Caribbean & Central America - November 2017 (ISSN 1741-4458)

*** AIRLIFT CAPACITY HIT BY HURRICANES. OAG, the air travel data provider, has produced figures highlighting the effect of the hurricanes Irma and Maria on tourist airlift. According to the figures, the overall number of flights was down by an average of 6.7% in October, with seat capacity down by 4.1%, but these averages hide some much larger declines for some destinations.

With regard to frequency of flights, the worst hit destination was St Kitts and Nevis (down 34.3%), Puerto Rico (-25.1%), and Montserrat (-21.5%). The main other affected destinations were: Dominica (-13.7%), St Maarten (-12%), British Virgin Islands (-11.2%), Anguilla (-6.3%), and the US Virgin Islands (-5.6%). Seat capacity was down by nearly 50% for St Maarten and by one-third for St Kitts & Nevis and Montserrat.

With regard to the main regional airlines, LIAT experienced a 21.3% fall with Caribbean Airlines down by 9.5%. Among the main overseas carriers, American Airlines suffered a 10.6% fall in flights, with capacity down by 8.5%. JetBlue, on the other hand, managed to increase frequency during October by 2.8%, with capacity rising by 5.6%. And, despite the disruption caused by the hurricanes, overall capacity to the region for the first nine months of 2017 was up by 5% compared with the same period in 2016.

*** IMF PRESCRIBES STRONG MEDICINE FOR THE BAHAMAS. The International Monetary Fund (IMF) has declared that between 30% and 40% of public-sector employees in The Bahamas are “non-essential temporary workers” and their numbers should be reduced. It has recommended reducing the government’s wage bill to the 2016 fiscal year level, which would provide savings amounting to 0.8% of GDP relative to FY2018.

In its latest Article IV consultation, the IMF reported that the country’s fiscal deficit grew to 5.7% of GDP in FY2017, from 3.5% a year earlier. The central government debt-to-GDP ratio was 73% of GDP. The combined debt of state-owned enterprises (SOEs) was 18% of GDP, and government transfers to SOEs reached 2.1% of GDP in the last fiscal year. It recommends reducing subsidies and transfers sufficient to produce a saving of 1.25% of GDP on the FY2018 budget.

The main bright spot was the reduction in unemployment to 9.9% in May 2017, down from 11.6% in November 11.6%, partly as a result of the completion of the long-stalled Baha Mar megaresort in April. GDP growth is forecast to be 2.5% in 2018, up from 1.75% in 2017. However, the current account deficit, which fell to 12.9% of GDP in 2016 from 13.6% a year earlier, is likely to widen to 17.75% of GDP due in part due to a surge in Baha Mar-related imports. Thereafter, it is expected to fall back to around 7% of GDP.

The Inter-American Development Bank (IDB), in its quarterly bulletin for September, noted that the implementation of value-added tax (VAT) in 2015 had been positive but that it had now reached “peak efficiency” and that harvesting additional revenue would not be possible without an increase in VAT rates. Tax revenues increased from 16% of GDP in 2013 to 21% in 2016, partly due to the introduction of VAT. For the IDB, the main problem now is expenditure, not revenue collection. It said: “The path of expenditures in The Bahamas is on an upward trajectory and is currently outpacing revenue gains from implementation of VAT.”

The IDB report concluded: “If this trend continues, declining fiscal space and rising debt levels will limit the government’s ability to direct scarce resources to other pro-growth areas such as vital infrastructure development. Successful reforms of expenditures must include plans to restructure the administration of ministries and state-owned enterprises to provide more efficient service with fewer resources, and to channel savings to partially fund infrastructure maintenance and growth-driven infrastructure development.”

*** FORMER BARBADOS AG ATTACKS ANTI-CORRUPTION ACT. Sir David Simmons, a former chief justice and attorney general, has dismissed the 2012 Prevention of Corruption Act has an ineffective “joke”. In a speech to a forum on corruption in late October, Simmons said the legislation was so flawed “you can drive a cart and ten donkeys through it”.

Simmons, who is a supporter of the opposition Barbados Labour Party (BLP) and currently head of the Integrity Commission in the Turks and Caicos Islands (TCI), said that one of the main deficiencies was the lack of investigative power. He said: “You cannot function effectively unless you have investigators who will go and chase up things, who are skilled investigators. We have four in [TCI], three of whom are British.” He added: “Our [investigators] have powers of arrest. When we arrest you, we hand you over to the police to take the matter on from there.”

*** ANTIGUA CUTS COST OF CITIZENSHIP BY INVESTMENT. The prime minister of Antigua & Barbuda, Gaston Browne, told parliament on 12 October that the cost of acquiring citizenship through contributions to the National Development Fund (NDF) would be reduced to US$100,000 from US$200,000. He said that there had only been three applications over the past two months, generating just US$600,000. The option of gaining citizenship through real estate investment will remain at US$400,000, and the business investment option will maintain its price tag of US$1.5m.

Interestingly, a recent move by the St Kitts & Nevis (SKN) government to reduce the investment required by a four-member family to acquire citizenship was met with considerable criticism. The amount was reduced from US$300,000 to US$150,000 for those paying into a newly created Hurricane Relief Fund. The move was widely criticised as an attempt to undercut the CBI programmes of Dominica and Antigua & Barbuda, both of which were much more seriously affected by the hurricanes than SKN. Mahdi Mohammed, CEO of the CBI advisory firm Guide Consultants, described it as a “shameful move”.

Mohammed added: “This is simply a ploy, a blatantly opportunistic move to improve the competitiveness of the St Kitts & Nevis CBI programme at the expense of their Caribbean neighbours…Dominica has lost every source of government revenue except its CBI programme, and St Kitts & Nevis is attempting to undermine that.” Sir Ronald Sanders, Antigua & Barbuda’s ambassador to the US, described the move as “a most unfortunate development”.

*** NEW LEADER FOR BAHAMAS OPPOSITION. In a vote on 25 October for the leadership of the Progressive Labour Party (PLP), the main opposition party in The Bahamas, Philip Brave Davis won easily, securing 1,004 votes to 300 for Glenys Hanna-Martin, another MP. The PLP was ousted from power on 10 May in a landslide victory for the Free National Movement (FNM) which left the PLP with only four seats in parliament.

*** TRINIDAD’S OPPOSITION UNC TO HOLD LEADERSHIP VOTE. The United National Congress (UNC), currently led by former prime minister Kamla Persad-Bissessar (2010-2015), will hold a leadership election on 26 November. Dr Roodal Moonilal, who challenged Persad-Bissessar in the 2015 internal elections, has said he will not stand for election this time because he has “quite a few other matters on his table”. Moonilal is facing a corruption investigation. Another potential challenger, Dr Surujrattan Rambachan, has said he will support the current leader but that he wants to see a “more vibrant” national executive (Natex). He said: “I am supporting her but will have reservations about the quality of the people on Natex, we need a mix of professional people and political activists”.