Compiled By NAN Business Editor
News Americas, NEW YORK, NY, Fri. July 3, 2020: Here are some of the top business and finance news making headlines across the Caribbean this week.
The Caribbean must rethink its future. That’s the words from Carlos Felipe Jaramillo, Vice President of the World Bank for Latin America and the Caribbean.
In a commentary on the state of Latin America and the Caribbean, Jaramillo said the Caribbean region’s governments also need to create an environment that is conducive to investment, with more room for new entrepreneurs and new ideas.
He urged for the elimination of the impediments that have limited competition and curbed economic vitality for far too long. “The most competitive companies are those that are more fully integrated into the global market, and we need a new generation of regional companies that can take advantage of the opportunities that will open up as the world recovers from the coronavirus,” he said.
Read the full commentary here.
Sagicor Financial Co. Ltd. says it will not go ahead with its acquisition of ScotiaLife Trinidad and Tobago Ltd.
The company made the decision after it and Scotiabank Trinidad and Tobago Ltd. agreed not to proceed with a 20-year distribution agreement for insurance products in Trinidad and Tobago.
The announcement follows a decision last year by Sagicor to call off its deal to buy Scotia Jamaica Life Insurance Co. Ltd. following a similar decision regarding a distribution agreement.
Sagicor had announced its plan to buy both operations in November 2018.
A new report Wednesday by the Inter-American Development Bank estimates that some of the most tourism-dependent economies in the Caribbean could shrink by as much as 19% as a result of fewer cruise ships, business travelers and student backpackers traveling to the region.
The expected economic shock is unprecedented. While tourism arrivals to the region contracted by as much as about 4% during the global financial crisis, the near-complete shutdown of both air travel and cruise ship activity beginning in March from the global pandemic could lead to declines of anywhere from 40% to 70%, according to the report. Based on simulations, the direct impacts of the shock to tourism flows for The Bahamas could cause an economic contraction relative to pre-crisis baseline estimates of between 8 percent and 13 percent.
“Taken together, our Tourism-Dependency Index and various related indicators suggest that countries in Latin America and the Caribbean are likely to suffer more than most in terms of the COVID-19 generated shock,” said IDB economics advisor for the Caribbean Department, Henry Mooney. “Governments can provide focused and tailored support to preserve productive assets, help replace lost incomes for individuals engaged in the sector, and use the interim period to prepare the ground for the resumption of activity under uncertain circumstances.”
The IDB anticipates The Bahamas could lose USD900 million in reserves this year. The news comes as Moody’s downgraded The Bahamas to non-investment grade Ba2 with a negative outlook. Further bad news as the Bahamas opened back up to tourism on July 1st included The Central Bank saying the economy will contract 12% in 2020 even as the government anticipates debt-to-GDP will reach 82.8% at the end of FY2020/21, up 14.9 percentage points as a result of the double shocks of Hurricane Dorian and COVID-19, said Caribbean economist Marla Dukharan.
The IMF expects a 40 percent decline in tourist arrivals if tourism resumes in Q4 2020 – around four times the decline based on the Global Financial Crisis says Dukaran. This scenario translates into a 55% drop in travel exports and a current account deficit of 10% of GDP. The news comes as foreign direct investment is expected to contract by 70 percent this year.
Dukharan says the uncertainty related to the election result in the South American CARICOM nation could spook investors. Guyana received USD35/bbl for its second oil shipment in May 2020, which is USD20/bbl below the price achieved for its first shipment in February. This as international reserves in Guyana dipped to the lowest level since 2018 in April 2020, at USD501 million.
This other South American CARICOM nation may be headed for a new government but they are inheriting a terrible economy. Domestic debt increased 69% in April and a surge in inflation is already being felt, said Dukaran, with prices rising 8% month on month and 26.2% year on year in April 2020. Foreign currency reserves have also continued to decline, down 15% year over year in April 2020, to USD434 million
Trinidad & Tobago
Trinidad and Tobago’s Finance Ministry has announced a revised fiscal deficit of about TTD14.5 billion or 8.8% of GDP for FY2020. The Minister of Finance expects GDP will contract by 2.4% this year, similar to the economic contraction of 2.3% seen in 2017. The Central Bank indicates COVID-19 is having an “unprecedented” impact on economic activity and employment.
The Planning Institute of Jamaica forecasts a contraction of 12-14% for Q2 2020 resulting from containment measures and the halt in tourism activity. Net international reserves declined 5.5% year over year to USD2.9 billion at the end of May, roughly 37 weeks of goods and services imports.