimants’ case was that in 2001, at the request of Barbados, COTED increased the tariff which Barbados may levy on cement to 60 per cent.

In a judgment delivered last year before the resolution of the substantive dispute, the court noted that in an affidavit in support of the application for the discharge of the interim measures, Mark Maloney, executive chairman of Rock Hard, said those measures spelled disaster for the company and its ancillary businesses.

He said Rock Hard is part of a group of companies operating in Barbados which utilises the bulk of the cement imported into that country for carrying on construction and manufacturing of precast concrete for all types of structures, such as housing solutions, commercial buildings, hotels, condominiums, and roofing tiles for the local export market.

According to the court document, Maloney said that Rock Hard was established on the basis of a five per cent rate of duty, and its business model and prices were derived on that basis.

He also said the company was unable to sustain imports at a rate of 60 per cent and if the order continues, then Rock Hard and its related companies will have to consider ceasing business, which would result in losses such as job cuts.

CASHLESS CARIBBEAN

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ECCB launches digital currency

By Catherine Morris, STAR Businessweek Correspondent

I

t’s not often that the Caribbean is first to market in the technology space but in February the Eastern Caribbean Central Bank (ECCB) signed a landmark agreement pioneering the world’s first blockchain-backed currency issued by a central bank.

“The journey of the ECCU has always been marked by bold initiatives and forays into the unknown to pioneer a path for the region’s survival and success,” says the ECCB FinTech Working Group which has been developing the initiative in partnership with Barbados fintech firm Bitt Inc. The project will create a digital version of the EC dollar (DXCD), distributed and used by licensed institutions for financial transactions, with plans to eventually phase it into public use.

According to the FinTech Working Group: “The long-term strategic objective is to explore the suitability of a digital EC currency, underpinned by distributed ledger technology/ blockchain, to help advance economic growth, resilience, competitiveness and financial inclusion in the ECCU.”

What is blockchain?

The Central Bank digital currency will be backed by blockchain, a form of electronic ledger. Broadly speaking, blockchain consists of individual blocks or records, linked together. Each user on the chain only has access to their particular block, meaning that they can only edit their own individual records. The blocks are linked and timestamped by a programme that ensures they are kept in sync with each other. Decentralising the records in this way makes them more secure and less susceptible to breaches. If a breach does occur, it can be easily contained without putting the entire system at risk.

“Blockchain can be leveraged to provide a decentralized payment and settlement system that can potentially facilitate broader access to the financial system, quicker and more easily verifiable settlement of transactions and payments, and lower transaction costs,” says the ECCB FinTech Working Group. “In the region, this can help

APRIL 27, 2019

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space and is being embraced by the ECCB as a way to monitor, evaluate and protect participants while maintaining financial and regulatory stability.

“Innovation is critical to propelling private sector development and growth,” according to the ECCB FinTech Working Group. “Sandbox arrangements allow for the testing of innovative propositions in the market with real consumers in controlled environments with relaxed regulations.”

How will it impact EC citizens?

Governor of the ECCB, Mr. Timothy Antoine (left), and CEO of Bitt Inc., Mr. Rawdon Adams, after signing the contract to launch the ECCB CBDC pilot on March 6, 2019

boost economic growth, competitiveness, resilience and financial inclusion consistent with the ECCB’s monetary and financial stability objectives.”

Blockchain was first introduced in 2009 to enable bitcoin transactions, and is now a significant disruptor to financial markets worldwide as institutions realise its benefits. A number of innovative Caribbean tech entrepreneurs have also adopted the technology for use in niche applications such as marine archaeology and tourism.

How will the digital dollar be rolled out?

The current initiative is a pilot, so it will be some time before the average citizen is paying for their purchases with digital dollars. The development and testing phase, which is expected to last around twelve months, will be followed by a six-month rollout and implementation in selected pilot countries.

The currency is being trialled in four member countries rather than the entire Eastern Caribbean so that it can be tweaked and tested in a manageable and controlled environment. According to the ECCB FinTech Working Group, pilot countries will be selected “based on interest in participating [and] other criteria such as institutional capacity, geographic representation and supporting technology infrastructure.”

It may be tested in a few locations but feedback and engagement will take place throughout all the member states as the ECCB seeks to educate and inform all citizens. The Bank met with stakeholders, including financial institutions, professional associations, merchants and private sector bodies, from May to December last year and says the response was “significant and generally positive”.

This type of sandbox-style testing, where initiatives are rolled out in controlled environments, is common in the FinTech

This latest leap forward in the region’s fintech capability has been widely welcomed by stakeholders with the Caribbean Association of Banks calling it “a bold step” and adding: “With the advent of the digital EC dollar the region is being thrust to the forefront of financial technology. The potential benefits of digital currency are many, for banks, vendors and customers. Aside from a lower reliance on cash, and a reduction in overall transactional costs, a secure, resilient digital payment and settlement platform is expected to have a net positive effect on the growth and development of the Caribbean financial sector.”

Once it has been fully vetted and approved, there are plans to take the digital dollar mainstream so that the general public can benefit from easier, quicker and more secure transitions enabled straight from their personal devices. These digital wallets will provide an alternative to cash, cheques, debit card and wire transfers. The online currency is not designed to eliminate cash entirely, but provide other options for those who want more diverse ways to pay or transfer funds. For businesses, a digital currency can help them target and serve both new and existing markets regionally by making it easier to process transactions across borders, and eliminating the need for debit and credit card payment platforms or wire transfers.

The new digital currency will feature easy to use payment and transfer platforms with no minimum spending amount, no minimum account balances and a private data feature to ensure all information is secured. The ECCB hopes it will improve financial inclusion, promote trade and boost resiliency SBW in the financial sector.

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The star businessweek

APRIL 27, 2019

VENEZUELA

www.stluciastar.com

Creditors are coming for Venezuela’s assets

By Colby Smith, Alphaville

F

or almost a decade now, Canadian gold miner Crystallex has sought to establish a single fact: Venezuela’s state-owned oil company PDVSA is the “alter ego” of the state.

In other words, Venezuela is so enmeshed in PDVSA’s daily operations and personnel that they are essentially one and the same. The designation would allow Crystallex, which is backed by hedge fund Tenor Capital, to go after PDVSA assets in the US once sanctions are lifted. The company is still owed hundreds of millions from Venezuela as part of a US$ 1.4bn arbitration award it won three years ago after the government nationalised its gold mining project in 2011.

Earlier this week, Crystallex came one step closer to cementing the linkage between PDVSA and the state. A victory for the gold miner would create a window of opportunity for the swathes of investors and companies who hold defaulted Venezuelan debt or arbitration awards to seize assets associated with the country in the US, at a time when Venezuela’s

economic and humanitarian catastrophe rages on.

On Monday, lawyers representing Venezuela, PDVSA and a motley of creditors convened in Philadelphia, Pennsylvania at the US Court of Appeals for the Third Circuit to deliver oral arguments in the case between Crystallex and the country. Over four hours, each representative tried to persuade a panel of three judges that their reasoning was correct. Lawyers defending the government and those defending PDVSA argued that a previous ruling that the state-owned oil company was Venezuela’s “alter ego” didn’t hold water.

In August US federal judge Leonard Stark of the Delaware District Court had invoked the alter-ego argument and given Crystallex permission to seize the shares of the Venezuelan holding company — PDV Holding — that owns the US oil refining giant, Citgo. The holding company is in turn owned by PDVSA. Judge Stark based his decision on a Supreme Court case involving a Cuban bank. The Bancec case, as law professor Mark Weidemaier of UNC Chapel Hill

Venezuela’s oil minister and president of the Venezuelan state oil company PDVSA Manuel Quevedo (centre) at a news conference in Caracas last week © Reuters

points out, established two instances when courts can disregard the legal status of a state-owned corporation — meaning they can deem a company an “alter ego” of the state: First, when the government so extensively controls day-to-day operations that a ‘relationship of principal and agent is created’. Second, when respecting the corporate form would result in a fraud or injustice.

Crystallex is only claiming the first point, not the second. And given that no one has tried to make the case that the gold miner is a victim of fraud or unfairness, “on merits, Crystallex has the better of arguments,” Weidemaier tells Alphaville.

“The state’s level of control and domination here is quite extraordinary.”

For that reason, Weidemaier says he would be surprised if the Court of Appeals overturns the alter-ego finding.

Russ Dallen at Caracas Capital Markets, who attended the oral arguments, agrees.

Not least because he thinks Crystallex’s counsel, Miguel Estrada of Gibson Dunn,

Ultimately, a favourable ruling for Crystallex could change the arithmetic for creditors when it comes to obtaining a judgment

“was the best litigator in the room”. Dallen also tells Alphaville that he got the sense that the judges seemed to accept the alterego argument point blank.

The implications of a Crystallex victory are enormous. According to Dallen, “if the Court of Appeals upholds this [alterego] finding, it’s open season on PDVSA assets.” While creditors wouldn’t be able to seize any PDSVA asset that piques their interest without first going through the courts, it would certainly make the process easier.

And if sovereign creditors can more easily lay claim to parts of PDVSA, existing PDVSA creditors could now have a lot more competition when it comes to repayment — a point the legal counsel representing BlackRock and hedge fund Contrarian Capital tried, and, according to Dallen, failed to make on Monday. Other creditors holding a PDVSA bond due in 2020 would surely be impacted by the ruling, given the bond is collateralised by 50.1 per cent of Citgo’s shares. Russia’s Rosneft holds the remaining 49.9 per cent, which were exchanged for a $1.5bn loan.

A potential silver lining does exist for those owed money from PDVSA. As Weidemaier points out to Alphaville: “This is a road map for PDVSA bondholders, trade creditors and others to go after the government’s assets.” Not all are convinced though. A sovereign debt lawyer involved in the ongoing situation in Venezuela disagrees that the alter-ego argument would work in reverse. And even if it does, the government owns so few assets that are not protected by some form of diplomatic immunity that there is little for PDVSA creditors to collect.

Ultimately, a favourable ruling for Crystallex could change the arithmetic for creditors when it comes to obtaining a judgment. Since December, there have been multiple new lawsuits filed against Venezuela and PDVSA. Expect more to come.

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